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Privately Developed Scorpion Jet Takes to the Air on Maiden Flight over Kansas

December 13, 2013 by · Comment
Filed under: ISR, Kansas, Syndicated Industry News, Textron, United States 

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Annual Production Options Continue to be Executed as V-22 Buy Goes Through

Despite the “Fiscal Cliff” and sequestration facing the U.S. Federal budget the U.S. military has continued to execute their FY13 buys for hardware. The vote last night in the house delayed sequestration issues and also extended some of the Bush tax cuts. The options on existing contracts are able to be awarded under Continuing Resolution Authority so they are not tied to any new budget or legislation.

One of the most recent was the production buy for the V-22 from Boeing-Bell (BA). The Marine Corps and Air Force will purchase a further 22 V-22 for just over $1.4 billion. These will be delivered in 2014-2015.

This follows the current production contract for 21 aircraft being delivered at this time.

This is the second multi-year production contract for the versatile tilt rotor aircraft that has seen use in Iraq and Afghanistan.

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New Air Cushion Landing Craft Program Continues with Award to Rolls-Royce

Update – The Rolls-Royce engine chosen for this application is the engine from the V-22 Osprey. This decision offers some synergy in support and maintenance as the SSC will be operating from ships that also are able to support the V-22.

In July the U.S. Navy awarded Textron (TXT) a contract to begin initial prototype development of the new Ship to Shore Connector (SSC) program. The SSC will ultimately replace the Landing Craft Air Cushion (LCAC) used for the last twenty-five years or more to support amphibious operations.

The LCAC due to its high speed and long range was a key component of the over-the-horizon assault concepts developed during the Eighties. The SSC represents an incremental upgrade to the existing LCAC but will offer improvements based on current technology.

As part of this contract Textron has chosen Rolls-Royce (RR) to provide the engines for the SSC. Rolls-Royce will potentially provide up to 300 engines for 72 landing craft if all parts of the contract are executed.

Rolls-Royce offered an engine to be made in Indiana that should provide more power and better fuel economy.

Photo from Official U.S. Navy Imagery flickr photostream.

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Army Places Two Large Orders for UAV Systems

The U.S. Army announced this week two large contracts to purchase Unmanned Aerial Systems (UAS) for use both by themselves and the Marine Corps. Over the last decade the U.S. military as much of the world’s have been investing in more systems with greater capabilities.

Originally planned mainly to be used for ISR missions the various UAV now in used include ones armed with Hellfire missiles and other weapons to carry out precision strike. The U.S. UAV fleet has grown significantly and their contribution to the fighting similarly.

First, General Atomics Systems, received a contract for more production of the MQ-1C Grey Eagle for the Army. The contract is worth just over $400 million and will procure spare parts and support as well. The Grey Eagle is an improved version of GA’s earlier Predator system and is being integrated into the Army primarily for reconnaissance.

Second, AAI Unmanned Systems, part of Textron (TXT), received a contract worth $350 million to upgrade RQ-7B Shadow systems to the V2 standard. These will be used by both the Army and Marine Corps. The upgrade allows longer range, more payload and better reliability. The Shadow not only collects information but has a communications relay role as well alongside some targeting capability.

The U.S. military will continue to develop and integrate UAV into their units to provide not only better ISR capabilities but also more strike and combat roles as well. They will be used to supplement manned aircraft in these roles and will received more and more funding.

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Navy Awards Prototype Production Contract for LCAC Replacement

The Farnborough Air Show in the U.K. is ongoing and normally one expects companies to announce large, aviation contracts. Even so one of the more interesting contracts awarded recently was by the U.S. Navy. This was to Textron, Inc. (TXT) and will begin initial production of the new hovercraft based landing craft for fast delivery of men and equipment from amphibious ships.

In the Eighties the Navy developed the Landing Craft Air Cushion (LCAC) for this mission. The advantage of the hovercraft based system was that it was much faster then traditional landing crafts, could drive further onto the beach and also traverse other types of terrains. The LCAC have seen heavy use in humanitarian operations as the U.S. Navy and Marine Corps have not done an amphibious assault in many years.

