Pratt & Whitney wins $4.4 billion contract for F-35 engines

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  February 1, 2024 | International, Aerospace

  General Atomics demos 3-D printed air-launched effects vehicle

  The company partnered with Divergent Technologie. to design and build the 100% additive-manufactured Advanced Air-Launched Effects vehicle.

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  August 19, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

  Market exposure in the Top 100: Defense, commercial aviation and much more

  By: Doug Berenson and Chris Higgins This year's Defense News Top 100 list of global defense companies coincides with a steep economic downturn created by COVID-19. Although the defense sector has faced pandemic-related business disruptions, it remains a safe haven, with most defense-oriented firms reporting only modest impact on revenues and profits. Seeing how diversified players rely on their defense units is of particular interest at a time when the commercial aviation market has all but collapsed. While many defense firms are bracing for stagnation in defense-spending growth, other markets could experience an extended downturn. Avascent drew on the Top 100 list to examine the broader mix of market exposure among firms comprising the global defense industrial base. We segmented company revenues across more than two dozen defense and commercial end markets. This analysis provides insight into how companies with defense business leverage exposure to other markets, either as a complement or as a hedge to their defense activities. One can think of defense companies in three categories: Defense/government pure-plays: Companies that focus overwhelmingly on military markets generate about 23 percent of the defense-oriented revenue on this year's list. To the extent these companies have revenue outside defense, it comes from close adjacencies in intelligence, civil space or others. Indeed, the top ranks of the Defense News Top 100 list includes numerous firms for whom defense and government comprise 85 percent or more of total revenue. Lockheed Martin, Northrop Grumman, BAE Systems, LIG Nex1, and Huntington Ingalls Industries and many others fall in this category. BAE Systems and L3Harris maintain significant positions in the commercial aviation supply chain, but these activities represent a small portion of their total revenues. The unique demands of military and government markets — complex acquisition processes, challenging sales channels, burdensome regulatory compliance — has led many leading defense players to maximize their position across the defense product range. These frustratingly unique features of government customers have deterred many commercial technology firms from pursuing this space, a fact that the U.S. Department of Defense is struggling to reverse. Firms in this category have optimized their financial management, business development and other processes to the particular demands of government customers. Within government markets, the different economics that characterize the sale of products and services has increasingly led to the separation between these two distinct segments. Many of the market leaders in U.S. government services, including Leidos, Booz Allen Hamilton, CACI International, SAIC and others, feature a near-exclusive focus on government customers. A range of firms providing such services continue to find business with both the government and commercial clients, to be sure, including Bechtel, Jacobs, Babcock International and KBR, to list just a few on this year's Top 100 list. But companies with a significant focus on mission-oriented requirements have increasingly focused solely on government customers. Commercial and defense sectors: Nearly 60 percent of the defense revenue tracked in the Top 100 list comes from firms that compete in sectors that cross the defense-commercial divide. These include shipbuilders and automotive manufacturers, but the vast majority of firms serving both defense and commercial customers are focused on commercial aerospace. A range of firms recognize the unique complementarity between military and commercial aerospace technology in their business mix. Airframe primes like Boeing and Airbus are chief among these, sitting atop vast aerospace supply chains. But many other household names have sought opportunity in commercial aviation, either as airframe primes (General Dynamics via Gulfstream, Textron via Cessna) or as suppliers of avionics, structures, and other content. Because it calculates 2019 revenue, this year's Defense News list does not count Raytheon Technologies, which was created with the merger of Raytheon Company and United Technologies Corp. in April 2020. The new “RTX” would have pro forma 2019 revenue of about $43.4 billion in defense and $33.7 billion in commercial markets; this excludes Otis (elevators) and Carrier (air conditioners), which were spun off concomitant with the Raytheon-UTC merger. Many firms with heavy commercial market exposure now face unprecedented economic headwinds. Between March 1 and Aug. 1, 2020, stock prices for firms spanning defense and commercial aerospace declined by 33 percent, as global air travel nearly ground to a halt amid the coronavirus pandemic. By contrast, an index representing defense/government pure-plays has dropped by just 5 percent over the same period. Conglomerates were in the middle, declining about 16 percent. The silver lining, however, may be the ability of some companies to draw on defense-related cash flows to sustain commercial aerospace investment in preparation for an eventual upturn. Industrial conglomerates: Finally, there are firms with a foot squarely in defense but which also pursue markets far afield, in terms of customer types and market economics. About 18 percent of the defense revenue tracked in the Top 100 list is earned by firms with interests that have almost no technical or customer link with defense. Large Asian conglomerates — including China North Industries Group Corporation Limited, also known as NORINCO; Japan's Mitsubishi Heavy Industries; and South Korea's Hanwha — top this category in total revenue. But several Western firms also follow this approach to varying degrees: Textron, Ball Corporation, Diehl Group and others combine widely disparate product lines in a holding company structure. With defense versus commercial valuations relatively high, there may be competing instincts in the boardrooms of these giants. On one hand, these companies may decide to reorient their portfolio more toward defense activities by exiting underperforming industrial businesses. On the other hand, firms could elect to use defense cashflows to support the broader corporation and position the company for an economic rebound. Trends to monitor While defense budgets could face downward pressure in much of the world, many U.S. contractors have good predictability through 2021 because of DoD outlays already in process. It is the wider commercial economy where the real uncertainty lies. This makes it hard to predict how many firms active in defense markets will fare over the next year, given the variety of other markets they serve. Over half the revenue earned by the Defense News Top 100 is generated from commercial sectors. Commercial aviation markets are likely to languish at pre-2019 levels through 2022 or later. The outlook for other commercial markets is more heterogeneous, but challenges exist across areas like shipbuilding, automotive, industrial equipment and energy. To the extent that countries pursue infrastructure-led stimulus, some of the more diversified companies may find pockets of sunshine amid the gloom. Doug Berenson is a managing director at Avascent, where Chris Higgins is a principal. https://www.defensenews.com/opinion/commentary/2020/08/17/market-exposure-in-the-top-100-defense-commercial-aviation-and-much-more/

