Nouvelles

by Marc Selinger US-based Aero Precision and Kellstrom Defense have merged their operations to form a military aircraft sustainment firm named AllClear, according to a 17 August announcement. The combined entity, which is privately owned, supports “over 40 platforms” for the US military and allied forces. It is based in El Segundo, California, where Kellstrom was headquartered, and its CEO is Darryl Mayhorn, who previously led Aero Precision. AllClear said it has been integrating the two companies since March, when Aero Precision, which was a parts distribution firm, acquired Kellstrom, which specialised in maintenance, repairs, and overhauls. When the acquisition occurred, Aero Precision said the deal would streamline sustainment by creating a “new bundle of parts and services”. https://www.janes.com/defence-news/news-detail/aviation-firms-aero-precision-kellstrom-defense-merge

Développement économique Canada pour les régions du Québec (DEC) a le plaisir de vous informer que General Atomics Aeronautical Systems, Inc. (GA-ASI) entreprend une démarche pour trouver des partenaires industriels stratégiques pour travailler sur l'équipe du MQ-9B SkyGuardian, offert dans le cadre de l'appel d'offre sur les Système d'aéronefs télépilotés (SATP-RPAS). Dans le cadre de son engagement envers le Canada et l'industrie canadienne, GA-ASI désire rencontrer des entreprises ayant des projets connexes. Les entreprises canadiennes ayant des capacités aérospatiales et de défense éprouvées et capables de fournir des technologies dans les domaines suivants sont invitées à s'inscrire: 1. Exploitation et maintenance des aéronefs (E&M) 2. Traitement, exploitation et diffusion des données des capteurs (PED) 3. Capteurs / charges utiles aéroportés 4. Chaîne d'approvisionnement mondiale pour les composants et la fabrication d'aéronefs 5. Projets liés à la recherche et au développement (R-D) d'aéronefs sans pilote Vous êtes invités à soumettre une demande de participation et à inclure votre profil d'entreprise et les informations supplémentaires demandées dans le formulaire de demande de participation à l'adresse suivante: https://www.ga-asi.com/canada-industry-engagement . Une sélection sera effectuée par GA-ASI et les entreprises sélectionnées pour discuter de leurs capacités recevront une invitation officielle avec des détails et un temps pour rencontrer les experts en la matière de GA-ASI. Les inscriptions seront ouvertes du 19 août au 03 octobre 2020. Les entreprises seront informées la première semaine d'octobre si elles ont été sélectionnées. Certaines entreprises canadiennes auront l'occasion de tenir des réunions d'affaires avec le personnel de GA-ASI pour discuter des capacités de leur entreprise et des possibilités de travailler avec GA-ASI. Veuillez consulter la présentation générale de GA-ASI avant de soumettre votre demande de participation. Merci et nous nous réjouissons de votre participation à l'événement de l'industrie. Pour plus d'informations, n'hésitez pas à nous contacter par courriel : DEC : mathieu.trudelle2@canada.ca GA-ASI : GA-ASI-in-Canada@ga-asi.com

