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Philippine Marines Are Eying Mini Drones for Recce, SAR Missions

December 14, 2013 by · Comment
Filed under: Syndicated Industry News, U.S. Marine Corps 

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F-35 Joint Strike Fighter (JSF) Foreign Intrigues Continue

The F-35 “Lightning II” Joint Strike Fighter (JSF) will be used not only by the U.S. military to replace its aging F-16, A/V-8, F/A-18 and A-10 aircraft but also by many other NATO countries and allies. It is being purchased as a F-16 replacement by many of these and like the successful F-16 program will have manufacturing and parts co-share agreements with different international partners.

The delays and cost increases to the program have been well documented and these have caused some early planned users to question the financial sense of continuing the program. Many of these countries, though, have already contributed through development funds as well as already had their aerospace contractors sign contracts and agreements with Lockheed Martin (LMT) to produce parts for the aircraft which continues in its Low Rate Initial Production (LRIP).

Canada, the Netherlands and Australia have had and continue to have debates about their purchase of the advanced aircraft rather then existing systems like the F/A-18, Eurofighter, Rafael, SAAB Gripens and Russian alternatives. In Canada they are reviewing the whole cost analysis that had led to the decision to continue the purchase which could technically end it and look at other aircraft. That leads to editorials and articles like this one, “The Case for the Super Hornet As The RCAF’s New Fighter” from Canada or analysis in Australia such as this: “Politics first as white paper fails on big issues”.

At the same time the U.S. has been successful in adding Foreign Military Sales (FMS) of the aircraft most notably to Israel and Japan. There has also been interested expressed by other U.S. allies like the U.A.E.

The commitment of the foreign partners is somewhat critical to the whole program as a reduction in buy quantity will have a ripple effect on the whole program. Less purchased in total and annually will cause a cost increase for each aircraft and the whole program. The F-35 PEO, Lt Gen Bogdan, identified this risk in Congressional testimony in April. If somebody drops out the price the others pay will go up putting more pressure on their budgets and perhaps cause them to drop out too. This would then become a spiral causing issues for the U.S. and all of the other nations involved in the program.

Despite the issues with the aircraft over the last decade the U.S. remains committed to the program. Over 100 are on order and there is discussion to award a new 2 year production contract this summer for a further 60-70. Training is underway for both aircrew and maintainers of the U.S.A.F., Navy, Marines and allies. The big questions remain though about completing development, how many will be built, and who ultimately will operate the aircraft.

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JAGM to Follow JCM in Obama’s Latest Budget

The Joint Air-to-Ground Missile (JAGM) program is an Army run one to develop a replacement for the air launched Hellfire and Maverick missiles. The Hellfire is fired from helicopters and started life as a laser guided anti-tank missile. It now has a variety of warhead options and has seen heavy use in Iraq and Afghanistan from AH-64 and AH-1W attack helicopters. The Maverick is fired from fixed wing aircraft primarily by the U.S. Air Force and too was initially an anti-tank system.

Several years ago there was a similar program in development called the Joint Common Missile (JCM). This was cancelled around 2005. The JAGM program began a few years later. Originally it was planned to have two teams compete for designs and then take one into production. Raytheon (RTN) and Boeing (BA) formed a team and Lockheed Martin (LMT), who had been the prime contractor for the JCM, also competed. One of the requirements for JAGM is the use of a 3 mode seeker utilizing radar, infrared and laser guidance.

In 2012 the Army rather then continuing the contest decided to delay final development and production of the system. Rather the two teams would be given contracts to continue their work and this could then support a later production decision if it was decided to finish out the program. Both contenders were given about $60 million contracts for this work.

Now in the latest budget submitted by the Obama administration last week it looks like a final decision has been made to cancel JAGM. Only the costs of the current development plan are considered which would save a little over $200 million in the 5 years the budget plan covers. It is of course up to Congress to decide whether to remove the funding and end this program.

