Contract Awards by US Department of Defense - March 13, 2020

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  28 avril 2020 | International, Aérospatial

  Collapse of Boeing-Embraer deal could have major impact on C-390 Millennium’s future

  By: Valerie Insinna WASHINGTON — Boeing's termination of a $4.2 billion deal for a majority stake in Embraer's commercial aviation business could have widespread implications on the Brazilian firm's flagship military aircraft. Boeing on Saturday announced that it would walk away from a joint venture that would give it an 80 percent stake in Embraer's commercial business, as well as a 49 percent stake in the company's C-390 Millennium cargo plane. Although Boeing said that the company would maintain previous teaming agreements to support Embraer with marketing the C-390 internationally, analysts told Defense News that the vitriol between the two companies could portend a wider collapse of their collaboration in the military sphere. “The future of the KC-390 without Boeing — or without a U.S. defense prime helping — isn't all that great,” said Richard Aboulafia, an aerospace analyst with the Teal Group. “It just seems like cooler heads should probably prevail.” At Dubai Air Show last November, the companies announced the formation of a new entity known as Boeing-Embraer Defense set up specifically to proactively market the C-390 around the world — a step up from previous agreements that had Boeing in more of a hands-off role. The agreement gave Boeing a new plane that could compete head-to-head against Lockheed Martin's C-130, and gave Embraer the resources to match. The big question now is whether Embraer seeks out partnerships elsewhere for either the KC-390 or its commercial business, said Byron Callan, an analyst with Capital Alpha Partners. “I just wonder, is there something else or someone else that emerges in 2021 or 2022 that ties up with Embraer. Could that be Chinese? Indian? Another country, company or entity outside of the United States?” he said. “That would be a more interesting broader change for aerospace, that has military implications as well, too.” It's even possible that Airbus could try to usurp Boeing's role as Embraer's partner on the C-390, said Callan, who noted that Airbus — like Boeing — does not offer a medium cargo transport aircraft that directly competes against the C-130. A good relationship gone bad On Monday morning, Embraer announced that it had filed arbitration proceedings against Boeing, capping off an angry back-and-forth between both companies that spanned the weekend. When Boeing announced it was walking away from the deal on Saturday, the company claimed it had “worked diligently over more than two years” to finalize the transaction, but that Embraer left some conditions of the master transaction agreement, or MTA, unresolved. "It is deeply disappointing,” said Marc Allen, Boeing's president of Embraer Partnership & Group Operations. “But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues." Embraer, however, issued a scathing statement of its own, asserting that it had fulfilled all contractual obligations and blaming the failure of the deal on Boeing's continued financial problems and the fallout from two fatal 737 MAX crashes. “Embraer believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the US$4.2 billion purchase price,” the company said. “We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.” Boeing's decision to break its agreement with Embraer makes sense from a financial standpoint, Cai Von Rumohr, a defense analyst with Cowen, wrote in an email to investors. Because of COVID-19's impact on the aerospace industry, $4.2 billion seems an inflated price for Boeing to pay to acquire a controlling stake in Embraer's commercial business, and terminating the deal may help to free up cash that Boeing needs in the near-term. But while Von Rumohr said he believes Boeing and Embraer will continue to collaborate on the C-390, it will depend on whether the relationship can be salvaged. “This issue is, how pissed off is Embraer now, and is this something they're likely to get over to continue with what was a teaming agreement that made a whole lot of sense for both parties?” Von Rumohr told Defense News. Another major question is how the COVID-19 crisis effects worldwide defense spending, with implications for nations' domestic industries as well the international defense industrial base. Callan noted that some countries who have ordered the aircraft such as Brazil or Portugal “are probably looking at different defense budget projections. Aboulafia added that the dissolution of the partnership increases the likelihood that Embraer will need stimulus funds from the government of the Brazil to help fortify its commercial sector during the COVID-19 pandemic. “That money could easily come out of defense spending, which would impact Embraer defense programs, particularly Gripen or C-390,” he said. https://www.defensenews.com/air/2020/04/27/collapse-of-boeing-embraer-deal-could-have-major-impact-on-c-390-millenniums-future

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  5 décembre 2019 | International, Aérospatial

