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Important Notice about CAF Outlooks 2020 As a membership organization, CADSI always puts the health and safety of our community first. As event organizers, we are closely monitoring developments related to COVID-19 and adjusting to its impact hourly. On Sunday, March 15, Ottawa's Medical Officer of Health recommended the immediate suspension of events of all sizes. We are following this recommendation and as such, CADSI will no longer have a face-to-face aspect of the 2020 CAF Outlooks, which had been planned for the Shaw Centre on April 7-9. We are currently exploring all options with our government partners on ways forward to deliver an alternative program. CADSI will provide updated information on this program on April 1. Cancellations and refunds will be accepted until April 6, 2020. In the meantime, we thank you for your patience and understanding during this challenging and unprecedented time. We will share updates via email, our website, and CADSI's twitter account (@CADSICanada). Posted 2020-03-16 Last Modified 2020-03-16 16:58 https://www.defenceandsecurity.ca/media/article&id=361&t=c

NAVY BAE Systems, San Diego Ship Repair, San Diego, California (N00024-16-D-4419); Huntington Ingalls Industries Inc., San Diego, California (N00024-16-D-4420); and General Dynamics, National Steel and Shipbuilding Co., San Diego, California (N00024-16-D-4421), are awarded a $171,876,527 firm-fixed-price modification to exercise Option Period Four to previously awarded indefinite-delivery/indefinite-quantity, multiple award contracts for complex, emergent and continuous maintenance and Chief of Naval Operations (CNO) availabilities on amphibious ships (landing platform/dock, landing ship dock, landing helicopter assault and landing helicopter dock) homeported in San Diego, California. Work will be performed in San Diego, California, at contractor facilities or Naval Base San Diego and is expected to be completed by March 2021. The exercising of these options ensures continued facilities and human resources capable of completing complex, emergent and continuous maintenance, repair, modernization and CNO availabilities on amphibious ships assigned to or visiting the port. Awards under Option Period Four have an estimated cumulative value of $171,876,527. No funding is obligated at the time of award. The Southwest Regional Maintenance Center, San Diego, California, is the contracting activity. Manson/Connolly Seal Beach JV, Seattle, Washington, is awarded $66,530,000 which provides for exercise of Options One, Two and Three under a firm-fixed-price contract for the construction and building operations of Ammunition Pier, Naval Weapons Station Seal Beach, the reconstruction of Anaheim Bay Road, and the construction of the Smoke Shack Building. Work will be performed in Seal Beach, California, and the performance period will be extended for an additional 600 calendar days. The work includes labor, supervision, management, tools, materials, equipment, facilities, transportation, incidental engineering and other items necessary to provide dredging, constructing and several building operations. After award of these options, the total cumulative contract value will be $154,677,000. Fiscal 2020 military construction funds in the amount of $66,530,000 are obligated on this award and will not expire at the end of the current fiscal year. Naval Facilities Engineering Command Southwest, San Diego, California, is the contracting activity (N62473-19-C-2450). Northrop Grumman Systems Corp., Bethpage, New York, is awarded a $49,143,009 cost-plus-fixed-fee and cost-only modification to a previously awarded contract (N00024-17-C-6311) for engineering services to support the Littoral Combat Ship Mission Modules Program. Work will be performed Bethpage, New York (32%); Mayport, Florida (18%); San Diego, California (18%); Port Hueneme, California (18%); Pittsfield, Massachusetts (8%); Panama City, Florida (1%); Washington, District of Columbia (1%); and various other locations less than one percent (4%). Engineering services will be provided to support the existing efforts of the Littoral Combat Ships Mission Modules Program. Incidental other direct cost items are also provided in support of said engineering services. Work is expected to be complete by March 2021. Fiscal 2020 operations and maintenance (Navy); fiscal 2018 and 2020 other procurement (Navy); fiscal 2020 research, development, test and evaluation (Navy); and fiscal years 2014, 2015, 2016 and 2017 shipbuilding and conversion (Navy) funding in the amount of $21,857,006 will be obligated at time of award. Funding in the amount of $18,825,998 will expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, District of Columbia, is the contracting activity. L-3 Harris, Northampton, Massachusetts, is awarded a $14,181,070 firm-fixed-price modification to a previously-awarded contract (N00024-16-C-5366) to exercise options for Mk 20 Mod (automatic grenade launcher) 1 Electro-Optical Sensor Systems, radar cross-section kits, shock ring kits and spares for both the