March 24, 2020 | International, Aerospace, Naval, Land, C4ISR, Security
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
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September 9, 2020 | International, Aerospace, Naval, Land, C4ISR, Security
By: Joe Gould WASHINGTON ― Senate Majority Leader Mitch McConnell on Tuesday introduced and set up a floor vote for a leaner Republican coronavirus relief bill, but it does not contain the billions of dollars the defense industry has sought to diffuse the economic impact of the pandemic. The bill, which includes some of the elements of the $1 trillion package the GOP proposed in July, is intended to break a weekslong partisan stalemate. However, it has a slim chance of passage in the face of Democrats' insistence for more sweeping aid. “The Senate Republican majority is introducing a new targeted proposal, focused on some of the very most urgent health-care, education and economic issues. It does not contain every idea our party likes,” McConnell said in a statement. “I will be moving immediately today to set up a floor vote as soon as this week.” It wasn't immediately clear what the differences, if any, were to an earlier version that Senate Republicans floated last month. Both draft bills excluded the $29 billion for defense that the GOP included in its previous $1 trillion package. The $1 trillion proposal from July contained $11 billion to reimburse defense contractors for coronavirus-related expenses, as authorized by Section 3610 of the Coronavirus Aid, Relief and Economic Security Act. which expires Sept. 30. Defense firms and trade associations have lobbied for an extension of Section 3610 as well as the funding, fearing the Pentagon would otherwise have to tap modernization and readiness accounts. The move comes as lawmakers straggle back to Washington for an abbreviated preelection session, as hopes are dimming for another coronavirus relief bill — or much else. Passage of an extension for Section 3610 and any funding may have a better chance if lawmakers can attach it to and pass a stopgap continuing resolution before Sept. 30, when the fiscal year ends and 2020 appropriations run out. However, defense industry observers were pessimistic on Tuesday. “I don't see any of the COVID package procurement money making it into the CR, and the CR is a high hurdle in any event,” a defense industry source told Defense News. “This Senate bill is a ‘press release' bill and not a piece of legislation that has a chance of passing into law.” Several Republican senators in tough reelection bids are eager to show constituents they are working to ease the pandemic's strain on jobs, businesses and health care. But many Senate Republicans are resisting more spending. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told reporters Tuesday that the GOP conference would discuss the legislation during a meeting on Wednesday. McConnell's move Tuesday would clear the way for a Thursday test vote in which the $500 billion, scaled-back bill — roughly half the size of a measure McConnell unveiled earlier this summer — is sure to be blocked by Democrats. McConnell's bill would provide more than $100 billion to help schools reopen, enact a shield against lawsuits for businesses and others that are powering ahead to reopen, create a scaled-back supplemental jobless benefit of $300-per-week, and write off $10 billion in earlier post office debt. (The National Defense Industrial Association is among groups that have called for a liability shield.) But the bill won't contain another round of $1,200 direct payments going out under President Donald Trump's name. House Speaker Nancy Pelosi, D-Calif., continues to demand $2.2 trillion, and while Trump's negotiators have signaled a willingness to inch further in her direction, a significant gap remains. Pelosi and Senate Minority Leader Chuck Schumer, D-N.Y., rapped McConnell in a statement Tuesday for resisting earlier calls to work on an economic stimulus bill. They called the most recent bill “political” and a nonstarter with Democrats. “As they scramble to make up for this historic mistake, Senate Republicans appear dead-set on another bill which doesn't come close to addressing the problems and is headed nowhere,” Pelosi and Schumer said. The Associated Press contributed to this report. https://www.defensenews.com/congress/2020/09/08/will-gops-targeted-stimulus-include-defense-dollars/