The close to $213 million contract is to build the first prototypes of the new Ship-to-Shore Connector (SSC) as well as design efforts and training material. Textron was the original designer and manufacturer of the LCAC.

The SSC is an improved version of the LCAC able to carry heavier loads as well as be easier to maintain. Many of the requirements have been driven by the need to transport heavier, more armored vehicles now used by the Marine Corps. This heavier weight has been caused by the IED and mine threat most common in Iraq and Afghanistan

If things go well Textron will receive follow-on contracts to begin larger scale production of more SSC to replace the aging LCAC fleet.

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More V-22 Engines for Rolls-Royce

Following the second operational crash of a V-22 during exercises in Morocco there was the usual hand wringing about the safety of the V-22 Osprey tilt-rotor made by Boeing (BA) and Bell, part of Textron (TXT). Even so the program continues with planned expanded deployment and new missions including support of Presidential movement operations.

It has been reported that as part of the planned reductions in spending starting next year that V-22 quantities will be reduced. The total purchased should remain the same but it will be spread over more years. The next five year multiyear production contract is still being negotiated as the current one ends.

Even so the Pentagon went ahead and place orders for engines to support delivery of over 100 more aircraft with Rolls Royce (RR). The almost $600 million contract for 268 engines will have one base and four options years. The base contract will be for 70 engines.

The company has delivered over 500 engines for the V-22 program.

The V-22 offers unique capabilities compared to traditional rotary wing aviation assets. It has served in Iraq and Afghanistan with no combat losses although an Air Force one crashed in Afghanistan and now a Marine one has crashed as well. It is planned to replace Navy logistics aircraft as well as serve more with the Marines and Air Force Special Operations.

Boeing and Bell are obviously looking for new missions and customers for the aircraft. Certainly there may be pressure as the Pentagon reduces its budget to cut the number of V-22 to buy as they are expensive to buy and operate. The more that are sold, though, drives down the price for every customer.

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FY13 Defense Budget Hits Aircraft Procurement

The Obama Administration submitted its FY13 budget to the Congress today and as expected the defense budget took some hits. Trying to keep spending flat compared to the 2012 budget the Administration has proposed some cuts to investment, personnel programs and benefits. Chief among these were cuts to the most expensive program in the budget: the F-35 Joint Strike Fighter (JSF) as well as some other aircraft and Unmanned Aerial Vehicle (UAV) programs.

Even though the F-35 saw production reduced from only 31 to 29 this saved an estimated $1.6 billion. Over the next five year budget plan 179 less F-35 would be purchased then planned. Lockheed Martin (LMT) is the prime contractor on the advanced aircraft.

The V-22 which has gone into use with the U.S.M.C. and Air Force as a transport and search-and-resuce aircraft saw its planned production cut to 21 from 27. This should save about $500 million. The V-22 made by Boeing (BA) and Bell Helicopter, part of Textron (TXT), was on the downslope of the current multi-year production contract with the second in negotiation. This possibly could see reduced quantities.

All of this adds up to reduced revenues for Lockheed, Boeing and Textron although Congress does not need to accept the proposed cuts. It is expected though that a great deal of them will make it through the budget cycle as the need to reduce the deficit and government spending as a whole will require some reductions in defense spending.

Photo from Secretary of Defense’s flickr photostream.

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Reports that Next V-22 Production Contract Will See Reduced Quantities

The V-22 Osprey tilt rotor aircraft is a unique capability to the U.S. armed forces. Built by Boeing (BA) and Bell, part of Textron (TXT), in a joint venture the twin engined aircraft have seen a great deal of use in Iraq and Afghanistan since entering service in 2006 with the U.S. Air Force and Marine Corps. The system had a lengthy development timeline being cancelled more then once and then revived.

The first five year production contract saw 174 aircraft ordered and late last summer the government and contractor began entering into negotiations for the second one. That would be for a further 122 Ospreys at an estimated cost of close to $8 billion.

