April 2, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

Opinion: Six Ways COVID-19 Could Change Defense Sector

Byron Callan

The coronavirus pandemic is going to be as consequential for defense and security as were the Sept. 11, 2001, attacks in the U.S. For the defense sector, there are multiple implications to ponder and possibly to begin to position for as these play out in 2021 and beyond.

Large contractors should fare relatively well in 2020, compared to other sectors. They will not see the demand destruction that is ripping through commercial aerospace and therefore are unlikely to experience financial duress. That alone may enable them to act strategically and aggressively in 2020 and beyond, although there are risks to weigh as well. Here are six changes to ponder:

First, a crisis the size of the COVID-19 pandemic is bound to spawn new government investment and organization to address future outbreaks. The Sept. 11, 2001, attacks led to the formation of the U.S. Department of Homeland Security and creation of the position of director of national intelligence. It's fair to assume there will be changes in the wake of the current pandemic. Some contractors already have federal services segments that address U.S. health care. Core skills they can bring are dealing with bureaucracies, technology and regulations. There should be new opportunities in 2021 and beyond from whatever changes are made to improve the national resilience and response to future pandemics.

Second, small and medium-size businesses are being stressed. The CARES Act in the U.S. may help somewhat, and changes in Defense Department progress payment rates could be another short-term relief. Large contractors might choose to vertically integrate to improve their fortitude against future shocks. Or there could be further consolidation, particularly of distressed suppliers.

A reintegration of defense and commercial aerospace is a third change that might emerge. The Raytheon-United Technologies merger may be a harbinger of this shift. The ramifications of the coronavirus crisis on the air transport and commercial aerospace sectors could lead to structural changes and a need for capital, particularly in commercial aerospace. If valuations remain depressed in 2020-21 in commercial aerospace, there could be more opportunity for defense contractors to reintegrate.

A fourth change could be to expectations for contractors. The model for U.S. defense since 1945 has largely been that the Pentagon pays for the bulk of research and development, and contractors can reclaim most of their own research and development as an allowable cost for which they are reimbursed. Operating margins have generally risen, compared to levels evidenced in the 1980s and before, and large contractors have in the last 15-20 years allocated most free cash flow to shareholders.

It is conceivable that this model will change in the 2020s. Operating margins may appear to be ho-hum compared to other sectors, but returns on invested capital are attractive.

If there is a greater squeeze on the Pentagon budget and demand for security remains steady or increases, this could compel the Pentagon to change expectations for contractor behavior. Could they be expected to take on more contract risk? Will they need to step up their own independent research and development funding or find more creative ways to access and apply technology to national security needs? On the flip side, could there be more emphasis on dual-use technology investment, as occurred in the 1990s, where research and development for defense should have commercial/civil benefits as well?

A fifth potential change is in security threats and national defense strategies. Some governments and regimes might come through this crisis with their positions enhanced, having overseen relatively mild disruptions and having been able to achieve quick economic bounce-backs. Others, however, will have failed this test, and they could see new political challengers (in democracies) or be overthrown or consumed by internal unrest from competing forces or mass movements that are emboldened by recent failures. The Middle East remains a likely place for these sorts of changes; Venezuela is another. The civil war in Syria and the fighting in Libya are current examples of how state collapse and regime challenge can drag in outside interests.

The U.S. National Defense Strategy that reoriented the Pentagon and contractors toward “great power” competition could be pulled in different directions depending on where fragilities emerge. Some allies may be significantly weakened, and that could bear on U.S. defense planning and export sales. It is not just the coronavirus that matters in this regard; the crash in oil prices is also a factor to weigh.

Finally, the coronavirus has turbocharged federal deficits and is sending federal debt to record levels. It may take weeks or months to assess just how much is going to be added, but there will be a fourth and possibly a fifth stimulus package in the U.S. Ultralow interest rates and the urgency of limiting social and economic damage and keeping the health care system functioning make this tolerable. But higher debt raises the risk in the 2020s that if rates increase, interest outlays could weigh on defense.

https://aviationweek.com/defense-space/opinion-six-ways-covid-19-could-change-defense-sector

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July 22, 2020 | International, Aerospace

