France, UK strengthen military relations — but future fighter jet cooperation ‘not yet there’

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  July 31, 2020 | International, C4ISR

  Exclusive: As Japan weighs missile-defence options, Raytheon lobbies for Lockheed's $300 million radar deal

  TOKYO (Reuters) - U.S. defence company Raytheon (RTN.N) is lobbying Japanese lawmakers to replace Lockheed Martin Corp (LMT.N) as the supplier of powerful radars as Tokyo reconsiders plans for two Aegis Ashore missile defence sites, three sources said. “It's game on,” said one of the sources, who has direct knowledge of Raytheon's lobbying campaign. Raytheon's pitch includes a proposal to put its SPY-6 radar on refitted destroyers, as the U.S. Navy plans to do. The company says that would save money and time as Japan tackles new missile threats, drones and stealth aircraft. Lockheed Martin has a contract with Japan to build its $300 million SPY-7 radars at the two cancelled Aegis Ashore sites, but says other sites or ships are possible. But critics say dedicating ships to missile defence pulls them away from other duties, and new destroyers can cost hundreds of millions of dollars. And Japan could face financial penalties if it pulled out of its contract with Lockheed Martin. “We are looking at the various options available to us,” a defence ministry spokesman said. A key battle for the two companies will be winning the support of former defence ministers and deputy ministers who as early as next week will make recommendations to Prime Minister Shinzo Abe. That group, led by former defence minister Itsunori Onodera, formed in June after current defence chief Taro Kono suspended the Aegis Ashore plan. It has weighed in on missile defence and discussed proposals that Japan acquire strike weapons for that mission, Japanese officials have said. The group of lawmakers will release their recommendations on Friday after they present them for approval to the ruling Liberal Democratic Party's defence policy committee, Onodera told reporters after the group met on Thursday. Japan under Abe has beefed up its military with stealth fighters designed to fly off carriers, longer-range missiles, new amphibious units and stronger air defences meant to deter threats from neighbours, including North Korea and China. Kono said he ordered the Aegis sites relocated because rocket boosters that accelerate interceptor missiles into space could fall on residents. But concern over mounting costs was the main reason for that decision, according to the three sources. ADVERTISEMENT China is rapidly expanding and improving its ballistic missile arsenal, and in 2017 North Korea tested a missile that flew over the Japanese island of Hokkaido. With around three times the range of radars currently used by Japan, both SPY-6 and SPY-7 would greatly enhance Japan's ability to detect multiple attacks. One option for Japan that would avoid any political fallout would be to buy both radars, using SPY-6 on Aegis ships and deploying Lockheed's SPY-7 as an early warning radar, one of the sources said. CHOICE Onodera's backing would make that change more likely because he approved the Lockheed Aegis radar acquisition two years ago. At the time he was unaware that testing in Hawaii could add at least $500 million to Aegis Ashore's $4 billion budget, separate sources told Reuters last year. In an interview in the Asahi newspaper on Thursday, Onodera said the “ideal option” for Japan would be to find a safe ground-based location. He also noted that building Aegis ships would cost both money and manpower. Onodera's office declined an interview request, but one source familiar with his position on the radars described him as “flexible.” Masahisa Sato, a former deputy defence minister who also served as a deputy minister of foreign affairs, said Japan's choice is between SPY-7 at new sites, with the missile launchers deployed elsewhere, or building Aegis ships equipped with SPY-6. “I am recommending an increase in Aegis ships,” he said. “SPY-7 is under development and there is a question about how it would perform in a new configuration,” Sato added. Lockheed Martin said its system could be adapted to ships, and disputed questions about performance. “SPY-7 radar is the most advanced radar in the world today and we believe it is the best solution for Japan's defence needs,” the company said in an e-mail. For its part, Raytheon said the SPY-6 will be deployed on 50 U.S. Navy ships, calling it the “most advanced radar technology in production today.” https://www.reuters.com/article/us-japan-defence-aegis-exclusive/exclusive-as-japan-weighs-missile-defence-options-raytheon-lobbies-for-lockheeds-300-million-radar-deal-idUSKCN24V0VQ

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  April 24, 2020 | International, Aerospace