Now there is word that as part of the planned reductions to the defense budget over the next five years the U.S. Defense Department will cut 24 of the next batch of V-22. This would reduce the next five year contract to 98 aircraft at a cost of roughly $6.5 billion. The reports indicate that the hope is to save $1.75 billion but if 122 cost $8 billion the back of the envelope calculation would show only about $1.5 billion in savings.

Normally reducing the quantity bought over the same time period would lead to higher unit costs as there would be the loss of savings reduced with buying larger numbers of parts but it seems the Pentagon is hoping to not only cut aircraft but to negotiate a better price with Boeing-Bell. If that is possible remains to be seen. The delay in retiring the CH-46 and other aircraft the V-22 is replacing may also lead to higher operational costs for those as some will have to remain in service for a longer then originally planned timeline.

At least for the companies the program is not being eliminated or delayed. That means there will still be some revenue and earnings off of the program.

The cut will also illustrate how hard it is to reduce the budget just by slicing programs. There are enough sunk and recurring costs that savings are not directly tied to the amount of items being purchased. It is easier to eliminate whole programs which is reportedly being done with the Joint Air-to-Ground Missile (JAGM, C-27 JCA transport and the C-130 Avionics Modernization Program.

Photo from Beige Alert’s flickr photostream.

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U.S. Army Awards JMR Study Contracts

Currently the U.S. Army, Navy and many Allied nations rely on the Sikorsky, part of United Technologies (UTX), UH-60 Blackhawk helicopter for the medium lift mission. The Blackhawk entered service in the late Seventies as a replacement for the venerable UH-1 Huey aircraft. Since 9/11 it has been heavily used in Iraq and Afghanistan flying several hundred thousand flight hours.

The Army is working on a long range replacement program for the Blackhawk called Joint Multi Role (JMR). This will be an aircraft that not only will take on the UH-60 missions but may also form the basis for a new attack or scout helicopter like the UH-1 did with the AH-1 Cobra.

As part of this program the Army went ahead and awarded contracts to four different companies to conduct long term research and design studies for the future JMR.

Interestingly enough one of the contracts was awarded to AVX Aircraft of Texas. This is a new company started by mainly former Bell employees that has produced an interesting concept for the Army’s new scout helicopter the Armed Aerial Scout (AAS).

The AAS is a follow on to the cancelled Armed Reconnaissance Helicopter (ARH) which had been started as the Bell ARH-70 Arapahoe to replace the OH-58D Kiowa Warrior but was cancelled in 2008 due to cost and schedule issues. AVX has come up with a plan to fit the OH-58 with two rotors and ducted fans that push it to increase speed, range and payload. Similar concepts could be used to meet the JMR requirements.

The other contracts went to the more traditional Boeing (BA), Sikorsky, and Bell, part of Textron (TXT). These all have current military aircraft flying and they may offer more traditional ideas for the new aircraft. Boeing does currently make the V-22 for the Marines and Air Force which could be used as a tilt rotor basis for a new medium lift system.

The JMR when it is ready for competition would be a major contract as it may be expected to last 30-40 years and see production quantities of several hundred. Also if it did enter U.S. service it might enjoy good Foreign Military Sales (FMS) similar to the Blackhawk which could mean billions in revenue for the ultimate provider of the aircraft.

Unfortunately in the current budget situation the program probably will not move fast and it might be several years for the new system to take shape. This means that the Army and other users will soldier on with the UH-60.

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Textron to Reset Army Armored Vehicles

Since World War II the U.S. Army has not invested in armored cars like many other nations have. They have used light armored vehicles based on their standard full tracked armored personnel carriers like the M113 or M2 for reconnaissance and screening missions. They have also relied on their large amounts of aerial assets to do this mission. In Vietnam the Army and the Air Force did buy some of these wheeled vehicles from Cadillac Gage to provide local and airfield security but not in any large numbers.