Navy and Coast Guard (USCG). Work will be performed in Northampton, Massachusetts, and is expected to be complete by March 2022. This option exercise is for additional Mk 20 Mod 1 Electro-Optical Sensor Systems, radar cross-section kits, shock ring kits and spares to support the Mk 34 gun weapon systems in support of anti-air warfare and anti-surface warfare. The Mk 20 EOSS is a major component of the gun weapon systems employed by the Guided Missile Destroyer (DDG 51 class); Ticonderoga-class cruiser (CG 47 class); and the USCG's offshore patrol cutters. Fiscal 2020 other procurement (Navy); fiscal 2020 shipbuilding and conversion (Navy); and fiscal 2020 other procurement (USCG) funding in the amount of $14,181,070 will be obligated at time of the award and will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, District of Columbia, is the contracting activity. Northrop Grumman Systems Corp. - Marine Systems, Sunnyvale, California, is awarded a $11,244,675 cost-plus incentive-fee, contract modification (P00003) to a previously awarded contract (N00030-19-C-0015) for technical engineering services, design and development engineering, component and full scale test and evaluation engineering, and tactical underwater launcher hardware production to support the development and production of the Common Missile Compartment. Work will be performed in Sunnyvale, California (55%); Ridgecrest, California (20%); Cape Canaveral, Florida (10%); Bangor, Washington (5%); Kings Bay, Georgia (5%); Barrow-In-Furness, England (2%); New London, Connecticut (1%); Quonset Point, Rhode Island (1%); and Arlington, Virginia (1%), and is expected to be completed by March 2024. Fiscal 2020 shipbuilding and conversion Navy funding in the amount of $9,097,994 will be obligated on this award. Fiscal 2020 United Kingdom Common funding in the amount of $2,146,681 will be obligated on this award. No funds will expire at the end of the current fiscal year. Strategic Systems Programs, Washington, District of Columbia, is the contracting activity. Cabrillo Enterprises,* doing business as R.W. Little,* National City, California (N55236-16-D-0005); South Bay Sand Blasting and Tank Cleaning Inc.,* San Diego, California (N55236-16-D-0006); and Surface Technologies Corp.,* Atlantic Beach, Florida (N55236-16-D-0007), is awarded $10,000,000 for a combined overall ceiling increase due to modifications under previously-awarded indefinite-delivery/indefinite-quantity, multiple-award contracts to exercise Option Year Four in support of deck covering removal and non-skid installation services onboard Navy ships. Work will be performed in San Diego, California, and may include Oceanside, California. Each contractor shall provide all management, administrative services, materials, tools, equipment, labor, rigging, scaffolding, utilities (i.e. air, water and electricity, etc.) and required services and support to accomplish deck covering removal and non-skid installation onboard Navy ships within a 50-mile radius of San Diego. Work is expected to be complete by April 2021. Actual funding will be identified per individual task order. No funding is obligated at the time of award. The Southwest Regional Maintenance Center, San Diego, California, is the contracting activity. Engility Corp., Andover, Massachusetts, is awarded an $8,782,647 modification (P00012) to a previously awarded, cost-plus-fixed-fee, cost reimbursable, firm-fixed-price delivery order (N68936-19-F-0307) against a General Services Administration One Acquisition Solution for integrated services multiple award contract. Work will be performed in Point Mugu, California (90%); Patuxent River, Maryland (1.79%); Whidbey Island, Washington (1.79%); Edwards Air Force base, California (1.79%); Huntsville, Alabama (1.79%); China Lake, California (1.07%); Dayton, Ohio (1.07%); El Segundo, California (0.70%); and is expected to be completed in March 2021. This modification exercises an option for engineering, technical and programmatic support services for the development of electronic attack and electronic warfare products within the Airborne Electronic Attack Integrated Program. Fiscal 2020 research, development, test and evaluation (Navy) funds in the amount of $75,000; and fiscal 2020 operations and maintenance (Navy) funds in the amount of $156,000 will be obligated at the time of award, $156,000 of which will expire at the end of the fiscal year. The Naval Air Warfare Center Weapons Division, Point Mugu, California, is the contracting activity. Penn State University Applied Research Lab, University Park, Pennsylvania, is awarded an $8,404,271 cost-plus-fixed-fee contract for the Advanced Broadband Navigation Sonar System Future Naval Capabilities Program. This contract provides for the development and demonstration of technologies associated with continuous subsea autonomous navigation by developing and demonstrating improvements to navigational sonar systems. Improved estimation of positon and velocity afforded by advanced sonar processing will provide naval platforms with increased navigational performance for undersea