Opinion: How The 2020 Election Is Likely To Affect Defense

On the same subject

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  October 4, 2019 | International, Aerospace

  Leonardo: Europe Should Have Role In Future Vertical Lift

  Tony Osborne The managing director of Leonardo's helicopter business says he would like to see a role for European industry in the programs that emerge from the U.S. Army's Future Vertical Lift (FVL). Gian Piero Cutillo told Aerospace DAILY on the sidelines of the 1,000th AW139 helicopter delivery in September that the European helicopter industry had generated the competencies to make it a useful partner in such a program, and said the company was in continuous talks with different partners but “there is nothing concrete.” European industry points to the F-35 Joint Strike Fighter program, which while securing significant sales in Europe has had an impact on the sales of European-built combat aircraft. There is a fear that with the volume of FVL platforms likely to be purchased by the U.S., their price could make FVL an attractive proposition for export customers. Sikorsky's Black Hawk has secured an increased customer base, particularly in Eastern Europe in recent years. The U.S. Army's work on a Future Long-Range Assault Aircraft (FLRAA) and Future Attack Reconnaissance Aircraft (FARA) is beginning to attract attention from European nations, with the U.S. Army planning to begin sharing information with allies shortly. The UK already has personnel embedded into the FVL program and is working on an operational analysis of its future helicopter fleets, with a focus on what high-speed rotorcraft can offer UK land forces. “From my heart, I would like to see European industry become one of the main actors. I strongly believe we have all the capabilities,” Cutillo said. “We are talking about what will be a global program, with more than one technology and room for the traditional technology as well.” Any FVL partnership should not be like that of previous programs, Cutillo said. European industry has already begun the development of high-speed rotorcraft, such as Leonardo's AW609 tiltrotor, Airbus' X3 compound helicopter and a future development of the latter, the Rapid And Cost-Efficient Rotorcraft (RACER). But so far they are targeted to the commercial market. An Airbus proposal for FARA, believed to use the X3 technology, was rejected earlier this year, with only U.S.-based companies awarded contracts. The Italian military is said to be interested in purchasing the Leonardo tiltrotor. But contractual limitations imposed by Bell, which was previously a partner on the AW609, stipulate that the aircraft cannot be offered with armaments. It is unclear whether these limitations extend to future tiltrotor models. Leonardo is investigating future tiltrotor technologies through the European Union Clean Sky 2 program, with a technology demonstrator, the Next Generation Civil Tilt Rotor, due to fly in 2023. https://aviationweek.com/vertical-flight/leonardo-europe-should-have-role-future-vertical-lift

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  October 29, 2021 | International, Aerospace

  Lockheed predicts Aerojet acquisition will close next quarter

  Lockheed Martin's $4.4 billion acquisition of Aerojet Rocketdyne is expected to close in the first quarter of 2022, one quarter later than expected.

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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