New Air Force Arctic Strategy May Update Planes For Polar Ops
"Historically the Arctic, like space, was characterized as a predominantly peaceful domain," the Air Force Secretary Barbara Barrett said. "This is changing." By THERESA HITCHENSon July 21, 2020 at 4:58 PM WASHINGTON: As part of its new Arctic Strategy released today, the Air Force is eyeing how to modernize mobility aircraft capable of polar operations, improve existing bases, and expand allied cooperation as it gears up to face increased challenges in the region from Russia and China — as well as the changing environment. “Historically the Arctic, like space, was characterized as a predominantly peaceful domain,” Air Force Secretary Barbara Barrett told the Atlantic Council Tuesday afternoon. “This is changing with expanded maritime access, newly discovered resources, and competing sovereign interests.” The new Air Force strategy document, which follows from Department of Defense's 2019 Arctic strategy, touts the service's extensive northern network of airbases and radar stations. The study even says that the service is responsible for “close to 80% of DoD resourcing to the Arctic region.” Now, that surprising figure is sourced to a single DoD paper from 2016, and the Navy submarine force, which regularly sails under the ice and holds an annual ICEX, might challenge that contention. As Breaking Defense readers are well aware, the Navy has been ramping up efforts in the Arctic over the past year, and new Navy Secretary Kenneth Braithwaite is a former ambassador to key regional ally Norway. In Tuesday's event, the Air Force Chief of Staff, Gen. David Goldfein, was politic enough to emphasize that the service is working closely with the other services, especially the Navy, and with the joint Combatant Commanders to ensure “seamless” joint operations in the region. In particular, he referred to the ongoing series of Global Integration Exercises — launched by former Chairman of the Joint Chiefs of Staff Joseph Dunford — that are designed to allow more fluid operations across and between Combatant Commands. Indo-Pacific Command, European Command, and Northern Command (which covers North America) all have jurisdiction over pieces of the Arctic. Sec. Barrett cited DoD's familiar litany of concern with Russian and Chinese aspirations and activities in the far north. “No other country has a permanent military presence above the Arctic Circle comparable to Russia's. Recent Russian investments in the Arctic include a network of offensive air assets and coastal missile systems,” she said. (Of course, no country has as long an Arctic coastline as Russia, either, and Russian leaders remember the US and other Western powers staged a desultory intervention in Siberia in 1918-1920). China, she added, is setting potentially “predatory” eyes on newly opened access to natural resources, including oil. “China is not an Arctic nation by geography, but through its One Belt, One Road initiative It has laid the claim to an Arctic role, and has become an observer to the Arctic Council,” she said. “We're perfectly prepared to accept fair and benevolent action there and having China as a participant, but we will be attentive to overreaching.” The strategy, signed by Barrett, Goldfein, and Space Force/Space Command head Gen. Jay Raymond, lays out four lines of effort along with the sub-elements of each: “Vigilance in All Domains; Projecting Power through a Combat-Credible Force; Cooperation with Allies & Partners; and, Preparation for Arctic Operations.” Barrett said that the “vigilance encompasses everything from weather forecasting and consistent communications to threat detection and tracking.” The strategy document further notes that missile defense and space capabilities — including intelligence, surveillance and reconnaissance (ISR) and all-domain awareness — also are key to the mission. As for power projection in the region, Barrett mentioned in particular the Air Force's deployment of F-35 stealth fighters to Alaska as critical in enhancing capabilities. The service is in the process of moving some 54 F-35s to Eielson AFB in Fairbanks. “When the full complement of planned F-35s arrive at Eielson Air Force Base, Alaska's unparalleled concentration of fifth-generation fighters will project unmistakable influence,” Barrett said. She also noted that the service is looking at recapitalization of Lockheed Martin's LC-130, the ski-equipped polar version of the C-130 Hercules transport plane. The Air National Guard currently has 10 operational LC-130H aircraft, according to the service's 2021 budget documents. “The LC-130s have been pivotal to getting access to terrain that otherwise would be inaccessible,” Barrett said. “So the LC-130 is very important, and recapitalizing is a significant issue to us.” “The Air Force will advance recapitalization and explore modernization of existing and emergent polar mobility platforms that are critical for reaching remote areas,” the new strategy says. In addition, the strategy emphasizes efforts to sustain and modernize bases in Alaska and at Thule, Greenland to allow regional power projection. As Breaking D readers know, Gen. Terrence O'Shaughnessy, head of Northern Command, is particularly interested in upgrading command, control and communications (C3) capabilities in the Arctic. Raymond told the Atlantic Council webinar that one of the new challenges for Arctic infrastructure is dealing with new challenges cropping up due to the warming climate. “What has changed is the thawing and the melting of the permafrost,” he said. “It can have significant challenges on our infrastructure. It can cause foundations of buildings and equipment to shift. It can impact the structural integrity of those facilities .. for example cause increase runway maintenance,” he said. Goldfein stressed the strategy's high priority to enhance operations with NATO and regional allies, including Canada, Denmark and Norway. “You know only through cooperation with our allies will be be strong in Arctic or any other location in the globe,” he said. But he also said DoD and the Air Force should be making an effort to establish rules of the road and norms of behavior in the Arctic, and reaching out to Russia to identify mutual interests. “So, the question is: are there areas of common interest we can find above the 66th parallel that perhaps we're not able to find below?” Goldfein said. “There has to be a few areas of common interest that we can find where we can be better together than we are separately.” https://breakingdefense.com/2020/07/new-air-force-arctic-strategy-may-update-planes-for-polar-ops
October 23, 2020 | International, Aerospace