The Hellfire has a successful history but the JAGM, and JCM, would have offered improvements in size, range and guidance capability. If sequestration continues then the U.S. military will be faced with more choices of deferring new development, using existing equipment or investing in new capabilities for them. The current budget without considering those mandatory cuts already is starting to make those kind of decisions.

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Precision Extended Range Munition to improve capabilities of US Marine Corps expeditionary forces — Press Release

TUCSON, Ariz., Jan. 22, 2013 /PRNewswire/ — The United States Marine Corps awarded Raytheon Company (NYSE: RTN) a contract for the design, development and demonstration of a new production representative 120mm long-range, guided-mortar munition.

Once fielded, the Precision Extended Range Munition (PERM) will be used with the M327 rifled towed mortar, the primary weapon system of the Expeditionary Fire Support System. The system provides all-weather, ground-based close support, and immediately responsive and accurate indirect fires in support of the Marine air-to-ground task force.

“Leveraging our extensive experience with precision munitions, Raytheon will provide the Marine Corps with precision, highly lethal indirect fire support for its combat operations while minimizing collateral damage,” said Tom Bussing, vice president of Advanced Missile Systems for Raytheon Missile Systems. “Our PERM solution is also expected to reduce logistical burdens since fewer rounds will be needed to accomplish the mission.”

Under the PERM contract, Raytheon will design, develop, test and deliver mature, production-representative mortars for a live-fire demonstration by the Marines in 18 months. The company has partnered with Israeli Military Industries, an experienced provider of weapon systems.

About PERM

  • Excalibur-like operational flexibility and precision lethality for the Marine expeditionary unit
  • Extended range to reach enemy artillery, command and control centers, and other targets beyond current mortar capabilities.
  • Engineering and manufacturing development program expected to be completed within 24 months.
  • Robust across all-weather conditions and terrain.

About Raytheon
Raytheon Company, with 2011 sales of $25 billion and 71,000 employees worldwide, is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 90 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. Raytheon is headquartered in Waltham, Mass. For more about Raytheon, visit us at www.raytheon.com and follow us on Twitter @raytheon.

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USMC Shop for Hand-Held Target Acquisition Devices

the US Marine Corps has awarded development contracts worth $12 million to four companies to come up with hand-held integrated laser rangefinders for the Common Laser Range Finder Integrated Capability (CLRF IC) system. Some have an off-the shelf solution, others have to develop it from scratch

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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5th LRIP Batch of F-35 JSF to be Awarded

Lockheed Martin (LMT), the prime contractor on the Joint Strike Fighter (JSF), and the U.S. Department of Defense have pretty much wrapped up negotiations for the latest batch of F-35 Joint Strike Fighter (JSF) production. This goal was to complete and award this by the end of 2012 and it looks like that will be met.

The FY13 order will be for 32 more of the advanced aircraft split between the 3 variants. The bulk, 22, are the Air Force’s Conventional / Take Off and Landing (CTOL) version. These are intended to replace the F-16 and A-10 platforms currently in use. Then there are 3 F-35B Short/Vertical (S/VTOL) for Marine Corps to meet the AV-8A mission and finally 7 F-35C carrier based aircraft for the Navy. Estimates for the cost of the aircraft along with engineering services and other money is in the $3.8 – 4 billion range.

The F-35 program remains several years behind original schedules and cost have increased greatly but much progress has been recently made. There are now over 150 aircraft delivered or in production with this order. They are supporting test and development along with training for pilots and ground crew.

Due to the high concurrency remaining with the program Lockheed will have to go back and modify many of the current production aircraft to the final standard after they are delivered. This is due to the much more T&E remaining for things like the advanced helmet, software and other parts of the aircraft. The F-35 continues to remain on track to be the most expensive defense acquisition program in history.

Photo from U.S. Navy Imagery’s flickr photostream.

