Austerity, Populism and Greek Defense

by Dan Darling, Forecast International

These are interesting times for Europe – and in particular for Greece. While leaders of European Union member countries worry about the recidivist tendencies of an emboldened Russia, the emerging underbelly of the EU – both diplomatically and economically – now lies in Greece. A strange coalition of extremist parties – both left and right – now sit atop the government in Athens, bringing with them a mixture of narrow populism and economic grievance.

Greek FlagAfter the far-left Syriza Party won the January 25 election, its leader (and now prime minister) Alexis Tsipras shocked observers by inviting the far-right Independent Greeks (ANEL) Party to join in a ruling coalition as junior partner. The new government has first and foremost sought to carve out a financial way forward for Greece that would allow for Athens’ independence of action. Anxious to shed the shackles of austerity requirements imposed on Greece by its IMF and EU lenders as the cost of their EUR240 billion ($270 billion) bailout aid, the Syriza-led coalition has nonetheless sought from the EU – and received approval for – an extension of its current bailout.

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JLTV Program a Bright Spot in Down Vehicle Market

by Dean Lockwood, Forecast International

While the ongoing worldwide economic crisis continues to have a significant negative impact on defense spending, defense intelligence provider Forecast International expects the international light wheeled vehicle market to produce over 36,000 units, worth at least $30.9 billion, through 2024.

Lockheed Martin's JLTV prototype

Lockheed Martin’s JLTV prototype

Assuming the Joint Light Tactical Vehicle (JLTV) program survives the ongoing budget crisis and enters serial production as scheduled in FY18, the vehicle will utterly dominate the light wheeled vehicle market, just as the HMMWV did between 2005 and 2009. All told, the JLTV could account for 75 percent of production over the next ten years.

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Sanctions Impact Russia’s Irkut; MC‑21 Soldiers On

by Richard Pettibone, Forecast International

With Russia continuing its aggression in Ukraine, the world has responded with sanctions. As a result, the country’s aviation industry has been stymied in its efforts to grow beyond its usual customer base.

As these sanctions and counter sanctions continue, the opportunity to gain sales with Western operators has dimmed considerably. For an industry that was just beginning to emerge from the post-Soviet doldrums, this is an unwelcome development to say the least.IRKUT_Logo.svgBefore these developments, Irkut led the reformation of Russia’s aerospace realignment efforts. The firm pursued a more Western consolidation strategy. It started at the bottom, where the most expensive overcapacity is, rather than from the top. This proved successful, and Irkut was one of the first aviation firms in Russia to become somewhat privatized.

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Is the Indian Rafale Purchase Really Dead?

By Dan Darling, Forecast International

Recent statements made by senior Indian Ministry of Defense (MoD) officials to local media regarding a potential $20 billion procurement of 126 new-build French Dassault Rafale jet fighters as being “effectively dead” have led to confusion and speculation . Whether or not these statements are an accurate portrayal of the mindset in the Defense Ministry or a negotiating ploy remains to be seen, but there is little doubt that in terms of finalizing a deal, crunch time is fast approaching.

Dassault Rafale

Dassault Rafale

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Turbomeca’s Arrano Named Exclusive Engine on X4 Helo

By Douglas Royce, Forecast International

Airbus Helicopters has decided to make Turbomeca’s Arrano turboshaft the exclusive engine for its new twin-engine X4 helicopter, currently in development in France to replace the company’s popular EC 155/Dauphin model.

Airbus Helicopter X4

Airbus Helicopter X4

The Arrano is a new design in the 1,100- to 1,300-shp class. Turbomeca says the Arrano will offer a 10 to 15 percent reduction in fuel consumption compared with previous-generation engines.  First bench testing of the Arrano took place in February 2014, and Turbomeca says that type certification for the engine will track the schedule of the X4 test program.

Airbus Helicopters once planned to offer two engines on the X4.  The alternative engine, Pratt & Whitney Canada’s PW210, has been dropped because it is no longer considered powerful enough in the wake of design changes to the aircraft.

Setouchi’s Quest Aircraft Buy Could Lead to New Models

by Douglas Royce, Forecast International

Japan’s Setouchi Holdings is buying Quest Aircraft, the maker of the Kodiak single-engine turboprop.  The new deal will provide an influx of capital to Quest to allow it to explore adding another aircraft to its product line.

Kodiak 10-seat utility aircraft

Kodiak 10-seat utility aircraft

The Kodiak competes primarily against Cessna’s Caravan and Pilatus’ PC-6.   Quest has never publicly indicated what kind of new aircraft it might add in the future, and it’s hard to find an unoccupied niche in the General Aviation segment these days.  A twin-engine model is one possibility, allowing it to steal customers away from the popular Beechcraft King Air family, but developing an all-new aircraft is a long, expensive, and financially risky process.

