June 7, 2023 | International, Other Defence
New hypersonic testing facility could boost US development
The new facility houses two wind tunnels and an advanced manufacturing technology center intended to improve materials and production processes.
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.
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February 26, 2020 | International, Aerospace
FARA: Five-Way Fight For Army’s Future Scout
By SYDNEY J. FREEDBERG JR. WASHINGTON: After four decades of failed attempts to replace its Vietnam-vintage OH-58 Kiowa scout, next month the Army will choose two of five competing teams to build prototypes for a new Future Attack Reconnaissance Aircraft. Those prototypes, in turn, will compete for a mass-production contract in a 2023 “fly off,” with deliveries no later than 2028. A new scout is urgently overdue as the US faces ever-more-sophisticated Russian and Chinese air defenses that can keep traditional aircraft at bay. But with limited budgets, the Army will have to pick and choose high-priority units to get FARA first, and the rest of the force will have to wait. “We've got to look at, where are the most critical spots to bring capability,” said Brig. Gen. Michael McCurry, director of aviation for the Army Deputy Chief of Staff for operations and plans. The priority is the cutting-edge combat units that must break open sophisticated anti-aircraft defensives for the rest of the force to follow, he told me: “That penetrate force, that's where FARA is going to go.” Learning From the Past Now, the Army has made its job easier in a couple of important ways. Perhaps most important, instead of the traditional dozens or hundreds of detailed technical specifications that hem in designers' ingenuity, Future Vertical Lift director Brig. Gen. Walter Rugen told me, “we have very few critical attributes within our FARA spec.” One huge thing that the Army is not asking for: stealth. Unlike the costly Boeing Comanche cancelled in 2006, the FARA won't have to be shaped and coated to be impervious to radar – which is largely irrelevant to low-flying helicopters hiding behind hills, trees, or buildings, which are most often detected by the sound of their rotors, not by radar. Like the Comanche, advertised as a “digital quarterback,” FARA will act as an electronic hub for battlefield intelligence, collecting target data from drones and passing it to Army artillery, hypersonic missiles, and Air Force strike fighters – but network tech has come a long way since 2006, the year before the iPhone went on sale. Finally, unlike the Comanche, FARA won't be a conventional helicopter with a single main rotor and a small tail rotor for stability. The speed and range required to survive the future battlefield are greater than that classic set-up can achieve. That's driven all four firms who've discussed their designs in public – Boeing has not revealed anything – to adopt innovative configurations the Army's never fielded before. Only one of the designs, Sikorsky's, is based on an existing aircraft that's done actual flight tests. But the Army is confident the competitors can deliver. In detailed modeling, Rugen said, “all those offerings are beating those [minimum] mission critical attributes that we're trying towards.” Congress actually cut the FARA budget for 2020 by $34 million. That won't slow the program down, the Army has said, but it will reduce the amount of Government Furnished Equipment (GFE) the service can provide the contractors to build their prototypes around: weapons systems including a 20-millimeter autocannon and a missile launcher, Modular Open Systems Architecture (MOSA) electronics, and the GE Improved Turbine Engine. To simplify and speed up development, all the competitors are required to include these standard-issue systems in their design — but the aircraft they build around them are radically different. Design shop AVX has proposed an aircraft with two helicopter-style main rotors for vertical takeoff, wings for extra lift, and a pair of their characteristic ducted fans for speed. AVX, founded by Bell alumni, has never built an actual aircraft. But it's backed by the manufacturing might of the much larger L3Harris, a firm created by the merger of the 18th and 26th-largest defense contractors in the world (as per their 2019 rankings on the Defense News Top 100). By contrast, Bell – part of Textron, No. 34 on the Top 100 – is a major builder of both military and commercial helicopters, as well as the revolutionary V-22 Osprey tiltrotor, from which the company's contender for the Army's future transport aircraft, the V-280, derives. Ironically, the Bell 360 Invictus is the most conservative-looking of the four known FARA designs: It's a streamlined single-main-rotor helicopter (looking kind of like Comanche) with the addition of two short wings for extra lift. Inside the aircraft, though, Bell is using new fly-by-wire flight controls and other technologies developed for its civilian Bell 525. Aerospace giant Boeing – No. 2 of the top 100, counting its defense contracts alone – builds the Army's current mainstay armored gunship, the AH-64 Apache; its heavy lifter, the CH-47 Chinook; and, with Bell, the V-22 tiltrotor. But Boeing, which built the stealthy Comanche, is so far in public-relations stealth mode on FARA, declining to discuss its design. Karem Aerospace is another design shop with an excellent pedigree – its founder is the father of the Predator drone – but no track record of actually building an aircraft. However, it's partnered with Northrop Grumman (No. 3 of the top 100) and Raytheon (No. 4) for this program, giving it serious manufacturing heft. The Karem AR-40 design has a unique combination of a single main rotor on top, a propeller at the tail that can swivel to act either as a tail rotor for stability or a pusher propeller for thrust, and wings that can tilt for the optimum aerodynamic angle in different modes of flight. Last in the alphabet, comes Sikorsky, the helicopter division of the world's biggest defense contract, Lockheed Martin. While Sikorsky's Raider-X design hasn't flown yet, it's essentially a 20 percent larger version of the two S-97 Raiders the company built and flight-tested at its own expense. (One of them was totaled in the process, thankfully with no loss of life). And Sikorsky already knows how to upscale its compound helicopter technology, because there's already an even bigger member of the family, the Sikorsky-Boeing SB>1 Defiant, now in flight tests for the Army's Future Long-Range Assault Aircraft (FLRAA). All these aircraft derive from the Collier Trophy-winning X2 and share its configuration: two main rotors on top, using ultra-rigid blades to provide maximum lift with minimum vibration at high speeds, and a single pusher propeller at the tail. Between the X2, the S-97, and the SB>1, Sikorsky's configuration has been through far more flight testing than any of its competitors on FARA. So which team has the best combination of innovative design, proven technology, and the manufacturing muscle to build it at a price the nation can afford? That's a call the Army will make, and soon. https://breakingdefense.com/2020/02/fara-five-way-fight-for-armys-future-scout
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