In the Nineties as an alternative to uparmored and upgunned HUMVEE vehicles for use by Military Police and lines of communication security troops the Army did buy a small number of Cadillac Gage, now part of Textron (TXT), newer and larger vehicles. The M1117 Armored Security Vehicle (ASV) entered use in the Former Republic of Yugoslavia (FRY) for some security missions but the Army continued to prefer aviation, the M3 variant of the M2 Bradley and HUMVEE for this mission so production was limited.

Once the invasion of Iraq was complete and the U.S. turned to fighting insurgents and internal problems which the mine and Improvised Explosive Device (IED) were the biggest threats the U.S. Army began a program of uparmoring their existing vehicles and buying heavier armored ones such as Mine Resistant Ambush Protected (MRAP) systems. As part of this they began to buy the M1117 in larger amounts for their MP and other security forces to protect convoys and facilities. Ultimately over 2000 of the M1117 would be ordered by the Army.

Now that the fighting in Iraq and Afghanistan is winding down the U.S. Army is returning troops and reorganizing and resetting their equipment. The M1117 is no different. This means that Textron recently received a contract to begin resetting the armored cars so that they are returned to a like new status and then may be reissued to units.

The base contract is worth almost $20 million but has two option years which could greatly increase the value if they are exercised. It could be used to reset almost 400 of the M1117 ASV.

The Army as part of the overall budget review is looking at their future organization and equipment and part of this will be determining how many of each system they want and need. This could affect how many ASV remain in their inventory and their demand for new ones.

Textron has been able to sell the M1117 ASV to some foreign customers and certainly there is a market for these types of vehicles. They offer some advantages over HUMVEES being more protected and better armed and MRAP since they are more tactically oriented. The U.S. though will probably be a very limited market for the next decade.

Photo from James.Gordon6108 Flickr photostream.

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Bell-Boeing Working with Navy on Next V-22 Contract

Boeing (BA) along with Bell Helicopter, part of Textron (TXT), have been building the versatile V-22 Osprey tilt rotor aircraft under a current five year contract with the U.S. Navy. The V-22 is used by the Marine Corps for transport missions and the U.S. Air Force for search and rescue and Special Operations. The current production contract is for 174 aircraft. The companies have opened negotiations with its customers on the award of a second production contract.

The V-22 has had a long development time but finally began entering service in the early part of this century despite being conceived almost forty years ago. The program was started, stopped and re-started as the Defense Department and various Presidential Administrations argues about the cost and utility of the aircraft. Now that it is in service the aircraft has performed admirably in both Iraq and Afghanistan with no reported combat losses although one crashed there last year.

The new contract for up to 122 of the aircraft between 2013-2017 has the potential value of $8 billion and would be a multi year award. The V-22 current fly away cost is about $65 million. This might go down as more of them are built and Bell-Boeing negotiate better deals with suppliers and sub-contractors. The benefit of awarding a multi year contract such as this is that it allows longer and smoother planning of the production line offering a better price for the government.

The majority of stable U.S. aircraft production lines are under similar constructs. These include aircraft like the C-17 and C-130J transports and helicopters such as the UH-60 Black Hawk. The transition of the V-22 to this contract type would indicate that it has reached a point where the user is very comfortable with its performance and price.

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Indian Air Force Buys Bombs from the U.S.

One of the plans that U.S. and the European defense contractors are hoping will offset decline in business in their own countries due to budgetary pressures is to sell overseas. Asian, Middle Eastern and South American countries are expected to invest billions over the next few decades in their military. While the contracts won’t be as frequent or as large as the ones gained domestically they are still good business.

India has taken great strides in the past two years to reform its defense acquisition to allow greater competition from Western defense contractors. In the past the offset and investment requirements as well as regulations to encourage domestic growth made it hard for their market to gain much interest. Now India is trying to take advantage of the Western market to upgrade the overall technology of their military systems. India has signed deals with Boeing (BA) for P-8I Maritime Patrol Aircraft as well as considering the C-17 transport.

