Tony Osborne July 10, 2020
While Airbus' commercial business faces strong headwinds from the novel coronavirus pandemic, the company's military capability is still very much in demand. But can Europe's big defense initiatives—many of which involve Airbus-—be sustained with burdened budgets post-COVID-19? London Bureau Chief Tony Osborne put those questions to Airbus Defense and Space CEO Dirk Hoke.
AW&ST: What does the defense environment look like post-COVID-19? Will we face more spending cuts, or will spending plans be maintained? And are you confident big defense programs can survive? A health and economic crisis doesn't erase the necessity of being able to defend your territory. NATO missions are continuing, and the extensive use of our A400Ms and [A330 Multi-Role Tanker Transports] MRTTs during the COVID-19 crisis is a perfect example of how much value military assets can bring in humanitarian missions, when nations are in need. In addition, spending in defense procurement, if you do it right, is always an investment in your own economy and therefore now twice as important.
The defense business was undertaking some restructuring and cost cutting at the beginning of 2020 after a difficult 2019. Where are those plans; will they have to be reconsidered? We have had to slightly adapt our restructuring due to the COVID-19 impact, but the rationale stays the same. In our defense business, many important contracts had been postponed or came later than expected, which has of course had an impact on operational planning. In our space business, we currently see an extremely flat market for telecommunication satellites. We are [the] market leader and confident that the situation will change again. But for the time being we must take the appropriate measures.
How has COVID-19 affected production and output in the various countries, and how have you overcome or are overcoming those hurdles? I would say we were early adapters. Given the experience we had at our commercial sites in China, on which we could build, it took us around a week to clear all production facilities for working under COVID-19 work restrictions. On the defense side, we also delivered aircraft in the lockdown phase and provided our services to the military crews on mission.
It was, rather, the space part, where we had to reschedule satellite launches due to the temporary closure of the launch site in Kourou [in French Guiana]. And for the desk jobs, many were working from home during the lockdowns in order to avoid [having] too many meetings at the offices at the same time. They are now coming back to their desks. We could demonstrate that also in crisis times we are a trustful partner for our customers.
Airbus proposed a compromise deal for the Eurofighter following Germany's decision on a Tornado replacement. Is Berlin showing interest in your proposals; could we see some of these Eurofighters on contract soon? Let me state that we are very proud of being part of the Eurofighter family. There are some good opportunities ahead. Recently we signed the contract for equipping 115 [German and Spanish] Eurofighters with brand-new Captor-E radars. In the autumn, we are confident [we will] sign a contract for 38 Eurofighters to replace the German Tranche 1 fleet.
Additionally, we are in discussions for planning a Tranche 5 [implementation of] the Long-Term Evolution Program. What the final decision on Tornado will be, we will see only after the elections in Germany [at the] end of 2021. In the meantime, there are further opportunities in Spain, Switzerland and Finland. The Eurofighter clearly is the backbone of European air defense.
What progress is being made on the Future Combat Air System (FCAS)? Can you talk about some of the technological hurdles, where there needs to be or has been progress to reach the next phase? There is a tremendous drive in the project. All parties, on both the political and industrial sides, are pushing for progress and can be proud of what has been achieved in less than three years after being mentioned the first time in the French-German declaration on July 13, 2017. We need to keep this spirit up to achieve our ambitious timelines. In terms of technologies, we are at the early stage of a long journey.
Overall, we are looking into a wide range of technologies in the areas of combat aircraft capabilities, digitalization and data analysis, as well as connectivity and communication. Airbus is the only company in Europe that has extensive know-how in all three areas. Nevertheless, as we are talking about requirements needed in 2040, we are far away from having definite answers yet. The FCAS is very much an incremental journey with an open end—that's what makes the program so challenging, but also so exciting.
You made representations to Madrid regarding the involvement with Indra on the FCAS. Is there any sign of that changing? Is there a point when you begin working together and sideline the differences? Spain is a very welcome partner in the FCAS program and is one of our Airbus home nations. I really believe that the FCAS project is large enough for the whole European defense industry. To make it a success, it is important that everybody contributes where he has the largest experience. In terms of system integration, it is undoubtedly Airbus—especially in Spain, where we have a large industrial footprint, are producing the Eurofighter, A400M, tankers and the light and medium transport aircraft. I think it is understandable that we expressed our incomprehension to the Spanish government.
Are you any closer to securing a contract for the Eurodrone development? Are you concerned that France could still be swayed down the U.S. route? In June we handed over our best and final offer and are expecting a decision by the nations after the summer break. Germany, France, Spain and Italy worked with us on the capabilities from the onset, so the complete design is according to their wishes. Therefore, in terms of performance, capability and European sovereignty there is no serious competitor on the market. What is clear is, the later the order comes, the more the delivery dates are slipping. I don't think that's in anybody's interest.
Are you making any proposals for Germany's Pegasus signals--intelligence (sigint) platform since Berlin withdrew from using Triton? Will you offer the Integrated Standby Instrument Systems (ISIS) system on a manned platform? That's now in the hands of the German government. Over the years of the project we developed many skills and capabilities in Germany that are required in any sigint platform. That applies especially for the ground control station, which we also deliver for NATO's [Alliance Ground Surveillance] project. Therefore, we stand ready [for] implementing our know-how once the decision has been taken. Nonetheless, I am still convinced that Triton would have been the most capable platform for the envisaged missions.
On MRTT, where do you see the next market for that platform? How many more orders could come from the European Multinational Multi-Role Tanker Transport Fleet/Unit (MMF/MMU)? Is the agreement with Lockheed on MRTT making progress on marketing for U.S. needs? What is your hope for that? Only weeks ago, we delivered the first MRTT to the joint NATO fleet. I don't want to speculate about numbers, but pooling resources as is already the case with military transport capacities is a blueprint for the future. The U.S. surely is the largest accessible market for military tankers. We have the best aircraft in this class. And besides our own Airbus footprint, we have Lockheed Martin as an equal partner in the country. We stand ready. In the end the question will be whether the U.S. is ready for this, too.
Regarding A400M tactical capabilities and exports, any progress on both? The A400M has meanwhile proven to be a real workhorse in the services, and flight testing again has made good progress in recent months. Simultaneous paratrooper jumps out of the side doors are now certified, and the helicopter air-to-air refueling is advancing well. The aircraft is simply best-in-class. Other nations recognize this very well, but it is currently a difficult environment to predict when the next exports are coming in.
Given that space has been declared a warfighting domain by several nations, are you seeing an uptake in defense interest in space, or is that something still warming? When we see how dependent mankind is on assets in space, it is high time to act and find ways to protect them. Some countries are making progress already. Others are still undecided on their strategy. As Europe's largest space company, we can make suggestions. But what is valid for the world applies also in space: You can't defend space or your assets there as a single country. What we need is a common approach. And it is needed sooner rather than later.
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