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Raytheon to Work on Solar Powered Generators for Navy

One of the issues that Afghanistan has raised for the U.S. and its Coalition partners is the high cost of fuel and also the difficulties in transporting it. Due to the terrain and mine/IED threat much of the supplies and people needed are moved by air. This greatly increases the cost of a gallon of fuel at its final destination point. Demand for this commodity is not only driven by the need to power vehicles but also to generate the large amounts of electricity needed for modern combat systems.

To counter this the U.S. Department of Defense has been investing in different types of renewable energy to see if it may be used to supplement their standard diesel powered generators. This has included fuel cells, solar power and other ideas to reduce reliance on those units. Generators also provide large noise and heat signatures which could aid in enemy targeting of facilities and bases.

The Office of Naval Research (ONR) continuing this trend recently awarded Raytheon (RTN) a contract to work on hybrid solar/diesel generators to support deployed U.S. Marine Corps troops.

The goal of the two year demonstration contract is to work on prototypes with the potential of a further contract to build a working full scale system.

While some have criticized the Pentagon for the amount it is spending on green fuels and renewable energy for uses such as this it makes sense as it will lessen the logistic burden as well as reducing threats through lower signatures.

Photo from USAG-Humphrey’s Flickr Photostream.

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General Dynamics Continues Work on ACV Contender

The United States Marine Corps (USMC) has operated armored vehicles to move troops from ship to shore since World War II. The current AAV-7 generation vehicles have seen use since Vietnam. A new program to develop a faster, more capable system called the Expeditionary Fighting Vehicle (EFV) was cancelled in 2011 due to cost and schedule issues. Since then the Marine Corps has released a new road map for vehicle procurement which includes another potential AAV replacement called the Amphibious Combat Vehicle (ACV).

General Dynamics (GD) was the prime contractor on the EFV.

The ACV program is currently still in the requirements stage and the Marine Corps is relying on industry to demonstrate capabilities to meet those requirements. Earlier this month a Request for Information (RFI) to industry was released that asked to learn more about industry’s views on an incremental program where the initial vehicle would meet a set of basic requirements and then be upgraded to meet other future ones.

GD will be a potential source for the new ACV and they are working on demonstrating the ability of their systems to meet the requirements. They recently completed survivability testing of a hull design to show compliance with the protection requirements for the ACV. This self funded testing was successful with “confirmed that General Dynamics’ hull design meets the Marine Corps’ ACV survivability requirement and provided an early assessment of the unprecedented level of protection against threshold and objective threat levels that the new hull design will provide”.

As part of the reaction to the mine and IED threat that caused so many casualties in Iraq and Afghanistan new American combat vehicles face stringent protection requirements. This has driven up the weight for programs like the Ground Combat Vehicle (GCV), which will replace the M2 Bradley, adn the Joint Light Tactical Vehicle (JLTV), which is the HUMVEE replacement.

The ACV like all new development programs is facing the potential for a slow process depending on how sequestration and the budget issues are resolved.

Photo courtesy of U.S. Navy Imagery’s flickr Photostream.

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Raytheon AESA for F-15E Enters LRIP

While the United States continues development and testing of the F-35 Joint Strike Fighter (JSF) it must continue to utilize its older fighter and attack aircraft. The F-15, F-16 and F/A-18 all originally entered service in the late Seventies and Eighties but have continued to be upgraded with new electronics, systems and weapons. As part of this all 3 will eventually be fitted with new Active Electronically Scanned Array (AESA) radar systems to replace the mechanically scanned systems currently used. The AESA offer better reliability and ease of maintenance over the older systems.

Raytheon (RTN) is already producing a new radar for the F/A-18 used by the U.S. Navy and Marine Corps and several allied nations. Over 300 have been delivered for retrofit on aircraft.

Raytheon is also providing the new radars for the F-15C and F-15E aircraft used by the Air Force and Air National Guard (ANG). The F-15C variants have begun receiving them and a contract was recently awarded for the Low Rate Initial Production (LRIP) of the one for the F-15E strike version. Initially 6 systems will be delivered as part of this contract.