European nations should shape their air-combat fleets to support the F-35, US analysts say
By: Sebastian Sprenger COLOGNE, Germany — European NATO nations without the fifth-generation F-35 combat jet should mold their fleets to complement the U.S.-developed aircraft in future operations, according to a new report commissioned by U.S. European Command. The analysis, done by the think tank Rand and published Oct. 22, ascribes such a vital advantage to the F-35′s stealth and sensor-fusion features that the jet would be the only aircraft suitable for an initial contact with Russian forces in the event of a conflict. Following that logic, European nations that have already signed up for the Lockheed Martin-made jet should hone their tactics toward that initial engagement, and countries with less advanced aircraft should strive to maximize their ability to complement such an operation, the authors argued. The United Kingdom, the Netherlands, Denmark, Norway, Belgium and Italy are European NATO members in various stages of getting F-35 aircraft. One tier below that, in the eyes of Rand analysts, are countries like Germany or France whose Eurofighter and Rafale fleets, respectively, have sensors advanced enough to be considered “fourth-generation-plus” aircraft. The report's recommendations are based on the hypothetical premise of a Russian land grab on the alliance's eastern flank. “One common scenario considers a calculation by the Russian government that Russia could leverage a regional imbalance in ground forces to occupy some slice of NATO territory, employ air defenses to stave off allied air forces, present a fait accompli similar to that seen in Crimea, and politically divide NATO by calling for negotiations,” the document stated. “The ability of European fifth-generation fighters to penetrate Russian air defenses and make significant combat contributions from the opening hours of a response — at the vanguard — would most likely challenge the logic behind this scenario, improving deterrence by increasing the Russian risks associated with this approach.” The observation follows the belief, which the authors propose is shared by Russia, that NATO forces have the upper hand in air-combat capability, whereas Moscow has the lead in ground forces. To be sure, the Rand analysis covers only one dimension in a potential confrontation with Russia. Air and naval assets as well as cyber weapons for information warfare would also shape the battlefield in potentially unpredictable ways, not to mention any surprise capabilities that either side could throw into the mix to nullify the opponent's technological advantage. The problem for European nations' fourth-generation and “fourth-generation-plus” aircraft, which lack stealth capabilities, is the inability to get close enough to targets without getting shot down by sophisticated air defense weapons, according to Rand. The key to making the best of the continent's aircraft mix is developing the fleets with greater interoperability in mind, the analysts argued. In that sense, non-stealthy combat planes, which typically can carry more weapons than the F-35, still have an important role to play after more advanced fighters clear any ground-based threats. European nations are studying two versions of a sixth-generation weapon for air combat, namely the Tempest project (led by the U.K.) and the Future Combat Air System (led by France and Germany). Those aircraft ideas are slated to come online around 2040, which puts them outside of the scope of the Rand analysis. https://www.defensenews.com/global/europe/2020/10/22/european-nations-should-shape-their-air-combat-fleets-to-support-the-f-35-us-analysts-say/
August 20, 2019 | International, Aerospace