platforms. Work will be performed in University Park, Pennsylvania, and is expected to be complete by March 2023. The total cumulative value of this contract is $8,404,271. The base period is $8,404,271, and no options are to be exercised. The action will be incrementally funded with an initial obligation of $1,925,613 utilizing fiscal 2019 research, development, test and evaluation funds, and will expire at the end of the current fiscal year. This contract was competitively procured under the “Long Range Broad Agency Announcement for Navy and Marine Corps Science & Technology” (N00014-18-S-B001) via the Federal Business Opportunities website. The Office of Naval Research, Arlington, Virginia, is the contracting activity (N00014-20-C-1061). ARMY Brantley Construction Co. LLC,* Charleston, South Carolina (W912HN-20-D-4004); Howard W. Pence Inc.,* Elizabethtown, Kentucky (W912HN-20-D-4004); Military & Federal Construction Co. Inc.,* Jacksonville, North Carolina (W912HN-20-D-4004); and Windamir Development Inc.,* McDonough, Georgia (W912HN-20-D-4004), will compete for each order of the $75,000,000 firm-fixed-price contract for new construction, design, renovation, upgrades, improvement and maintenance or repair of government facilities. Bids were solicited via the internet with 28 received. Work locations and funding will be determined with each order, with an estimated completion date of March 12, 2025. U.S. Army Corps of Engineers, Savannah, Georgia, is the contracting activity. Sierra Four Industries,* Fort Collins, Colorado (W15QKN-20-D-0013); Culmen International,* Alexandria, Virginia (W15QKN-20-D-0014); Multinational Defense Services,* McLean, Virginia (W15QKN-20-D-0015); Ultra Defense Corp.,* Tampa, Florida (W15QKN-20-D-0016); Global Ordnance LLC,* Sarasota, Florida (W15QKN-20-D-0017); Blane International, Cumming, Georgia (W15QKN-20-D-0018); and Greystone LLC, Pace, Florida (W15QKN-20-D-0019), will compete for each order of the $350,000,000 firm-fixed-price contract for procurement of weapons, parts, optics, accessories, tools and manuals for various commercial, foreign, non-standard and U.S. obsolete weapon systems. Bids were solicited via the internet with 11 received. Work locations and funding will be determined with each order, with an estimated completion date of March 12, 2025. U.S. Army Contracting Command, New Jersey, is the contracting activity. The Dutra Group, San Rafael, California, was awarded a $21,550,000 firm-fixed-price contract for West Coast Hopper Maintenance Dredging. Bids were solicited via the internet with two received. Work will be performed in Hammond, Oregon; and Samoa, California, with an estimated completion date of March 15, 2021. Fiscal 2020 civil operation and maintenance funds in the amount of $21,550,000 were obligated at the time of the award. U.S. Army Corps of Engineers, Portland, Oregon, is the contracting activity (W9127N-20-C-0009). Mission Essential LLC, New Albany, Ohio, was awarded a $12,406,907 cost-plus-fixed-fee contract for linguist, translation, interpretation and transcription services in support of U.S. Army Africa Command. Bids were solicited via the internet with one received. Work will be performed in New Albany, Ohio, with an estimated completion date of Dec. 14, 2020. Fiscal 2020 operations and maintenance, Army funds in the amount of $12,406,907 were obligated at the time of the award. U.S. Army Contracting Command, Detroit Arsenal, Michigan, is the contracting activity (W50NH9-20-C-0008). DEFENSE THREAT REDUCTION AGENCY Booz Allen Hamilton, McLean, Virginia (HDTRA1-16-C-0012), is issued a contract modification (P00036) to exercise Option Period Four line items with a ceiling value of $37,892,180, with an effective date of May 27, 2020. This does not include the value of the unexercised options. This contract is for advisory and assistance services in support of the Program Integration Division of the Cooperative Threat Reduction Program. Performance of this contract will take place at Lorton, Virginia; Fort Belvoir, Virginia; and at various locations throughout the world. The anticipated completion date of this option period is May 26, 2021. The contract was a competitive acquisition; the government received one offer. The Defense Threat Reduction Agency, Fort Belvoir, Virginia, is the contracting activity. AIR FORCE General Dynamics Ordnance and Tactical Systems Inc., Garland, Texas, has been awarded a $26,464,692 firm-fixed-price contract for warhead assemblies. This contract provides for the additional procurement of BLU 111 Engineering Change Proposal warhead assemblies. Work will be performed in Garland, Texas, and is expected to complete by June 2021. Fiscal 2018, 2019 and 2020 procurement funds in the full amount are being obligated at the time of award. Air Force Life Cycle Management Center, Eglin Air Force Base, Florida, is the contracting activity (FA8681-19-C-0015). Alliant Techsystems Operations LLC, doing business as Northrop Grumman Defense Systems, Rocket Center, West Virginia, has been awarded a $24,695,129 firm-fixed-price contract for warhead assemblies. This