Steve Trimble The U.S. Air Force agency that manages the service's nuclear arsenal has started researching enabling technology for an intercontinental-range, hypersonic glide vehicle (HGV), according to a document that was published briefly in error on a public website. Although the document shows a U.S. nuclear weapons agency is researching HGV technology, senior Pentagon officials say there has been no change to a policy that “strictly” limits the emerging class of hypersonic gliders and cruise missiles to non-nuclear warheads. A request for information (RFI) published on Aug. 12 by the Air Force Nuclear Weapons Center asks companies to submit ideas across seven categories of potential upgrades for intercontinental ballistic missiles (ICBMs) designed with a “modular open architecture.” The Air Force often describes the future Ground Based Strategic Deterrent ICBM as featuring a “modular systems architecture,” in contrast with the aging Minuteman III, which does not. Among the seven items on the upgrade list, the Air Force called for a new “thermal protection system that can support [a] hypersonic glide to ICBM ranges,” according to the RFI, which is no longer publicly available on the government's procurement website. The RFI appears to have disclosed information that was not meant by the Air Force's nuclear weapons buyers to be made public. Each of the seven items listed in the RFI's “scope of effort” for ICBM upgrades included a prefix designation of “U/FOUO,” a military marking for information that is unclassified, but for official-use only. Although not technically a classified secret, information marked as “FOUO” usually is withheld from the public. The RFI was removed from beta.sam.gov on Aug. 17 after Aviation Week inquired about the document with the Air Force and the Office of the Secretary of Defense (OSD). The Defense Department (DOD) has three different operational prototypes for HGVs in development now: the Air Force's AGM-183A Air-Launched Rapid Response Weapon, the Army's Long Range Hypersonic Weapon and the Navy's Intermediate Range Conventional Prompt Strike. Once fired from an aircraft, ground-launcher or submarine, all three are designed to strike targets with conventional warheads at intermediate range, which is defined as 1,500-3,000 nm by the official DOD Dictionary of Military and Associated Terms. But the Pentagon has no acknowledged plan to develop an HGV with a range beyond 3,000 nm and maintains a policy that “strictly” prohibits arming any such weapon—regardless of range—with nuclear warheads. The two-most senior staffers leading the hypersonic weapons portfolio reiterated that policy during a press conference on March 2. “Our entire hypersonic portfolio is based on delivering conventional warheads,” said Mike White, assistant director of defense research and engineering for hypersonic weapons. “Right,” agreed Mark Lewis, the director of defense research and engineering for modernization programs. “Strictly conventional.” The Pentagon has not changed the policy since March 2, said Lt. Col. Robert Carver, a spokesman for Lewis' office. “DOD is not developing nuclear-capable hypersonic weapons,” Carver said in an email. “There are common technology needs between the nuclear enterprise and hypersonic systems. Particularly in the area of high-temperature materials, we typically collaborate on the development of advanced dual-use materials technology. I will reiterate that our entire hypersonic program portfolio continues to be based on delivering conventional effects only.” Although the DOD upholds the conventional-only policy for hypersonic gliders and scramjet-powered cruise missiles, the source of the RFI raises questions, said James Acton, co-director of the Nuclear Policy Program at the Carnegie Endowment for International Peace. “The fact that [this RFI] is coming from the nuclear weapons center, it makes it sound an awful lot like this would at least be nuclear-armed or conceivably dual-capable,” Acton said. Although the RFI confirms research is underway, the DOD still has no acknowledged plan to proceed from basic research into the acquisition phase of an ICBM-range hypersonic glider, whether carrying a conventional or nuclear warhead. If the thermal-protection system technology is limited to research only, the RFI by the Air Force's nuclear weapons organization may not violate the DOD policy, which may apply only to fielded weapons. “DOD does a lot of research on a lot of different things and the vast majority of these programs never turn into an acquisition,” Acton said. “It could turn into something, but sophisticated observers recognize that it may not.” The DOD's conventional-only policy for maneuvering hypersonic weapons stands apart from other countries in the field. Russia, for example, has deployed the nuclear-armed Avangard HGV on the SS-19 ICBM. In February, the head of U.S. Northern Command, Gen. Terrence O'Shaughnessy, said in written testimony submitted to Congress that “China is testing a [nuclear-armed] intercontinental-range hypersonic glide vehicle, which is designed to fly at high speeds and low altitudes, complicating our ability to provide precise warning.” The DOD never has had an announced weapons development program for a conventional- or nuclear-armed, intercontinental-range HGV, but has experimented with air-launched gliders. The Hypersonic Test Vehicle-2 program by the DARPA attempted to demonstrate a range of 4,170 nm, but each experimental glider in two tests staged in 2010 and 2011 failed about 9 min. into a planned 30-min. hypersonic glide. The leading edges of an intercontinental-range HGV could be exposed to temperatures as high as 7,000K (6,726C) on reentry, then endure a prolonged glide phase compared to an intermediate-range system, said Christopher Combs, who researches hypersonic aerodynamics as an assistant professor at the University of Texas-San Antonio. “The bottom line is it's just crazy temperatures,” Combs said. “They're still not dealing with space shuttle or Apollo [capsule] temperatures, but it's still really hot.” The rescinded RFI, meanwhile, also may provide a rare glimpse into the Air Force's plans for the new ICBM developed under the Ground Based Strategic Deterrent (GBSD) program. Apart from the thermal-protection system for a hypersonic glider, the scope of effort in the RFI sought industry input on a variety of topics, including: • Fusing data from lower-fidelity, onboard sensors to improve guidance, navigation and control. • New navigation aids to correct inertial measurement unit drift on long-time-of-flight missions. • A lighter, smaller and more efficient “future fuze,” which also could “accept inputs from external subsystems.” • Radiation-hardening techniques for advanced microelectronics, such as a system on a chip or system in a package. • Improved computer hardware and software, including artificial intelligence algorithms. • A more secure architecture and better security sensors for ICBM ground facilities. The Air Force plans to award the contract to Northrop Grumman by the end of the month to launch the engineering and manufacturing development contract for the GBSD program. Northrop remained the sole bidder for the program to deliver more than 600 new ICBMs to the Air Force after a Boeing-led team withdrew from the competition last year. https://aviationweek.com/defense-space/missile-defense-weapons/usaf-errantly-reveals-research-icbm-range-hypersonic-glide