Even with the threat of budget reductions in the near future these programs will continue. They will most likely see cuts in quantities and slower development but they are necessary to provide the capabilities needed by these aircraft.

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F-35 Money Keeps Rolling In for Lockheed Martin

The F-35 Joint Strike Fighter (JSF) is the largest acquisition program in history headed up by prime, Lockheed Martin (LMT). The program has suffered delays due to testing and technical issues but now is in steady low rate production with the U.S. buying 30 or more a year for itself and allies. The F-35 will be used by the U.S. Air Force, Navy and Marine Corps. It also has countries like the u.K., Australia, the Netherlands, Norway and Canada as partners as well as already having Foreign Military Sales (FMS) to Japan and Israel.

Lockheed is not only getting contracts for the production but also for items such as training, simulators and of course spare parts. They were just awarded a contract for spares for the U.S. Navy and international aircraft worth about $200 million. As the aircraft are fielded they will also require the establishment of stocks of parts at bases and depots to support them.

The current production of F-35 is pretty much all going to the different training sites to support pilot conversion. They are also being used to continue testing and development of the system.

If the F-35 in its current plan survives potential budget cuts and restructuring between 3 and 4,000 aircraft will be made. They will fly for 30 plus years and be the main equipment of Western tactical air forces for most of that time.

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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 F-35 Work for Lockheed Martin

The Pentagon awarded Lockheed Martin (LMT), the prime contractor for the F-35 Joint Strike Fighter, another $237 million of work on the advanced aircraft program. This contract action is to add to the fourth low rate production batch some changes that have been developed over recent times. The F-35 program is very concurrent with testing and development ongoing while production is as well.

This means situations like this where aircraft already delivered or on the production line will be retrofitted with changes that have come out of the test program or experience flying the system. This concurrency is one of the reasons the program has suffered cost and schedule problems. At the same time it allows Lockheed to deliver aircraft to support training and testing and ultimately deployment.

Originally the contracts for production had been cost plus where the government was responsible for any increases in cost related to changing requirements or specifications. The most recent production one due to pressure to control cost has a cap above which Lockheed will be responsible for any additional costs.

Despite the fact that their line workers remain on strike for what is now approaching three weeks the company continues to work on the aircraft.

The F-35 program continues to be the most expensive defense acquisition program in history and recent moves to stretch out deliveries by several years will only add to that total cost.

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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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Update on Boeing’s (BA) Military Programs — Seeking Alpha

This is an exclusive post I wrote for Seeking Alpha on the current state of Boeing’s military aircraft programs.

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Despite F-35 Troubles Infrastructure Investments Continue

The F-35 Joint Strike Fighter (JSF) headed up by Lockheed Martin (LMT) is the largest defense acquisition program in history. It is facing a series of schedule delays and cost growth which is causing the Pentagon to buy less aircraft then originally planned and stretch out the deliveries. Many of the current customers are making noises about second thoughts due to these delays. Even so the program continues with test flights, production, development and the carrying out of other preparations.

This includes the issuance of a contract to build two hangers for the aircraft located at Marine Corps Air Station located in Yuma, AZ. This $70 million or more contract to Harper Construction will be for special buildings that are compliant with the F-35′s requirements. This includes special facilities to operate the logistics system being developed for the aircraft.

The Marines are currently planning on putting 6 squadrons of the aircraft at Yuma when fielding is complete and a further 6 squadrons at Mirimar MCAS near San Diego.

The F-35 like the F-22 Raptor fighter and B-2 bomber most likely utilizes construction materials to improve its “stealthiness”. This may mean it needs hangers adapted to the requirements for the maintenance and protection of those materials. This is probably why new ones must be built and old ones refurbished.

When the F-35 program is complete the U.S. will possess over two thousand of the advanced aircraft and allies another several hundred. That date right now is looking to be sometime in the 2030′s.