contract provides for the additional procurement of BLU 111 Engineering Change Proposal warhead assemblies. Work will be performed in Rocket Center, West Virginia, and is expected to complete by June 2021. Fiscal 2018, 2019 and 2020 procurement funds in the full amount are being obligated at the time of award. Air Force Life Cycle Management Center, Eglin Air Force Base, Florida, is the contracting activity (FA8681-19-C-0016). Major Tool and Machine Inc., Indianapolis, Indiana, has been awarded a $22,796,400 firm-fixed-price contract for warhead assemblies. This contract provides for the additional procurement of BLU 111 Engineering Change Proposal warhead assemblies. Work will be performed in Indianapolis, Indiana, and is expected to complete by June 2021. Fiscal 2018, 2019 and 2020 procurement funds in the full amount are being obligated at the time of award. Air Force Life Cycle Management Center, Eglin Air Force Base, Florida, is the contracting activity (FA8681-19-C-0013). U.S. TRANSPORTATION COMMAND UPDATE: A contract announced on Nov. 8, 2019, with an estimated program value of $5,700,000,000, has added Canadian Commercial Corp., Ottawa, Ontario, Canada (HTC711120DR008), as one of 18 awardees to provide worldwide Federal Aviation Regulation Part 135 airlift services utilizing fixed and/or rotary wing aircraft to transport Department of Defense and other federal agency personnel and cargo. (Awarded March 12, 2020) *Small Business https://www.defense.gov/Newsroom/Contracts/Contract/Article/2111974/source/GovDelivery/

Routine operations and patrols within Canada will continue The Canadian military has banned all foreign travel and ordered non-essential personnel to stay home — part of its sweeping response to the global outbreak of COVID-19. A formal order — known as a CANFORGEN — was issued Friday after a preliminary warning order was issued to units across the country the day before. In an interview, the country's top military commander also said a handful of troops who recently returned from an overseas operation have voluntarily gone into self-isolation at the military airbase in Bagotville, Que., but they are not considered "presumptive cases." Chief of Defence Staff Gen. Jonathan Vance confirmed that only one member of the military — a naval reservist — is in hospital in Spain after being formally diagnosed with the illness. 'Miltary operations will continue' He said those returning from deployment and leave outside of Canada will be ordered to self-isolate. "We're trying, at this point in time, to pause all things, but necessary military operations will continue," Vance said. The new travel ban will mean that the few thousand troops now serving on deployments, exercises and exchange positions will not be allowed to leave the countries where they are operating. Reservists, who serve part-time, are being encouraged to abstain from personal travel outside of Canada. Bases will be closed to visitors, including foreign delegations. Military training schools will restrict new entrants and those already on course will be confined to base. "While at home, or on leave, in Canada, I'm asking members to adopt an approach that protects themselves and their family from the virus," Vance said. "I expect our command and control headquarters to continue operations, albeit at reduced levels, and some units will be able to stand down to essential administration and command functions only." 'Ships will still sail and planes will still fly' Routine operations and patrols within Canada will continue, as normal. "Ships will still sail and planes will still fly," said Lt.-Col. Dave Devenney, a spokesman for the defence chief. "Our job is to stay healthy, preserve the force and be prepared to fight." Dave Perry, a defence analyst at the Canadian Global Affairs Institute, said the orders are meant not only to halt the spread of the virus but to give the military flexibility to respond if the civilian health care system or vital infrastructure becomes overwhelmed. "The military is pre-positioning if they are called out to help the government in any significant way," he said. Troops could be deployed with transport and communications to help frontline health workers, such as the people doing virus screening. "People at the frontline of the pandemic could require a host of supports," Perry said. An order for federal government workers to stay home also could put a strain on some parts of the country's telecommunications grid. "The military has independent communications that can work around that securely," Perry added. The order follows on a series of measures the military has taken in response to the unfolding pandemic crisis. Travel to China was banned shortly after the novel coronavirus became a major issue in Asia. THE LATEST Coronavirus: Here's what's happening in Canada and around the world on March 13 Government warns against all international travel, limits inbound flights to stop spread of COVID-19 A week ago, Vance said the military had started "pre-pandemic planning" by issuing orders that gave base commanders the authority to cancel large