  Military/Commercial Avionics Outlook Strong, Deloitte Says

  By Frank Wolfe The military and commercial outlook for avionics sales is strong, according to the author of a new Deloitte report, the 2020 Global Aerospace and Defense Industry Outlook. "The outlook for the aerospace avionics market is positive with good growth expected over the next few years, primarily due to the strong aircraft order book," Robin Lineberger, the leader of Deloitte global aerospace and defense, wrote in an email to Avionics International. "Moreover, all the major global militaries are increasing their spending on acquiring advanced military aircraft, further driving the growth for avionics," Lineberger wrote. Such aircraft include the Japanese F-3 twin-engine stealth fighter by Mitsubishi to replace the country's single-engine Mitsubishi F-2 jets and to complement the country's Lockheed Martin F-35s; the European Future Combat Air System (FCAS); and the United States Air Force's sixth generation fighter. In June at the Paris Air Show, Dassault Aviation unveiled an FCAS mock up, as government and company officials signed an FCAS Industry Agreement on Demonstrator Programs. The latter accord covers the main components of FCAS: a new generation, manned fighter; support "remote carrier" drones; and an Air Combat Cloud to integrate sensors. FCAS is to replace Dassault's Rafale fighter and the Airbus/BAE Systems/Leonardo-built Eurofighter. During the unveiling of the mock up, French President Emmanuel Macron said that he favors German-French-Spanish cooperation on FCAS with the British, which are developing their own advanced fighter through the BAE Systems Tempest program. In early October, the Air Force officially stood up a new program executive office to lead Digital Century Series, which will look to rapidly develop and field new aircraft beginning with the service's sixth-generation fighter. Last week, Will Roper, the Air Force's service acquisition executive, said that the new Digital Century Series initiative will look to improve integration of emerging technologies by buying smaller quantities of new fighter jets, potentially from multiple companies at a time. “Demand for military equipment is on the rise as governments across the globe focus on military modernization, given increasing global security concerns,” according to the new Deloitte report. “The uncertainty and sustained complexity of the international security environment worldwide is likely to boost global defense spending over the next five years.” In 2020, global defense spending will reach around $1.9 trillion, driven mainly by the U.S. but also countries such as China, Russia and India, the 14-page report says. It adds that NATO members in Europe, under pressure from the U.S., are also increasing defense spending to hit a target of 2 percent of GDP, and tensions in the Middle East are also driving demand for defense equipment. By 2023, global defense spending is expected to be $2.1 trillion, Deloitte said. Commercial and general aviation avionics sales are also expected to grow. "Demand for new and advanced flight capabilities from airlines and small general aviation aircraft owners to make flight operations more efficient and safer will continue to drive demand for commercial avionics," Lineberger wrote in his email to Avionics International. "Moreover, significant investments will be made on avionics because of government-mandated upgrades, for instance, the mandates for Automatic Dependent Surveillance/Broadcast capability (ADS-B), Head-Up Displays (HUD) and Controller/Pilot Datalink Communications equipment (CPDLC). However, there are some challenges which include longer product development cycle that leads to increased development costs." Urban air mobility, electric propulsion and fully automated flight decks are technology trends to watch in years ahead, according to the Deloitte report. "Although commercial aircraft manufacturers are increasingly relying on automated flight controls, including automated cockpits, the commercial aerospace sector is aiming to transition to fully automated flight decks," Lineberger wrote in his email. "Such a transition will likely reduce the number of crew members in the cockpit, resulting in lower costs for airlines. Moreover, automated flight decks would also address the growing pilot shortage issue currently faced by the aviation industry, which will likely be accentuated in the future as the commercial aircraft fleet continues to grow." https://www.aviationtoday.com/2019/12/04/military-commercial-avionics-outlook-strong-deloitte-says/

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  1 août 2018 | International, Aérospatial