It’s possible the company could be looking at reviving an out-of-production aircraft and updating it with new engines and avionics.  Viking Aircraft took this route with its Twin Otter 400 program.  The Twin Otter is a specialized bush plane that offers a combination of short takeoff and landing (STOL) capability and payload that no modern production aircraft can match.   Viking has delivered more than 50 new-build Twin Otters since restarting production of the aircraft. It spent far less to certificate the new version of an old design than it would have spent developing an all-new aircraft.

HAL Continues Its Slow Push Toward Self-Sufficiency

by Richard Pettibone, Forecast International

Hindustan Aeronautics Ltd (HAL) is the dominant aerospace contractor in India, as well as one of Asia’s largest aerospace companies.  Employing more than 34,450 technicians, engineers, and scientists, HAL produced the first military aircraft in South Asia (the HF-24 Marut), and today is involved in the design, development, and production of fixed- and rotary-wing aircraft and engines.

Dhruv Helicopter

Dhruv Helicopter

HAL’s principal indigenous projects have been the Dhruv advanced light helicopter and the Tejas light combat aircraft (LCA).  HAL also performs licensed assembly for a variety of foreign platforms via cooperative arrangements with suppliers such as Airbus, Boeing, RAC MiG, Sukhoi, and Dassault.

While the firm is one of South Asia’s largest, it is also one of the slowest aviation firms in terms of bringing products to market.  Several programs, such as the Tejas LCA and HJT-36 trainer, have been glacial in their development.  The problem is so bad that the Indian Air Force turned abroad to meet its trainer needs with aircraft from Pilatus and BAE Systems.  Despite the slow progress, India is committed to producing these systems, eventually.

Tejas LCA

Tejas LCA

With India seeking to modernize its forces and its industry, HAL is at the center of several major procurements with international partners.  The firm currently is charged with local oversight of key defense projects such as the Fifth-Generation Fighter Aircraft (FGFA), Medium Multirole Combat Aircraft (MMRCA), and Multirole Transport Aircraft (MTA).

India’s FGFA project is a collaborative effort between Russia’s Sukhoi and HAL.  The aircraft is based on Sukhoi’s T-50 PAK FA design, and India is looking to acquire 144 units, down from its original goal of 214.  Though India bears 50 percent of the development costs, it currently has a smaller work share.  Development costs on the project are expected to reach $12-$13 billion, which will be split between India and Russia.  The first of three prototypes was to have been rolled out in 2014, but will likely arrive a year late.

Dassault Rafale Selected for MMRCA

Dassault Rafale Selected for MMRCA

For the MMRCA program, India chose the Dassault Rafale in 2012.  However, the program has been delayed by extensive contract negotiations.  Dassault will supply 18 of the 126 aircraft to the IAF from its facilities in France; the remaining aircraft will be produced at HAL facilities in Bangalore.  As of December 2014, the $15 billion deal had yet to be closed. Delays in finalizing the order are attributed to cost and work-sharing issues, as well as elections in India.  Officials hope to complete negotiations by mid-2015.

Multirole Transport Aircraft

Multirole Transport Aircraft

Another India-Russia collaboration is the Multirole Transport Aircraft.  In 2012, HAL signed a contract with United Aircraft Corp, the corporate holding company of Russian fixed-wing-aircraft manufacturers, confirming HAL’s role in the MTA program.  HAL will build the prototype aircraft and produce aircraft in India.  Russia has promised to transfer necessary technology.  The MTA will replace India’s Antonov An-32 transport aircraft. In December 2012, UAC announced a revised schedule, with the MTA expected to perform its maiden flight in 2017. Serial production will follow in 2019. For the moment this program is moving ahead, though if history is any indicator, delays can be expected.

HAL’s growing pains are all part of India’s strategy of becoming self-sufficient in indigenous military production.  As such, support for these programs – delays and all – will be tolerated.  However, with an IPO of a small stake scheduled, the days of this liberality may be numbered once shareholders have a say.

Top Ten Federal Contractors for FY 2014

Top Ten Federal Contractors McKesson Corp is the only non-aerospace and defense oriented firm in the top ten this year.  The company is a healthcare provider specialist.




Bombardier Hires Outside CEO, Announces New Financing Plan

By Raymond Jaworowski, Forecast International

Former UTC executive Alain Bellemare has been named the new president and chief executive officer of Bombardier Inc.  Bellemare has also become a member of the company’s Board of Directors.  Laurent Beaudoin retired as chairman of the board after more than 50 years at the helm of the corporation, though he remains on the board with the title of chairman emeritus.  His son, Pierre Beaudoin, has stepped aside as president and CEO and has become executive chairman.