public gatherings, restrict all non-essential travel and enforce higher standards of personal hygiene. At that time, Vance said federal officials, under a worst-case scenario, were prepared for an absentee rate among government workers of 25 per cent and that the military is looking at a similar number. He added that the best defence is to not get sick at all. The biggest issue the Department of National Defence has faced thus far has been the civilian travel restrictions, which have hampered the movement of personnel. It also has prevented the full resumption of the military training mission in Iraq, a senior commander told a parliamentary committee this week. There is concern for the forces operating in war zones like Iraq, where the health care system lies in ruins. As of Thursday, Iraq reported 74 confirmed cases of COVID-19 and eight fatalities. Approximately one-quarter of the country's cases are known to be in the northern Kurdistan region, where Canadian special forces troops have been conducting an advise-and-assist mission to help root out the remaining extremist holdouts after the fall of the Islamic State. The country's second-largest city, Mosul, was largely destroyed by the fighting. The Canadian measures differ from those being imposed by the Pentagon, which as of today is barring all troops, family members and defence civilian employees from traveling to afflicted countries, including Italy, South Korea, and China, for the next 60 days. https://www.cbc.ca/news/politics/military-travel-halted-covid-19-1.5496537

India was the world's second-largest importer of arms and weapons during 2015-2019, according to a report from Swedish-based think tank Stockholm International Peace Research Institute, or SIPRI. Saudi Arabia ranked as the top arms importer. Saudi Arabia, India, Egypt, Australia and China accounted for 36% of all arms imports over that five-year period. However, while Russia remained India's most important source of arms, Moscow's share of the Indian weapons market has dropped from 72% to 56% since the 2010-2014 period. Still, India accounted for 25% of all Russian arms exports. After Russia, Israel (14%) and France (12%) were the top sources of weapons for India. The U.S. was India's second-largest arms supplier during 2010-14 as security ties between the two huge countries grew into a strategic partnership. “However, in 2015-19 India continued with its policy of supplier diversification, and imports of arms from the U.S. were 51 % lower than in 2010-14," the report said. India has received a bewildering and diverse array of military equipment from many sources, including Scanter-6000 naval surveillance radar from Denmark; Embraer ERJ-145 jets for early warning and control system from Brazil; ACTAS sonar systems from Germany; Super Rapid 76-mm naval guns from Italy; and K-9 Thunder 155- mm artillery guns from South Korea. Still, overall arms imports by India and Pakistan declined by 32% and 39%, respectively, between 2010-14 and 2015-19. "While both countries have long-standing aims to produce their [own] major arms, they remain largely dependent on imports and have substantial outstanding orders and plans for imports of all types of major arms," the SPIRI report said. https://www.ibtimes.com/india-increasingly-diversifying-its-arms-weapons-purchases-2939839

By: Tom Kington As Italy's coronavirus crisis worsens, state shipbuilder Fincantieri has suspended operations for two weeks at its Italian facilities. The announcement on Friday came as Italian authorities reported Italy's death toll from the virus had reached 1,266, while the total number of cases reached 17,660. This week, the Italian government placed the entire country under lockdown, restricting travel unless for work reasons and shutting down most shops as it attempts to slow the spread of the virus. Fincantieri said that following a request from unions, it would suspend production in Italy from March 16 to March 29. Fincantieri tried to reduce its exposure to the virus through teleworking and halting of business travel by staff. Italy's other major defense company, Leonardo, said this week it could not rule out the “temporary, partial and targeted suspension of operations of certain departments within production sites.” The firm also said marketing campaigns, supply chains, production and delivery times would likely be affected by the crisis. Leonardo expects to give an up update on impact of the virus on its financial performance soon. It reported revenue of 13.8 billion euros in 2019, up 12.6 percent year over year, thanks to healthy performance by its defense electronics and security and aeronautics divisions. https://www.defensenews.com/industry/2020/03/14/fincantieri-suspends-operations-amid-coronavirus-crisis