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  September 29, 2020 | International, C4ISR

  Britain’s new Protector drone completes maiden flight

  Andrew Chuter LONDON — British efforts to introduce a new family of long-endurance, medium-altitude drones has moved a step closer with an announcement by the Ministry of Defence Sept. 28 that the first General Atomics Protector RG Mk1 off the production had made its maiden flight. The MoD said the first production version of the drone flew in California on Sept. 25. The flight comes just over two months after the British announced they had inked a £65 million (U.S. $83 million) deal with General Atomics Aeronautical Systems to supply the first three of an expected fleet of at least 16 drones. Three ground control stations and other associated support equipment were also included in the deal. The contract contains options for a further 13 air vehicles and supporting equipment valued at around £180 million. A commitment for the additional drones could come in April next year. Progress with the Protector test schedule follows a two-year delay imposed on the program by the MoD in 2017 after the British ran into wider defense budget problems. The delay was primarily responsible for a 40 percent hike in Protector program costs, top MoD official Stephen Lovegrove said in a letter to the Parliamentary Public Accounts Committee published earlier this year. The Protector vehicles will replace General Atomics Reaper drones widely used by the Royal Air Force in operations in Afghanistan and the Middle East, most recently providing reconnaissance, surveillance and strike capabilities in the fight against the Islamic State group in Syria and Iraq. Protector is the British version of General Atomics latest Predator variant, the MQ-9B Sky Guardian. The RAF drone will fly longer and, armed with Brimstone and Paveway IV precision weapons, hit harder than the Reaper. Crucially, the machine is also in line to be approved to fly in non-segregated airspace in places like the U.K. British Defence Minister Jeremy Quin said the inaugural flight of the production drone was a welcome step in development. “With increased range and endurance, greater ISR and weapons capacity and improved weather resilience, Protector will play a vital intelligence and deterrent role in countering future threats,” he was quoted as saying in a statement. For the moment the first Protector will stay in the United States to support systems testing as part of an MoD, U.S. Air Force and General Atomics team. Following completion of the work the drone will be delivered to the MoD in the summer of 2021. The platform will continue to be based in the United States to allow the RAF to complete its test and evaluation program. Operating from its base at RAF Waddington, eastern England, Protector is scheduled to enter service by mid-2024. https://www.defensenews.com/global/europe/2020/09/28/britains-new-protector-drone-completes-maiden-flight/