The biggest ongoing contract is for new fighters that has attracted competition from across the Globe with Boeing, Lockheed Martin (LMT), MiG, SAAB and the Rafale from France.

While these bigger deals percolate India has been signing some smaller ones. It was announced yesterday that Textron (TXT) will sell over five hundred aerial cluster bombs to the Indian Air Force. The contract was done as a Foreign Military Sale (FMS) from the United States government and is worth over $250 million.

While this represents only one percent of the company’s most recent quarterly revenue it is still welcome work.

If the U.S. defense budget does see serious decline it will be contracts like this that will help preserve the U.S. industrial base and keep companies going.

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AAI Wins Sub-contract From Lockheed For eCASS Components

Lockheed Martin (LMT) is the prime contractor for the next generation of test equipment for U.S. Navy aircraft. The electronic Consolidated Automated Support System (eCASS) program will develop this for use on aircraft carriers and at land bases to support maintenance of key electronic systems on the F/A-18 and other Navy aircraft.

As part of the development and production of eCASS Lockheed gave AAI, a part of Textron Inc. (TXT), a contract to build radio frequency components. These mission equipment kits production is worth about $43 million if all options are exercised. AAI will provide over fifty of the units including two for depot use. As military programs become more-and-more complicated sophisticated test equipment aids in rapid diagnoses and fixes which minimized repair time and maximizes systems availability.

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Army Awards DCGS Support Contract

Overwatch an operating unit of Textron Inc. (TXT) was awarded a contract by the U.S. Army to support the Distributed Common Ground System (DCGS)-Army system. DCGS is a product of Raytheon (RTN) that allows the distribution of a variety of intelligence material. The DCGS-Army as it sounds is the system in use by the Army at their ground facilities to support their operations.

Overwatch received a contract that will be worth over $48 million if all options are exercised to provide software development and training. The software is used to develop and support applications on the DCGS. Overwatch has been doing this kind of work for U.S. and other countries military since the early 1990. It was acquired by Textron in 2006.

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Textron Sells Armored Vehicles To Columbia

The South American nation of Columbia has been involved in fighting drug lords and Communist rebels for several years. The United States Government has provided aid and assistance for several years. This includes advanced military hardware such as UH-60 Black Hawk helicopters. Yesterday it was announced that under Foreign Military Sales (FMS) Columbia will be buying thirty-nine armored vehicles from Textron Marine and Land Systems.

The contract for the vehicles to carry personnel and weapons will be worth about $45 million. These vehicles have been used by the U.S. military in Iraq and Afghanistan and should provide a useful capability to the Colombian military.

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Textron’s Earnings Reflect The Market

Textron reported their third quarter earnings yesterday. They did beat expectations by not having a loss but had a profit of about 1 cent a share. This was a decline of ninety-eight percent from the year before. Despite all this the company is confident they will make a profit for a year and earnings would be as predicted.

Textron decline is caused by financial products and their civil air division. Sales of Cessna aircraft a luxury item right now were down a lot. The company has been reducing their participation in the financial sector due to the general downturn there. Despite Bell Helicopter’s struggles with the Armed Reconnaissance Helicopter (ARH) the military part of the company saw some growth.

There have been previous reports that Textron might sell Bell or other parts as it reorganizes to face the current economic downturn but so far that has not happened. As with everyone the company will have to wait and see how the economy recovers and what growth occurs.

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Textron unit wins contract for test equipment

AAI Corporation, an unit of Textron, won a contract form the USAF to build Joint Service Electronic Combat Systems Tester (JSECST) systems. See an article here. These will be used to test the electronic warfare equipment and avionics on various US aircraft. Since they are joint they will be used by USAF, Navy, USMC and Army aircraft. Even helicopters are starting to carry more sophisticated electronic and infra-red countermeasures as the threat has got more complicated. The contract is worth up to $67 M if all options are exercised. Sophisticated electronic systems require expensive test equipment to support their operations. The JSECST has been in production for several years and is used by the US and some allies.

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