Former UTC Propulsion & Aerospace Systems Exec Alain Bellemare Now Leads Bombardier

Former UTC Propulsion and Aerospace Systems Executive Alain Bellemare Now Leads Bombardier

Bellemare is the first person outside the Beaudoin family to serve as Bombardier president and CEO since former railways executive Paul Tellier left those positions in 2004.  Members of the Beaudoin and Bombardier families own the majority of Bombardier’s Class A shares, thus effectively controlling the company.

At UTC, Bellemare had been president of Pratt & Whitney Canada, president of Hamilton Sundstrand, and, most recently, president and CEO of UTC Propulsion and Aerospace Systems.  Since stepping down from the latter position this past January, he has served as a consultant to UTC.

Bombardier CSeries faces continued cost overruns

Bombardier CSeries faces continued cost overruns

Bellemare takes over day-to-day command at Bombardier during a time of uncertainty for the Canadian company, especially in the firm’s aerospace business.  In perhaps its most highly publicized program, Bombardier is developing the CSeries, an all-new family of 108-160 passenger jetliners.  By spanning such a wide seating/capacity range, the CSeries is being positioned by Bombardier to compete in essentially two different markets.  The CSeries provides Bombardier with a needed counterweight to regional jets from its Brazilian rival Embraer, and it also enables Bombardier (for the first time) to encroach upon the lower end of the narrowbody market currently dominated by Airbus and Boeing.

However, the ambitious CSeries project has been hit by cost overruns and is surrounded by rumors of impending schedule delay.  Meanwhile, Bombardier is developing two new business jet models, the Global 7000 and Global 8000, that are intended to compete with Gulfstream’s groundbreaking (and already in service) G650 ultra-long-range executive jet.

Learjet 85 program "paused"

Learjet 85 program pause contributes to Bombardier’s $1.2 billion 2014 loss

This past January, Bombardier announced a “pause” in development of another new business jet, the all-composite Learjet 85 mid-size jet, due to weak demand.  Also in January, Bombardier signed an agreement to sell its Military Aviation Training business to CAE.  The transaction, which is expected to close later this year, includes responsibility for the NATO Flying Training in Canada (NFTC) program that trains military pilots for Canada and various other countries.

At the same time that it announced the management shake-up, Bombardier also announced a new financing plan in a bid to strengthen the company’s balance sheet.  Bombardier said that, depending on market conditions, it will issue approximately $600 million in new equity, and access capital markets for up to $1.5 billion in new long-term debt capital.  To complement this plan, the company said that it will explore various initiatives to reduce debt, such as “certain business activities’ potential participation in industry consolidation.”  This could involve the sale of certain of the company’s assets.

Bombardier also said that its free cash flow would be more appropriately applied to bolstering its financial structure and investing in its core programs and businesses.  In line with this commitment, the company suspended the declaration of dividends on its Class A and Class B shares.

Changing U.S. Export Laws Affect Satellite Production Going Forward

By Bill Ostrove, Forecast International

Over the past few years, there has been growing concern in some circles that export restrictions have held U.S. manufacturers back. With the recent economic crisis and a push to increase American exports to revitalize the manufacturing sector of the economy, International Traffic in Arms (ITAR) restrictions have received renewed attention.

HISPASAT 1F built by Space Systems/Loral

On January 3, the National Defense Authorization Act (NDAA) for fiscal year 2013 was signed into law. The bill included a provision to repeal the 1999 law that placed U.S. satellites and spacecraft components on the munitions list. The new law allows many spacecraft and components to be placed on the Commerce Control List (CCL), which is managed by the pro-business Commerce Department rather than the Department of Defense, which is concerned with military security. Restrictions still apply. For example, restrictions are still placed on satellite exports to countries like China, North Korea, and Iran. However, waivers may be granted for China if a satellite is being exported there to be launched by a Chinese rocket. Export of hosted payloads and other U.S. government furnished equipment will also remain restricted.

Telkom 3S built by Thales Alenia Space

The effect these rule changes will have on the global commercial communications satellite industry is difficult to quantify. The Aerospace Industries Association trade group estimates that between 1999 and 2009, trade restrictions cost U.S. companies $21 billion and 9,000 jobs. However, there are other factors that could have contributed to those figures. For example, many European manufacturers can now compete with their U.S. counterparts on price and technology.

In any case, the changes will likely make U.S. manufacturers more competitive globally, providing some relief to companies such as Boeing and Lockheed Martin that have relied heavily on the U.S. government for sales. Other U.S.-based satellite manufacturers like Space Systems/Loral and ATK Orbital will also benefit. The new rules could also increase pressure on European manufacturers, such as Airbus Defence & Space and Thales Alenia Space.