  What To Watch For As A&D Companies Plan Future With COVID-19

  Michael Bruno Companies have good quarters and bad quarters, but rarely does a whole industry sound like it just got sucker-punched. That's what the next few weeks will be like in the aerospace and defense sector, and for sure there will be headlines describing industrial carnage as the industry gasps for air and works to recover after COVID-19. The truth is the aerospace and defense (A&D) supply chain suddenly is far too large for what is needed, maybe by a quarter or a third of excess capacity. As a result, quick or methodical cutbacks in manufacturing and services are expected throughout the syndicates that make airliners, business jets and other aircraft. As public companies report their latest quarterly financial results in late April and May, they will have to address the year ahead and offer insight into their response plans. Unfortunately, business as usual prior to COVID-19 is not expected until 2022 or later, according to numerous analysts and advisors. And that is just too long to carry extra financial costs, which means all levels will feel pain. “The COVID-19 decline is a serious risk for commercial OEM plays—Boeing, Spirit AeroSystems, Allegheny Technologies, Hexcel, Howmet Aerospace, Triumph Group and Carpenter Technology,” Cowen analysts say. “Aftermarket ‘relative safe havens' Honeywell International, Heico and TransDigm Group also face stiff near-term headwinds, with more serious risks at General Electric.” If OEMs and their Tier 1 and 2 suppliers are already cutting their workforces, slashing executive salaries and suspending shareholder returns—as dozens have announced since the novel coronavirus began sweeping through the U.S. in March—then it is easy to imagine that much lower tiers with their even thinner margins could face existential reckonings. “People who didn't plan for it were unreasonably naive,” asserts Avitas consultant Adam Pilarski, a longtime expert who espoused a bearish view on commercial aviation long before the Boeing 737 MAX crisis started gumming up business models. “There is no magic potion here. You will have less production.” While Pilarski's comment may come across as harsh, it accurately describes the depth of the coming paradigm shift for commercial aviation. Yes, perhaps it was too much to have asked OEMs and suppliers to model for a 95% collapse in passenger air traffic and two-thirds of large commercial aircraft fleets getting parked—including brand-new deliveries. But practically no one seemed to imagine simultaneous cuts to new orders, standing backlogs and aftermarket revenue streams. Indeed, Pilarski was one of the few who envisioned an environment with much less than the traditional 5% annual growth in air traffic. That is now changing: Airbus has revealed narrowbody and widebody production rate cuts of about a third, and Boeing is expected to follow suit any day. According to Credit Suisse analysts, such sudden rate changes will have a materially negative impact on the supply chain because the effect is exponential. “[The supply chain] will need to cut production by much more as Airbus consumes its inventories—for instance, potentially going to rate 20 on the A320 for some months and ramping up again to 40,” the Credit Suisse analysts say. Boeing's inventory—including roughly 800 MAXs that are backed up with its customers and supplier Spirit AeroSystems and are waiting to join its own fleets—is worse. Still, it is not that simple to look at customers such as Airbus and Boeing and draw a direct line to suppliers to guess their fate. While the vast majority of publicly traded A&D companies have shelved the 2020 forecasts they offered just weeks before, almost no one has outlined new plans. For one thing, few suppliers had even received change orders as of early April, Ken Herbert of Canaccord Genuity says. Here are three factors to watch for in earnings reports to discern how the supply chains will change. First, how much U.S. government aid will companies receive? This is a significant variable, and as of mid-April, we still did not know how much even sector leader Boeing will receive (presuming it does). “Most suppliers we have spoken with are still waiting for more clarity on the exact terms available under the CARES Act,” says Herbert, who has deep ties in the A&D supply chain. Meanwhile, many public companies have been able to tap short-term financing or debt markets to boost liquidity—a testament to their prior investment grades. Second, the supply chain has experienced robust vetting and stress-testing over the past decade. Did it work? Record growth, record mergers and acquisitions, and record private equity involvement have dramatically consolidated industry (for better or worse). Yes, it meant elimination of countless companies, and some smaller survivors remain stressed by technology investments and meager working capital accounts. But top-tier companies have been working to eliminate chokepoints and shore up weak links in their supply chains for the last few years, ironically as they sought to raise rates. Finally, many companies became less susceptible one way or another, especially through revenue diversification (see chart). Take the new Raytheon Technologies, the first supplier to rival its OEM customers in annual sales. Manufacturers elbowed into the aftermarket; commercial providers and defense suppliers tapped into each other's markets; and venture capitalists and billionaire competitors entered into and prodded new technology advances that legacy industry had resisted funding, among other trends. Will this lead to resilience? Some think so. “In many ways, the supply chain is now more mature, diversified and well-positioned to handle this economic downturn versus in 2001 and 2008,” says Alex Krutz, managing director at Patriot Industrial Partners, an advisory firm focused on operations and supply chain. “A large number of suppliers over this last decade have taken significant steps to ensure their long-term success.” There are sure to be industrial casualties as A&D faces its greatest business falloff in history. We should mourn the loss of skilled workers and devoted people who are forced to exit the sector, but there are still new aircraft to build. And there will be supply chains to do it. https://aviationweek.com/aerospace/manufacturing-supply-chain/what-watch-ad-companies-plan-future-covid-19

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  September 13, 2019 | International, Aerospace

