Back to news

March 24, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

COVID-19: Farnborough Cancellation Another Blow For Defense Biz

"Looking ahead, defense acquisition is in uncharted territory," says Air Force acquisition head Will Roper of the effects of the COVID-19 virus.

By

WASHINGTON: While the cancelation of the biennial Farnborough Air Show due to the COVID-19 pandemic may not have an immediate impact on the bottom lines of aerospace firms in the defense sector, the decision to close one of the world's top two airshows is yet another harbinger of pending upheaval in the overall market, analysts say.

In particular, it deprives US firms of publicity abroad and highly valuable face-time with customers and potential customers from foreign governments.

“Things like Farnborough are important to US aerospace companies because they help to facilitate sales and marketing,” said Todd Harrison, director of the Aerospace Security Project at the Center for Strategic and International Studies (CSIS). “It's traditionally been a place where you show off your latest technology and latest systems, but it's also where you finalize deals that have been in the works for a while. And so, some of that can still happen, but some of it may not happen.”

Richard Aboulafia, a veteran aircraft industry analyst at Teal Group, echoed: “It's just a reflection of a sad reality: economic time has simply come to a halt for our industry and for others. That means fewer big opportunities to meet clients, advertise products and capabilities, share information, and look for opportunities. Big air shows are essential for these, but here we are.”

The Farnborough Air Show — which takes place south of London — registered representatives from 96 countries in 2018, and some logged $192 billion in orders and contract commitments. The cancelation of the 2020 show, slated for July 20-24, was announced today.

“I don't see the cancellation of Farnborough as a big blow to defense contractors. It is generally a way of raising their profile, but has no immediate impact on their business prospects,” said Phil Finnegan, Teal Group's director of corporate analysis.

That said, Finnegan and a number other analysts agreed, the aerospace market is in for a rough ride — and not just on the commercial side as airlines see their profits for 2020 nosediving, making it increasingly unlikely that they will invest in new planes.

“Looking ahead, defense acquisition is in uncharted territory. Near- and far-term impacts of Coronavirus evolve daily,” Air Force acquisition head Will Roper said this afternoon. “As we complete our first week of response, our teams navigated potential work stoppages, changing local and state directives, halted supply chains, and gearing up to support any national Defense Production Act requirements.”

The Defense Production Act, which allows the government to order companies to boost production or produce new things, was invoked last week by President Donald Trump.

Finnegan said “the biggest threat to defense contractors will come to those with significant commercial aerospace operations. The cash flow drain from those operations potentially could hurt them.

“It also reiterates the importance of maintaining a balance in operations,” he added. “Obviously, in recent years commercial aerospace has offered greater growth and potentially high profit margins. This crisis reiterates the importance of a diversified approach to defense and aerospace to take advantage of the stability of the defense market in a crisis.”

Indeed, several other long-time industry analysts said that DoD may face price hikes as firms try to shift the costs of commercial overhead to the defense contracts — especially for spare parts.

Further, Harrison noted, governments around the world are going to be cash-strapped and likely loathe to make new commitments to large buys of new fighter jets or drones. According to the latest report from the Aerospace Industries Association, US aerospace and defense exports in 2018 amounted to $151 billion: civil aerospace accounted for the majority with $131.5 billion; defense products the remaining $19.5 billion.

“So, Farnborough may not be the reason that sales go down, It's more of a symptom of the fact that there just aren't going to be as many opportunities for a while,” he said.

https://breakingdefense.com/2020/03/covid-19-farnborough-cancelation-another-blow-for-defense-biz

On the same subject

  • US Army, BAE aim to accelerate armored vehicle production

    October 11, 2022 | International, Land

    US Army, BAE aim to accelerate armored vehicle production

    The move to quicken production may come as a surprise, given the Army originally planned to slow the rate of AMPV purchases across its five-year plan.