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GAO Finds Billion Dollar Overrun on Initial F-35 Production

Testifying to Congress yesterday the Government Accountability Office (GAO) reported on cost growth and overruns of the F-35 Joint Strike Fighter (JSF). The JSF program headed by Lockheed Martin (LMT) suffered cost increases of a billion dollars on the first four production orders for the aircraft.

These buys are for 63 aircraft which means about an average of almost $16 million each. The F-35 is the largest acquisition program in the world and ultimately over 2,000 will be built for the U.S. and allies to replace the F-16, F/A-18 and A/V-8A aircraft.

The cost overruns will be shared by the government and Lockheed in about a 65-35 ratio.

The GAO stressed there have been some improvements in the program and its stability but expressed concerns that there is still too much concurrency in it with simultaneous production, development and testing. This could lead to changes to the aircraft as they are being built adding time and cost.

The F-35 has suffered from schedule delays as it works through the testing and development program. One of the reasons for this added time and cost is that there are three different versions of the aircraft. One has vertical takeoff ability, another short and the the third conventional. This is for use not only on aircraft carriers but also to replace the unique capabilities of the A/V-8 Harrier which can land and take off vertically.

With the expected decline in the defense budget further increases like this will not only stretch out the production timeline but also reduce available funds for other programs. The Air Force has to invest in new tankers and bomber aircraft as well as the JSF. The Navy could see it needing more funds for ship building and the Marines ground vehicle programs could suffer.

As with all defense programs as time goes by it will solve its issues but the Pentagon has to face the question as to at what cost.

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Canada Reconsidering F-35 Buy?

Canada like many of the U.S. allied nations that purchased U.S. fighter aircraft in the 80′s is facing the need to upgrade their forces. They have used the CF-18 now for several years. They like others joined the Joint Strike Fighter (JSF) program early on providing R&D funds for the new aircraft. In 2010 the Conservative government decided to go ahead and commit to the production part of the contract with plans to buy 65 of the advanced fighters from Lockheed Martin (LMT). The move was controversial with the opposition ending up forcing a vote of no confidence in the government over the decision.

The Conservatives did well in the following election and actually increased their hold in Parliament.

The JSF program has seen major schedule slips as well as cost increases. This is why it is controversial in Canada, the U.S. and other potential buying nations. The U.S. has recently announced in their upcoming budget plans to reduce the annual buys of the aircraft in order to save money. This will stretch out the delivery times and further increase the price of the aircraft. Their also continue to be nagging technical problems common in any development program that has restricted testing and training.

Now there are reports coming out of Canada that it may be reconsidering their plans to buy the JSF. In testimony to Parliament defense officials stressed that they are still intending to buy the aircraft but there is no contract and they could leave the program if they wanted to. Canada has already stated that they will not spend more then they currently plan on the JSF which could lead to reduced numbers if the prices continue to increase.

If Canada does not buy the F-35 they will be faced with deciding between a variety of current aircraft. These include the Boeing (BA) F/A-18, Eurofighter Typhoon and France’s Rafale. The U.S. remains committed to the program and it will replace the F-16, F/A-18, and other aircraft.

If Canada does leave it would be a blow to the program and might encourage other purchasers like Holland and Japan to reconsider their choice.

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AeroVironment Wins More Raven Production

update – Edited the post to make clear that the contract is just for logistics support and not new systems.

The U.S. Army awarded AeroVironment (AVAV) a contract for further production of the hand-launched Raven small Unmanned Aerial Vehicle (UAV). The Ravens are used by small units for local area reconnaissance and surveillance.

The contract is worth a little over $11 million and will provide logistic support for deployed Raven systems not only for the Army but also the Marine Corps and any Foreign Military Sales (FMS).

AeroVironment makes a series of different UAV’s for use by military, law enforcement and other government agencies. The company is also investing in electric vehicles and power management solutions. They manufacture a home charging station for electric vehicles as well as supporting electric car design and development.

As with all OEM companies they also provide training and engineering support for their products.