Aviation Week Network forecasts that over the next decade 888 new, Western-designed aircraft performing military transport missions will be built, while 634 will be retired. This figure includes aircraft of all sizes, everything from four-seat general aviation aircraft ferrying VIPs to the enormous C-5 Galaxy. It also includes aerial refueling tankers that perform transport missions, but not aircraft devoted full time to gunship, C4ISR, or maritime missions. The Lockheed Martin C-130 holds the number one spot for both deliveries and retirements over the forecast. The C-130 will make up 18.4% of deliveries and 34.9% of retirements as the ubiquitous prop transport sees many of its legacy models leaving military service at a more rapid pace than the newest J models enter. The Boeing 767-based KC-46 holds a solid second place in deliveries thanks to the U.S. Air Force's (USAF) planned acquisition of airframes over the next decade, making up 16.8% of the global delivery total. These aircraft are expected to replace the rapidly aging Boeing KC-135 and KC-10s in service with the USAF, which make up the fourth and fifth largest number of retirements. While the United States holds the top two delivery spots, the rest of the top ten is defined by a diverse array of transports from around the world. With over a quarter of transports in service in 2029 still undefined beyond requirements and open competitions, there is ample opportunity for the A400M, CN235/C295, C-27 or others to increase their market share, replacing both legacy western and Soviet-era transports. Source: Aviation Week Intelligence Network (AWIN) 2020 Military Fleet & MRO Forecast. For more information about the 2020 Forecast and other Aviation Week data products, please see: http://pages.aviationweek.com/Forecasts https://aviationweek.com/defense-space/z/western-military-transport-aircraft-deliveries-retirements-2020-2029

Michael Bruno The COVID-19 outbreak is the biggest punch to the gut commercial aviation has taken since the Sept. 11, 2001, terrorist attacks. And coming on the heels of the Boeing 737 MAX crisis, Airbus and Boeing widebody production rate cuts, U.S. trade wars and the flight-shaming movement in Europe, the coronavirus emergency is challenging the aerospace manufacturing sector and its global supply chain. Is the historic upcycle of commercial aircraft orders over? Will orders be canceled and deferred? Will business aviation go out of favor? Only time will tell, but it has been interesting to hear what aerospace and defense (A&D) executives are worrying about. First, lost revenue from disrupted operations in China is not among their worries. Practically no one in A&D manufacturing has revised their 2020 financial forecasts—provided in January or February—because of COVID-19 alone. “To date, we have no reported cases of our employees having contracted the virus, and the direct impact to our trading activities has been minimal,” Senior Plc CEO David Squires said March 2. Likewise, GE CEO Larry Culp did not change the company's financial outlook because COVID-19 was already cited in a forecast given last month. “In our view, in all likelihood it is going to be temporary, but it doesn't mean it is going to disappear tomorrow,” Culp said at a March 4 shareholder briefing. To be sure, some OEMs and suppliers with Chinese operations had to shut down in recent weeks due to COVID-19. But those factories are back up, and the impact to revenue was limited. For instance, only 20 of Triumph Group's roughly 5,000 active suppliers are located in China or South Korea. All 20 remain operational, and no supply chain interruptions have occurred. On the supply side, the glancing blow could have a lot to do with the fact that not much in Western aerospace is sourced in China. According to U.S. Commerce Department data, the U.S. imports just $1.1 billion annually in aircraft, spacecraft and related parts. What is more, that figure has been dropping since 2016—before the U.S.-China trade war—and was expected to fall off a cliff for 2019 and 2020 regardless of the “Phase One” trade deal truce. China always was a twofold market for U.S. aerospace: Sell parts and services to existing Western-supplied fleets there, and partner for local production of nonproprietary parts and systems for emerging Chinese fleets. But China is ramping up efforts to get its own fleet into operation and is pairing with Russian suppliers more often. Any growth in overall aerospace trade likely would have to come from a jump in Chinese orders of Airbus or Boeing airliners, which was not widely expected in the wake of the Jan. 16 trade truce and is not anticipated now after the recent plummet in Chinese air traffic. Although collapsing demand worldwide for air travel could have a devastating effect on A&D manufacturing and supply, executives do not consider it likely. COVID-19 quickly turned into a short, sharp shock to the system, but industry leaders see the same underlying macro conditions driving long-term growth. Chief among them: expanding middle classes worldwide that spend more discretionary funds traveling by air for leisure. During the 2020 Aviation Summit in Washington, new Collins Aerospace President Stephen Timm was asked if the airliner-customer landscape could look a lot different in coming years due to the scare. “Frankly, we're going to see differences,” Timm said. “This will be a blip—a serious blip that we have to deal with today—but