  Britain kicks off competition to manage ground stations for next Skynet satellite program

  By: Andrew Chuter LONDON — Britain's defense secretary has fired the starting gun on an industry competition to manage the ground station element of the £6 billion Skynet 6 communications satellite program. “I can announce the launch of a new competition for an industry partner to operate and manage the ground stations, infrastructure and technology involved in this [Skynet 6] program,” Secretary of State for Defence Ben Wallace said in a speech at the DSEI defense exhibition in London Wednesday. The invitation to industry players could see incumbent ground service provider Airbus lose the contract after more than 15 years operating ground stations and satellites in the Skynet 5 private finance initiative deal with the British Ministry of Defence. The ground station service deal with Airbus comes to an end in 2022. Earlier MoD briefings to industry said they envisioned a contract award to the winning bidder around August next year. Julian Knight, head of networks at the MoD's Information Systems and Services organization said the government was about to enter a vital phase of the program. “We are seeking an innovative partner that will ensure effective and consistent defense satellite communications and will look to continually maximize performance and value for money,” he said. “The successful bidder will also negotiate the MoD's access to commercial satellite services, as well as managing the U.K.'s contribution and access to systems owned and operated by the U.K.'s allies,” said Knight. Ken Peterman, president of government systems at Viasat, said he was pleased at the references to commercial capabilities being adopted as part of the program. “ We are very encouraged by today's Skynet 6 announcement as it further demonstrates the value of commercial satellite trajectories and the need for an ecosystem that will allow war fighters to use both commercial and MoD purpose-built capabilities as one seamless enterprise.” It's not clear whether the British intend to use the Skynet 6 ground stations for non-communications satellite applications in the intelligence, surveillance and reconnaissance sector. Airbus wasted no time officially declaring it would be bidding for what's known as the service delivery element of the Skynet 6 program, and rivals are expected to follow suit in the next few weeks. “Airbus has an outstanding track record of being the pioneer of secure mil satcoms within a commercial framework....We look forward to offering the MoD a modernized and enhanced service with Skynet 6,” said the European-based company in a statement. Inmarsat, Viasat, Serco, Lockheed Martin UK and others are also expected to submit bids either leading or partnering in competing consortia. A spokeswoman for Lockheed Martin U Kconfirmed the company is “interested in participating” in the service delivery competition. The service delivery element of the program is the first part of a wider Skynet 6 program also planned to include a raft of capabilities to provide next generation non-line of sight communications. The competition for that element, known as enduring capability, is expected to get underway with an invitation to tender in the first quarter of 2020. Some of the same companies interested in the ground station portion of the deal will be pitching for the future capability requirement. Airbus is the main satellite player here but Lockheed Martin has been ramping up its U.K. space credentials and others like Viasat are also rapidly expanding their presence. Airbus, the European space leader, has already secured a contract with the British to provide a new satellite known as Skynet 6A for capabilities to supplement the four Skynet 5 satellites currently in operation. Airbus was selected for 6A without a competition over a year ago, but the deal has yet to be signed. A spokesman for Airbus in the U.K. confirmed the satellite contract had not been sealed but said he was optimistic the deal would be completed by the end of the year. The in service date for the satellite is targeted for mid2025. Beefing up space capabilities has become a top priority for the British and the threat posed by rival nations was referenced by service chiefs speaking at the DSEI show. Wallace referenced it as well. “Today we're having to deal with increasing threats to satellite-based navigation and the need for robust communications has never been more vital," he said. “That's why we're developing Skynet 6, which will give our forces unparalleled capacity to talk to each other in any hostile environment.” The British announced earlier this year they are collaborating with the U.S. on a project known as Artemis, aimed at researching the military potential of launching a constellation of small satellites. The goal is to launch a demonstrator vehicle within 12 months. Small satellite development is pretty much dominated by the British, primarily through the Airbus owned Surrey Satellites Technology. The British are also the first international partner to formally sign up for a little talked about U.S.-led coalition effort called Operation Olympic Defender, aimed at strengthening allies' ability to deter hostile actions by nations like Russia and China. Despite the new urgency to build a space capability, the British have still not published their long awaited space defense strategy detailing how the military intends to develop its space thinking in the decade ahead. Air Chief Marshal Mike Wigston, who recently took over as the chief of the air staff, declined to say when the document might surface or why its publication has been delayed for more than a year. Industry executives though were more forthcoming. One executive, who asked not to be named, said one of the principal reasons for the delay was the haggling between Joint Forces Command and the Royal Air Force over who would end up controlling Britain's military space activities. https://www.c4isrnet.com/c2-comms/satellites/2019/09/11/britain-kicks-off-competition-to-manage-ground-stations-for-next-skynet-satellite-program/