Taiwan has signed an agreement to purchase 66 F-16 jets from Lockheed Martin amid escalating tensions between the US and China. As part of the $62bn deal, Taiwan will procure the latest generation of F-16s to boost its air power. The Pentagon also confirmed the deal without specifying the buyer. According to a Bloomberg report, the deal marks the first sale of fighter aircraft to the Asian island, which China considers to be part of its territory since 1992 when the former US administration approved the sale of 150 F-16s to Taiwan. The latest agreement comes a year after Taiwan received approval from Washington for the purchase. After the potential deal was announced last year, China issued a strong response and said that the deal will violate the one-China principle. During the past year, the relationship between the US and China further deteriorated over the Covid-19 pandemic, 5G technology, Hong Kong and trade impasse. Lockheed Martin has an initial order of 90 F-16 jets, the delivery of which is scheduled for late 2026. https://www.airforce-technology.com/news/taiwan-66-f-16-jets/

by Gareth Jennings The US Air Force (USAF) has slated September 2021 for the maiden flight of the first of five engineering and manufacturing development (EMD) Boeing-Saab T-7A Red Hawk advanced jet trainer aircraft, Janes has learned. With production of the EMD aircraft set to shortly begin at Boeing's St Louis facility in Missouri and Saab's Linköping facility in Sweden, a USAF official told Janes on 18 August that the hitherto undisclosed date for the first EMD flight has now been set. “Saab has released all EMD aircraft ‘build-to-packages' to support build and manufacturing preparation. The EMD [aft] fuselages (five in total) are currently planned for build at Saab's factory in Sweden with delivery [to St Louis] no later than April 2021. Production is expected to begin with jig load [this] August at Boeing in St Louis. Boeing currently plans for assembly to be complete in June 2021, with the first EMD flight expected in September 2021,” the USAF said. Prior to this disclosure, both Boeing and Saab had declined to comment on the timetable for the first EMD flight, noting only that “this is very sensitive information for the USAF”. With two production-representative jets (PRJs) currently flying, the present EMD phase of the contract covers the five further aircraft and seven simulators. https://www.janes.com/defence-news/news-detail/maiden-flight-of-first-emd-red-hawk-jet-slated-for-september-2021

by Gareth Jennings The US Army has issued a request for information (RFI) for the ‘depopulation' of its remaining Boeing AH-64D Apache Longbow attack helicopters. Announced by the US Army Program Executive Office – Aviation on 17 August, the Apache AH-64D Attack Helicopter Depopulation RFI seeks to identify potential sources that possess the expertise, capabilities, and experience to meet the requirements necessary to depopulate (disassemble) hundreds of the service's remaining helicopters. “This RFI is to obtain qualified vendors to provide plans, procedures, production information, and reports addressing the depopulation of three to seven AH-64D aircraft per month. Additional work scope includes minor repairs in order to maximise reuse of components for production of the AH-64E [Apache Guardian]. The period of performance for this work is from January 2022 through December 2027 with the first delivery required in June 2023 and the last delivery required in March 2027,” the US Army stated on the beta.sam.gov government procurement website. https://www.janes.com/defence-news/news-detail/us-army-seeks-vendor-to-disassemble-remaining-ah-64d-attack-helos

By: Mike Gruss One way to understand how the United States' largest defense companies are responding to the coronavirus pandemic is to listen to what their leaders said on the most recent round of earnings calls. Consider this anecdote from General Dynamics. Phebe Novakovic, the company's chief executive, told analysts in late July that when COVID-19 struck, “our classified customers closed their sites to all but mission-essential employees. This impacted revenue and earnings and will continue to do so. Some of IT services' highest-margin programs have come to a hard stop because of COVID-19.” Novakovic described the pandemic as a time of “significant uncertainty.” That story was not unusual. David Calhoun, Boeing's CEO, described this as “a historically dynamic and challenging time.” Greg Hayes, Raytheon Technologies' top executive, opened his second-quarter call by stating: “As everyone knows, these last several months have been incredibly challenging.” And Bill Brown, the CEO of L3Harris, said: “The pandemic has challenged us all to find new ways of working effectively.” To be clear, defense contractors have lost roughly 20 percent of their value in the last six months, by tracking exchange-traded funds. That's the worst run for publicly traded companies in at least a decade. So what to make of this? James Taiclet, Lockheed Martin's new leader, said his philosophy is that there may be “an opportunity for us if there is a downturn, we're going to look at the silver linings that may be there.” He was talking about mergers and acquisitions. But defense companies of all sizes should look for another opportunity: a reason to operate differently, not an excuse to get back to basics. Leaders should reexamine how to embrace new talent, how to effectively telework, and how to add new equipment or partnerships with unexpected sources. Military leaders for years have said they value agility. Now they will get to watch firsthand who changes, who is prepared for the long term, who adapts and who merely talks about adapting. These “challenges” can give acquisition officials a reason to reward agility. But back to the earnings calls. Officials hinted about what may happen next, before we — fingers crossed — enter a post-pandemic world. Lockheed's Kenneth Possenriede, the company's chief financial officer, said that while solicitations may be slower getting out the door, final deadlines have not changed. Brown at L3Harris said: “We believe that the heightened threat environment will drive the trajectory of U.S military spending regardless of the election.” Novakovic seconded that notion. “There's a general consensus that the threat has not dissipated,” she said. “In fact, arguably some of our potential adversaries have raised additional questions. ... We'll see going forward, but [I'm] not hearing a lot at the grassroots level on ... any pending defense cuts.” The threat may not have changed. Nor may the business of defense. Yet. But it's impossible to ignore that almost everything else has. https://www.defensenews.com/opinion/2020/08/17/when-the-challenge-of-coronavirus-becomes-a-catalyst-to-change/