  Despite Trump’s Rhetoric, U.S. Defense Firms Pitch Moving Production To India

  As big defense firms line up to pitch their fighter planes to India, the government of Narendra Modi is demanding they build in India, something that might be at odds with the Trumpian America First philosophy. By PAUL MCLEARY WASHINGTON: The Trump administration has cleared the decks for what promises to be a huge increase in technology and weapons exports to India, putting the country on the same footing as members of NATO, and allies like Japan and Australia, when it comes to favored export status. While the new status may pave the way for major U.S. defense firms to lock up multi-billion deals with the Indian government, those deals would likely come with the stipulation that production be moved to India, something American defense giants like Lockheed Martin and Boeing have promised to do, even if it runs counter to the Trump administration's focus on creating more manufacturing jobs at home. Such offsets, as they are known in the arms export business, are a staple of such deals and are a crucial part of negotiations. Commerce Secretary Wilbur Ross made the announcement yesterday as part of the US government's continuing efforts to draw closer to Delhi, partly as a bulwark against Chinese expansionism in the region. Granting India Strategic Trade Authorization status also comes as the Indian military is considering spending tens of billions of dollars on drones, fighters and helicopters made by U.S. defense manufacturers. Ross, speaking at a U.S. Chamber of Commerce event, said the move reflects India's efforts to abide by multilateral export rules, and “provides India greater supply chain efficiency, both for defense, and for other high-tech products.” India's ambassador to the United States, Navtej Sarna, added that it is a sign of trust in India's “capabilities as an economy and as a security partner, because it also...would allow the transfer of more sensitive defense technologies,” and “fleshes out our defense partnership in a big way.” But the new trade status can only do so much, and India's decades-long reliance on Russian weaponry over U.S. or European equipment is something that shows no sign of changing anytime soon, a fact that rankles many on Capitol Hill. In Washington, the House recently passed its version of the 2019 NDAA, which granted Defense Secretary James Mattis' request to waive sanctions on partner countries that have bought Russian arms in the past, but the Senate has yet to take up the bill, and is expected to vote on it some time next month. The waivers, Mattis said in a series of letters to lawmakers, would allow the Pentagon to forge closer ties with countries like India, Vietnam, and Indonesia, by not penalizing them for having Russian equipment, even as they move closer to the U.S. But the chronically chaotic state of the Indian military's acquisition practices also presents significant hurdles, according to experts. Air Marshal M. Matheswaran, former deputy chief of the defense staff in the Indian Ministry of Defense told an audience at the Stimson Center in Washington that the Indian government and military often seek to simply to “fill in technological gaps” they believe they have, rather than building strategically. “Their procurement is a mess. They're not joint. They're risk adverse. They've just got a ton of problems,” one former White House official, who asked to speak anonymously, told me. “Broadly, in procurement they have tried in the post-Cold War era to diversify their procurements as a political sop to potential partners,” he said. “They start to move more through the pipeline than they can actually pay for, and they end up building this very motley force in a way that's not always coherent.” As it stands, the United States accounts for about 12 percent of India's defense imports, a number which is expected to grow 6.2 percent annually through 2023, according to a recent study by Avescent, a consulting firm. The Indian defense budget, at more than $53 billion, is the fifth-largest in the world, and as the Avascent analysis noted, it “is also one of the most competitive,” as local companies battle it out, along with a mix of Russian, French, Israeli, and American firms. The air force, for example, flys Russian MiG and French Rafale fighters, along with American C-17 and C-130 transport aircraft and Israeli Heron drones. In recent years, France has emerged as the big winner in several hard-fought awards, inking an $8.6 billion contract for 36 Rafale fighter aircraft in 2016 — which will serve as India's primary nuclear delivery aircraft — and a deal for six Scorpene-class submarines for $4.6 billion in 2005. As part of the government's “Make in India” initiative, most of the work on the subs will be done at the Mazagon dockyard in Mumbai. But Russia isn't going anywhere. Moscow is on the verge of finalizing a $3.2 billion contract for four S-400 surface-to-air missile systems with India, part of about $12 billion worth of Russian arms deals in the works with the Indian government. The two countries are also close to finalizing a $1.1 billion deal for 48 additional Mi-17-V5 military transport/utility helicopters, with final signatures expected during Russian President Vladimir Putin's October visit to India. According to local reports, the contract will mandate that 30 percent of the work be done by the Indian defense industry, as part of the Modi government's push to build up the Indian manufacturing sector. The helicopters joint U.S.-made Chinooks and Apaches in the country's rotary-wing fleet. The Indian government says that it doesn't have a problem with such a mix and match approach, however, even if it does complicate supply chains. Currently, the big contract up for an award is the Indian Air Force's requirement for 110 aircraft, expected to be worth as much as $15 billion. Boeing has announced it would join with Indian firms Hindustan Aeronautics Limited and Mahindra Defense Systems to manufacture its F/A-18 Hornet in the country if it wins the contract, and Lockheed Martin has pledged to move its entire F-16 production line to India from Greenville, S.C., to India, potentially at the expense of 250 South Carolina jobs. “The F-16 gives the Indian industry a unique opportunity to be at the center of the world's largest fighter aircraft ecosystem,” Lockheed exec Vivek Lallsaid earlier this year in his pitch, adding that the company was ready to equip the jets with the same target tracking device currently on the F-35, as well as a helmet-mounted tracking system and a new radio data link system. Swedish defense giant Saab Group is also in the running for the fighter deal, and has announced it is ready to do a “full” technology transfer of its Gripen-E fighter jet production to India if it wins the competition. Boeing, in conjunction with Indian manufacturer Tata has already moved part of its Apache helicopter fuselage manufacturing to India, and the factory will eventually be the sole supplier of the part for Boeing's worldwide sales. The promise was one of the keys to the company winning the $3.1 billion deal in 2015 for 22 Apache and 15 Chinook helicopters. While the deal for the fighter planes shakes out over the coming months, the competition is merely one part of a larger American push, which included a recent visit by the Pentagon's top weapons buyer, Ellen Lord, and the upcoming “two-plus-two” meeting between defense minister Nirmala Sitharaman, Foreign Minister Sushma Swaraj and their American counterparts, James Mattis and Mike Pompeo. And in a jab at the Russians, Indian officials announced this week that they would be replacing their Russian-made Pechora air defense systems around the capital in a $1 billion deal to buy the NASAMS-II, manufactured by Kongsberg and Raytheon. https://breakingdefense.com/2018/07/despite-trumps-rhetoric-u-s-defense-firms-pitch-moving-jobs-to-india/