Poland Awards Contract to Terma to Upgrade Helicopters

July 6, 2010 by Matthew Potter · View Comments
Filed under: Business Line, Companies, Contract Awards, Countries, Denmark, Events, Military Aviation, Poland, logistics, production program 

Defense contractors were hoping that the new NATO countries from Eastern Europe will offer a significant, new market. The former Warsaw Pact nations need to improve their equipment to meet the standards of the Western alliance. Some contracts have been awarded and more are pending, but with their economies hurt by the global downturn there has not been the purchases expected. Poland announced that they are awarding Terma, the Danish aerospace company, a contract to provide self protection equipment for twenty-two of their helicopters.

The contract is worth over $100 million and will place sensors and flare and chaff launching equipment on the Polish aircraft. Illustrating one of the issues with integrating their existing equipment into NATO is that Terma will modify Mi-17 transport and Mi-24 attack helicopters previously provided by the Soviet Union.

Terma has made and installed such equipment on a variety of platforms in use by the military of several different countries. This is their first order to be provided to the former Warsaw Pact nations.

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Framework Seems To Have Been Reached To Allow A400M Resolution

January 19, 2010 by Matthew Potter · View Comments
Filed under: Business Line, Companies, Countries, EADS, Events, France, Germany, Military Aviation, Restructuring, Services, development program, logistics 

Late last week it was announced that EADS and the customers for the A400M transport seemed to have reached a framework to allow talks to proceed that may resolve the funding issues with the program. Due to about two years of development and integration problems the aircraft only achieved first flight in December, 2009 and now will not deliver the first aircraft until 2012. These have caused EADS and its subsidiary Airbus to spend billions beyond the money planned.

The company is trying to work a deal where the customers pay a large portion of the overruns as the initial contract was a Fixed Price one that did not provide enough funding to cover the delays. EADS has spent over five billion Euros of its own money on the program and is hoping that either through price increases or direct investment the seven major European buyers will cover these costs. Recently EADS had threatened to just go ahead and end work on the program and eat the losses rather then continuing it and losing more money.

After a recent meeting it became clear that most of the countries involved are willing to work out some financial deal with EADS and that company will agree to continue talking. There will be a meeting in early February to begin these discussions. The compromise being discussed would see increased production prices and lower quantities for a few years with EADS absorbing some of the cost overruns internally. Then there would have to be a decision point in the future whether to complete the program’s planned total quantity. One of the two FMS customers, South Africa, already canceled their order due to the price increases proposed by EADS.

The A400M is the premier military aerospace program in Europe and it suffered from the optimistic plan to use a fixed price development contract. Not completing it would be seen as a blow to EADS and European defense integration. At the same time all of the customers are facing financial pressure due to the global downturn and increased social spending. At the same time building only a few of the aircraft solves nobody’s problems.

A400M first flight video from signatoryvideos. http://www.youtube.com/watch?v=oX-kIUYRyDk

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Selling Overseas To Make Up For Coming U.S. Defense Cuts

September 14, 2009 by Matthew Potter · View Comments
Filed under: Arizona, Bell, Brazil, Business Line, Companies, Congress, Countries, Department of Defense, Events, Federal Budget Process, India, Qatar, Raytheon, Restructuring, Services, States, UAE, development program, logistics, missile defense, production program 

Arizona is a top beneficiary of defense dollars. This is primarily due to Raytheon and Bell activities in the state. Raytheon makes missile defense systems and Bell helicopters. Now with the possibility that Obama’s cuts to the defense budgets starting in 2010 and out the companies there are looking overseas for work.

Unfortunately this will be the business plan for all defense contractors if their is a significant contraction in U.S. defense spending. The focus will be on selling systems and support to Asian, South American and Middle Eastern companies. India, Brazil, the U.A.E. and Qatar have already made major investments in U.S. and European equipment and there are several major contracts coming. In 2008 the U.S. already captured two-thirds of the market but overall purchases were the lowest they had been since 2005. If this trend continues due to the global downturn in the economy there may be less opportunity for these sort of sales.

These trends may lead to further consolidation of the defense industry in the U.S. and abroad as domestic and foriegn markets may not be able to support the amount of business built up since 2001 primarily by the United States. This will be the most important factor facing the industry which has not seen this situation since the early Nineties and the end of the Reagan arms build-up.

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