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/

By: Byron Callan As usual, the annual Defense News Top 100 rankings shed light on changes in the defense sector, while raising additional questions for all interested parties. The rankings among U.S. firms have been relatively stable, with the primary catalyst for several years worth of change being acquisitions or divestitures. The U.S. order will again change in next year's edition, when Raytheon Technologies appears as a single entity for the first time. Defense News added Chinese enterprises in 2019, and so it's good to see this extended in 2020, as China has the second largest defense budget in the world after the U.S. This year's list raises six points worth highlighting, while observing how relative rankings have changed over time. First: These lists are difficult to compile, as they depend in large part on the willingness of contractors to provide sales data. There are some omissions, which hopefully could show up in future rankings — notably, BWX Technologies, SpaceX, General Atomics, Mantech, Parsons and Kratos for the U.S.; more Japanese firms including Kawasaki Heavy Industries; Navantia of Spain and other European naval shipyards; United Aircraft in Russia; ASC Pty in Australia; and PGZ in Poland. There are other Indian firms as well that would likely qualify. Second: It is intriguing to note how long either Lockheed or its successor Lockheed Martin has been the No. 1 U.S. contractor. It's been at the top of the Defense News list since 2003, and data from annual reports show it has been the top U.S. contractor, by sales, since 1980. Size may matter in perpetuating a No. 1 position, so it is notable that the ratio of Lockheed's defense sales to the second-largest contractor has also increased over the years. For this year's list, Lockheed's defense dollars are 165 percent of Boeing's defense sales; in 1988, they were 130 percent higher than the next largest defense contractor, McDonnell Douglas. Third: As much as it's easy to categorize contractors by their home country, it bears repeating that this a global, multinational business with international sales not just from exports. A look at the Australian defense industry highlights the “multi-domestic” nature of contractors in that country. BAE Systems is listed as a U.K. company, but it derives higher annual sales from the U.S. and Saudi Arabia than from London. And in 2019, Israeli firm Elbit had more of its total sales from North America (28 percent of total) than Israel (24 percent of total). Fourth: While the rankings don't capture the changes in the composition of some of the largest contractors, this may have a bearing on competition in the 2020s. CACI and Leidos still are predominantly services contractors, but some of their recent acquisitions, most significantly the Leidos acquisition of Dynetics, are more product-centric. Fifth: Obviously the rankings only capture the top level of the global defense sector, and in assessing supply chains, resiliency, the pace of innovation and technology ingestion, a far wider net has be cast. A July 2020 report by Israel's INSS observed that Israel's defense industry, which has seen consolidation in recent years, is comprised of “about 600 companies” and employs over 45,000 workers. Much as the rankings of the top contractors are of interest, a more critical assessment of the health and agility of contractors may rest on what's happening with smaller firms. Finally: The question of state, private or public ownership is a sixth factor to weigh. State ownership of Chinese firms and partial government stakes in some of the largest European enterprises has entailed different incentives and goals — it's hard to conclude, given the nature of China's rise, that government ownership of contractors has stymied the development and production of competitive weapons systems, though there's little transparency on efficiency. In the 2020s, it remains to be seen how different and competing ownership shapes future rankings. Byron Callan is a policy research expert at Capital Alpha Partners. He specializes in the defense and aerospace industries. https://www.defensenews.com/top-100/2020/08/17/six-considerations-from-the-defense-news-top-100-list/