compared with the macro aerospace industry, we're in a really good place.” Where do industry insiders see change coming to the supply chain? For one thing, COVID-19 could help deepen resistance to business travel, said some attending Aviation Week's Annual Aerospace Raw Materials and Manufacturers Supply Chain Conference on March 9-12. That would exacerbate the ongoing drop in demand for widebodies. Still, the biggest change could come in accelerating a budding shift in A&D supply from globalization to regionalization. Executives and consultants at both the Wharton Aerospace Conference on Feb. 29 and Aviation Week's supply chain event discussed how COVID-19 cements a belief that just-in-time global supply chains are too risky and not worth the lower cost anymore. Instead, they look to capitalize on aerospace manufacturing hubs in Asia, Europe-North Africa and North America to supply themselves. The trend could start with aerostructures for future single-aisle airliners, especially as composite materials are increasingly incorporated. “From a colocation strategy,” says one supplier executive, “you will see it in the next-gen airplanes.” https://aviationweek.com/aerospace/manufacturing-supply-chain/how-covid-19-could-change-ad-supply-chain

By Steve Trimble Pratt & Whitney's F100 (pictured) is designed to be interchangeable with GE Aviation's F110 as the engine for the Boeing F-15 fleet. A jet engine maker is pressuring the U.S. Defense Department to scrap a plan to award a sole-source contract to a rival for a fleet of new fighters and investigate the opportunity for performance and cost improvements yielded by a competitive selection process. If that narrative sounds familiar, it is because it echoes a role GE Aviation played for more than 40 years, which included a successful bid in the 1980s to launch the “Great Engine War” over the F-15 and F-16 fleets and a failed campaign that ended almost a decade ago to establish the F136 as the alternate engine for the F-35. This time, however, the roles are reversed. Pratt & Whitney, which waged fierce lobbying campaigns against competitive engine policies for the F-15, F-16 and F-35, has switched sides in the debate. In response to the U.S. Air Force's decision to field the F-15EX into production powered solely by GE F110 engines, Pratt has filed two protests with the Government Accountability Office (GAO), which is scheduled to render judgments on both cases by early July. The Air Force sided with GE during the Great Engine War in 1984. Seeking to lower costs and motivate Pratt to resolve stall-stagnation problems with the original F100, the Air Force decided that year to split the engine contract for the F-15 and F-16 between GE's F110 and Pratt's F100. Thirty-six years later, the Air Force now worries about the schedule impact if the GAO sustains either or both of Pratt's protests of the F-15EX engine. Service officials decided to acquire the F-15EX after concluding the F-15C/Ds were too costly to sustain and because it would take too long for the Pratt F135-powered F-35A to replace all of them. Pratt's protests threaten to disrupt that schedule and erode the Air Force's original business case for the F-15EX. “If we have to do an engine competition, it will add time—2-3 years,” said Will Roper, assistant secretary of the Air Force for Acquisition, Technology and Logistics, testifying before the House Armed Services Committee on March 10. Only a decade ago, Pratt welcomed a vote by Congress in 2010 to cancel funding for the F-35 program's alternate engine, along with a decision by GE and Rolls-Royce a year later to abandon a plan to self-fund the certification of the F136. But Pratt now embraces the potential benefits of an engine competition for the F-15EX. “Our government supports competition at all levels, and we're interested in providing the F100 as a competitive alternative,” Pratt Military Engines President Matthew Bromberg told Aviation Week. “If we're not competitive in terms of capability, schedule [and] price, I get it. But after the U.S. government spent all this money creating two engines for the F-15 and F-16 platforms, why would it then not compete a 450-engine program?” Asked if the existing F100 would require additional development to meet the Air Force's requirements for the F-15EX, Bromberg replied that he cannot answer that question in the absence of a competitive process that allows Pratt access to the specifications. He also noted that the F100 exclusively powers the Air Force's existing fleet of F-15Es. The F100 and F110 were designed to fit interchangeably in the F-15, although the heavily modified Saudi Arabian F-15SA and the Qatari F-15QA from which the F-15EX was derived are exclusively powered by GE's engine. The GAO does not release complaints filed by protesters up front, but it does release the full text of decisions. It is not clear why Pratt filed two separate protests on the sole-source decision for the GE engine on the F-15EX, but Bromberg advised not reading too much into it. “I'd like to obviously be able to discuss them, but I can't because it's a legal process,” Bromberg said. “I would really view them as a single protest on a single procurement action, and that is a lack of competition.” https://aviationweek.com/defense-space/aircraft-propulsion/possible-new-engine-war-recasts-pratt-champion-competition