  • Armement : les coopérations européennes se multiplient

    November 9, 2018 | International, Aerospace, Naval

    Armement : les coopérations européennes se multiplient

    ANNE BAUER Pour le patron de la DGA Joël Barre, l'un des principaux défis de 2019 est de donner corps aux multiples programmes en partenariat avec d'autres pays européens. Le dialogue avec l'Allemagne est compliqué. Les restrictions budgétaires présentées mercredi par la loi de finances rectificative 2018 n'auront pas de conséquences significatives sur les livraisons d'équipements aux armées, a promis jeudi le directeur général de l'armement (DGA) Joël Barre. Son administration, chargée de l'équipement des forces, avait anticipé ce gel par une gestion prudente, a-t-il expliqué, en soulignant que les 319 millions d'euros d'annulations de crédits annoncés mercredi ne représentent que 3 % du budget d'équipement de 2018. 12,7 milliards de commandes Cette année, la DGA peut engager 12,7 milliards d'euros contre 11,2 milliards l'an dernier, tandis que le montant prévu en 2019, première année d'application de la nouvelle loi de programmation militaire, atteindra 14,3 milliards d'euros. Parmi les investissements importants, la marine commandera en 2018 et 2019 ses cinquième et sixième sous-marins Barracuda, 4 navires pétroliers ravitailleurs et plusieurs patrouilleurs. L'armée de l'air bénéficiera de la rénovation des avions Rafale au nouveau standard 3, avec notamment le nouveau missile air-air, MICA NG, dont 567 exemplaires seront commandés. Quant à l'armée de terre, elle recevra enfin ses premiers « Griffon », les blindés légers de nouvelle génération. Une année sans panache pour les exportations A l'exportation, l'industrie française de défense enregistre « une année normale », résume Joël Barre, en déclarant s'attendre en 2018 à quelque 7 milliards d'euros d'exportations, comme en 2017 - après 16 milliards en 2016 et 14 milliards en 2015, années de la vente de 12 sous-marins en Australie et de 96 Rafale à l'Egypte, le Qatar et l'Inde. Joël Barre a d'ailleurs confirmé que les négociations avec l'Australie se poursuivaient pour définir l'accord de partenariat stratégique et débloquer une nouvelle tranche de contrats de 1,5 milliard d'euros. Il a par ailleurs confirmé que la DGA avait estimé que « les conditions n'étaient pas réunies » pour que Dassault Aviation participe au futur appel d'offres que souhaite lancer le Canada en 2019 pour acquérir 88 avions de combat. Notamment parce que la France n'appartient pas à l'alliance dite des « Five Eyes » formée par les services de renseignement du monde anglo-saxon (Royaume-Uni, Australie, Canada et Nouvelle-Zélande). Ce qui aurait compliqué l'échange de renseignements avec les Américains. Multiples coopérations européennes Pour la DGA, les principaux défis de 2019 sont toutefois de donner vie à la coopération européenne. Avec le Royaume-Uni, la DGA cherche comment maintenir un courant d'échanges dans l'aviation de chasse « pour garder le contact », tandis que se poursuit le programme commun sur un nouveau missile, capable de remplacer les actuels missiles anti-navires Harpoon et Exocet, ainsi que les missiles de croisière Scalp et Storm Shadow. Deux nouveaux partenariats viennent d'être conclus, avec l'Italie via l'alliance entre Naval Group et Fincantieri, et avec la Belgique, qui vient de signer un accord intergouvernemental avec la France pour s'équiper comme l'armée de terre française en blindés. Reste le partenariat le plus ambitieux mais le plus compliqué à mettre en place : celui pour concevoir avec l'Allemagne le char du futur et le système de combat aérien du futur (Scaf). « Notre espoir est de pouvoir lancer les premières études sur le Scaf en janvier 2019 », a précisé Joël Barre, sans cacher que cet enjeu essentiel en développements technologiques et industriels faisait l'objet de discussions musclées. Alors que l'industrie aéronautique française est en avance sur l'allemande, les industriels français s'inquiètent des ambitions de leurs voisins. Anne Bauer https://www.lesechos.fr/industrie-services/air-defense/0600112092953-armement-les-cooperations-europeennes-se-multiplient-2220527.php

  • Harris Corporation Awarded Contract to Support Boeing’s MQ-25 Unmanned Tanker for the US Navy

    May 7, 2019 | International, Aerospace, C4ISR

    Harris Corporation Awarded Contract to Support Boeing’s MQ-25 Unmanned Tanker for the US Navy

    Highlights: Onboard computer provides superior processing capacity and enhanced situational awareness Processor, based on advanced open systems and COTS, allows for faster and easier upgrades Reaffirms Harris' strategy to leverage open systems processors into new platforms Harris Corporation (NYSE:HRS) has been awarded a contract by The Boeing Company to partner with Boeing AvionX in supplying the mission management open systems processor for the MQ-25 unmanned aerial refueling program. “Harris and Boeing have invested substantial R&D to develop affordable, high-performance solutions that allow for faster and easier upgrades,” said Ed Zoiss, president, Harris Electronic Systems. “This contract reaffirms Harris' strategy to leverage open systems processors into new platforms.” The mission management processor is based on an advanced open systems architecture solution and commercial-off-the-shelf (COTS) technology. The mission management processor manages sensor and communications functions on the MQ-25, providing the onboard processing capacity necessary to support advanced computing needs. Harris will provide hardware and firmware in conjunction with Boeing's open systems architecture solution. The MQ-25 is the U.S. Navy's first operational carrier-based unmanned aircraft and is designed to provide a much-needed refueling capability. The contract supports Boeing's engineering and manufacturing development program to provide four MQ-25 aircraft to the U.S. Navy for Initial Operational Capability by 2024. Harris has been a supplier to Boeing since the 1980s on a wide range of military aircraft, munition, and satellite programs. This latest contract will continue job growth for Harris in Florida, which is a supplier of mission management processors to Boeing and other major aircraft programs. “The MQ-25 program is vital because it will help the U.S. Navy extend the range of the carrier air wing, and Boeing and our industry team is all-in on delivering this capability,” said Dave Bujold, Boeing's MQ-25 program director. “The work we're doing is also foundational for the future of Boeing – where we're building autonomous systems from seabed to space.” https://www.harris.com/press-releases/2019/05/harris-corporation-awarded-contract-to-support-boeings-mq-25-unmanned-tanker

All news