New F-35 Modification Facility Brings Strategic Capability to FRCE
By Heather Wilburn, Fleet Readiness Center Public Affairs MARINE CORPS AIR STATION CHERRY POINT, N.C. (NNS) -- A recently-completed facility will bring a new strategic capability to Fleet Readiness Center East (FRCE) and the F-35B Lightning aircraft line next year. When the new F-35 laser shock peening facility is fully operational in 2020, FRCE will be one of two sites in the world that will use laser technology to strengthen F-35 structural components. Construction of the $6 million facility wrapped in July, and the contractor providing the laser shock peening service will take occupancy in early spring, said Donald Jeter, portfolio manager of the F-35 aircraft line at FRCE. Under that timeline, the first F-35 aircraft inducted for laser shock peening would arrive in June to undergo the validation and verification process, and then the depot will begin work on the remainder of the F-35 fleet that requires the laser shock peening modification. “This facility is a big get for Fleet Readiness Center East,” Jeter said. “It's very exciting. Being able to perform this laser shock peening process adds a huge strategic capability to our depot. With it, we'll be able to provide a critical support element to the F-35B program and act as a force multiplier for the fleet and the warfighter.” The 16,000-square-foot facility comprises two bays, where the actual laser shock peening process will take place, and a connected area that will house the laser generator. The state-of-the-art laser shock peening process will allow FRCE to conduct heavy structure modifications that will strengthen areas of the F-35's airframe without disassembling the entire aircraft, said Matthew Crisp, the F-35 Joint Program Office site lead at FRCE. The process strengthens designs without adding additional metal or weight, which increases the aircraft's life and reduces maintenance costs. It has been used on the F-22 Raptor and in manufacturing aircraft components including engine blades, Crisp said, but has never been employed for the F-35. Now, FRCE will use the technology to help Marine Corps aircraft reach their full life limit. Aircraft maintenance professionals at FRCE will conduct prep work and some structural modification on the F-35s inducted into the depot, then turn them over to the contractor running the laser shock peening operations. The contractor will complete the process to strengthen the bulkheads and airframes, and FRCE will put the jets back together, perform all the flight test functions and get them back out to the fleet, Jeter said. The end result is aircraft that have been reinforced without adding additional weight, which would reduce the fighter's capabilities by limiting its fuel or weapons carrying capacity. Shot peening is not a new process, Crisp said, but laser shock peening is unique in that it produces a uniform result across the surface being treated. In laser shock peening, the surface of the media is first coated with an ablative layer and covered with a water tamping layer. A high-energy laser beam is fired at the metal, which creates an area of plasma on the metal's surface. The impact creates a shock wave, which travels through the metal, and compressive residual stresses remain. This compression helps improve the metal's damage tolerance, fatigue life and strength. “(Shot peening) has been done for decades,” he explained. “It's where you take a solid media, like glass beads or some kind of metal, and you hit the surface of an item – kind of like sandblasting. You just randomly throw it at the surface, and it creates all these surface dimples. What you get is a very inconsistent surface profile, because it's not controlled.” With laser shock peening, the process is very controlled, Crisp said. “They create a laser beam that's actually square, and the intensity is consistent across the entire laser beam – it's the exact same at the very edge of the beam as it is in the middle,” he said. “They come up with a grid pattern and stack the squares up right beside each other, so the entire surface of the part is completely uniform. You don't have the weak spots in between these areas that would then induce cracking later.” Jeter said he expects laser shock peening to be a main focus of the F-35 line for the next four to five years. Once the first two aircraft have undergone the validation and verification process, it will be a sprint to the finish to complete modifications on the remainder of the F-35B fleet that requires this treatment. “After that val/ver event, the aircraft will basically be nose-to-tail,” Crisp added. “We'll completely fill every aircraft stall that's here, and for the next five years, when one leaves another will come in. That's critical, because this process has to be done on every single airplane that requires it.” The workload does not include every F-35 ever produced, although it does include B and C models, and also encompasses F-35 aircraft owned by partner nations. FRCE will focus solely on the B variant, while Ogden Air Force Base in Utah will work on the F-35C models and take any F-35B overflow. After the first round of laser shock peening modifications, what comes after that is still to be determined, Crisp said. “I'm sure there will be some follow-on work,” he said. “And beyond the F-35 program, this is a little bit exciting, because this really is cutting-edge technology and we have it here at FRCE. I think maybe within the engineering community here, as people find out more about it, they may open additional discussions about how we could implement this on other aircraft lines. We might find a future capability we want to look at.” FRCE is North Carolina's largest maintenance, repair, overhaul and technical services provider, with more than 4,200 civilian, military and contract workers. Its annual revenue exceeds $720 million. The depot generates combat air power for America's Marines and Naval forces while serving as an integral part of the greater U.S. Navy; Naval Air Systems Command; and Commander, Fleet Readiness Centers. https://www.navy.mil/submit/display.asp?story_id=110618

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