By Antoine Gelain Behind the big aerospace and defense (A&D) primes like Boeing and Airbus and the “Super Tier-1s” such as United Technologies (UTC) and GE, a very different type of company is shaping the global A&D industrial landscape in a way that may be even more impactful than high-profile UTC-Raytheon-type mergers. Companies such as Teledyne, TransDigm and Heico are the spearheads of a breed of A&D players dedicated to “components and subsystems,” with explicit and perfectly executed “horizontal” external growth strategies. Their track records are impressive: These three companies—with combined revenues of more than $10 billion—have collectively made close to 200 acquisitions and delivered more than 20% average annual growth rate in either profitability or share value over the last 20 years. Thanks to such returns and skyrocketing market valuations, they are able to outbid most other contenders when going after an acquisition target by leveraging the so-called “accretive effect.” This effect boosts the acquiring company's earnings per share, as long as the price paid for the target as a ratio of the enterprise value (EV) over its earnings before interest, taxes, depreciation and amortization (EBITDA) is lower than that of the acquiring firm. As it happens, the current EV/EBITDA ratio of the three above-mentioned companies stands at more than 18 (see graph). By comparison, most other A&D companies have an EV/EBITDA ratio in the 9-13 range. Such “buying power” is enhanced by operational synergies (for instance, in corporate overheads, sales and marketing), which immediately boost the profitability of the acquired company and can therefore be factored in the offer price. This gives them an additional edge against pure financial investors like private equity (PE) funds, which have historically been strong buyers of such component and subsystem businesses. Two recent deals in Europe (one still ongoing) illustrate this new balance of power. The first concerns Souriau-Sunbank, a $360 million-revenue specialist in interconnection technology for harsh environments. After being owned successively by two PE funds and bought by Esterline (now TransDigm) in 2011, it was again put up for sale last year. While expectations were that a PE fund would grab it, another industrial buyer, Eaton Corp., won the contest, paying the hefty price of $920 million (an EV/EBITDA multiple of 12). The second deal relates to a French company called Photonis, a world leader in night-vision technology for defense and space applications, for which Teledyne is apparently bidding—and offering a price 30% higher than the highest PE bid! These deals highlight the limits of the traditional private equity model (too short-term and too short-sighted) and why the “new predators”—all publicly listed companies—are in a much better position to continue to thrive. In fact, by combining “private equity-like growth in value with liquidity of a public market,” as TransDigm puts it, they are not only beating PE players at their own game, but they are also capturing a significant share of the A&D capital market by offering investors an attractive alternative to the traditional vertically integrated groups such as UTC, Thales or Safran. These groups are typically too busy focusing on large systems and equipment to realize that they would actually benefit from articulating a proper “component and subsystem” strategy. They would benefit not only because their portfolios are still full of such businesses, but also because their long-term competitiveness largely depends on their ability to nurture a strong network of strategic suppliers, in terms of both criticality for their own systems and national sovereignty. As it happens, Photonis seems to be such a strategic supplier, since the current French government just announced it would veto the Teledyne deal, hoping to give other French or European companies or investors time to make a competitive offer for the business. But because PE funds, at least in Europe, are somewhat faint-hearted when it comes to ambitious sector-specific “horizontal” portfolio strategies, and because Europe has no industrial player able to compete with the likes of Teledyne, the outcome of the process is still highly uncertain. In any case, Teledyne, Heico, Transdigm and similar companies are surreptitiously reshaping the A&D industrial landscape by buying technological nuggets and component businesses left and right, on both sides of the Atlantic. In the process, they are boosting their shareholders' returns and changing the balance of power with both traditional private equity investors and large vertically integrated A&D groups. As the saying goes: One man's meat is another man's poison. https://aviationweek.com/aerospace/manufacturing-supply-chain/opinion-how-new-predators-are-reshaping-aerospace-landscape