The UAV market has done well over the last decade as the U.S. military especially has invested in thousands of systems to support operations in Afghanistan and Iraq. This investment should continue even as the U.S. withdraws its troops and fighting ends. There will be focus on improving UAV payload, range and capabilities.

AeroVironment is working to develop the ultra long range, persistent Global Observer UAV which is powered by hydrogen fuel rather then a conventional engine. Boeing (BA) is also working on a similar system utilizing solar and other renewable fuels.

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Changes in Guam’s Plans Lead to Contract Cancellations

For several years the U.S. and Japanese governments have been working on moving a majority of the U.S. military based on Okinawa to Guam. This is to reduce their presence and potentially provide better training facilities. The move was going to be jointly funded by the two countries. One sticking point has been relocating the main Marine air base on the island which under the current plans will stay.

The Navy has been issuing contracts to build the new facilities on Guam which will include not only barracks but support capability such as a hospital, larger port, and the myriad things needed to support thousands of Marines, Sailors and Airmen and their families. The estimated cost of the move is close to $12 billion.

Right now though the move is under discussion and potential revision. This meant in the FY12 budget the Navy was specifically prevented from obligating anymore of the money from Japan. This meant that it has had to cancel two large contracts that were intended to be funded with that money.

The largest contract was an omnibus one, Mamizu Multiple Award Construction Contract, which would have allowed the Navy to issue orders to build facilities where the Marine headquarters were going to be. The other was for construction of a clinic.

The two governments have been working on this moved for several years. The fact that it remains unresolved despite much of the planning and work done in the last decade is not surprising. The presence of the U.S. on Okinawa has been a burden in the mind of the islanders and they would like all of it to leave. The relocation of the airbase has become a key sticking point and has not shown signs of resolution.

Even so eventually the U.S. will move a great deal of their infrastructure and personnel from Okinawa. The work on Guam will eventually get done and contracts issued and completed.

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C-130J Production Continues

Even though as part of the FY13 budget the Defense Department is proposing to restructure the existing C-130 fleet and cancelling the Aviation Modernization Program (AMP) production of the C-130J continues. With this the Air Force place a contract with Lockheed Martin (LMT) for 7 more of the capable transport for use by itself and the Marine Corps.

The $70 million option will procure 4 MC-130J tankers, 2 AC-130J gunships and a HC-130J for the Coast Guard. This is under the current production contract.

The next five year budget, though, due to the desire to cut several hundred billion in spending over the next five years is not so kind to the program. It sees a forty-one percent cut to the planned spending for production while also ending the AMP.

The AMP had been developed by Boeing (BA) but the plan was to have another contest to award the production and retrofit contract. Boeing under the development contract would have done some of the upgrades but the bulk would have been done by the winner of the new effort.

The budget also ends the C-27J Joint Cargo Aircraft (JCA) program which was buying twin engined transports from L-3 Communications (LLL) for use by the USAF Guard. This capability will be replaced by C-130 performing that mission. With the ending of fighting in Iraq and Afghanistan the planned use of the C-27J would have been much less then intended.

There is no guarantee that any of these budget proposals are final until Congress votes on the 2013 defense budget this year. They are the final say on what is cut and what is kept but generally they follow the Pentagon’s proposals.

Photo from kingair42′s flickr photostream.

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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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Panetta Lays Out Initial Defense Budget Spending Plans

Yesterday the Pentagon made a series of presentations and media events to lay out the initial numbers for future spending. The goal of the Secretary Leon Panetta’s Defense Department is to cut $487 billion in ten years with the current Five Year Defense Plan (FYDP) containing over half the reductions. As part of this DoD released a 15 page document and a one page budget summary that provides top level guidance on the plans.

Many of the planned cut backs are based on the idea that with the disengagement of forces in Iraq and Afghanistan cuts may be made in those areas. This means that money for the “Global War on Terror (GWOT)” or “Overseas Contingency Operations (OCO)” as that support was called will see significant cuts. In FY10 it was $163 billion, in FY11 $159 billion with $115 billion planned for FY12 and only $88 billion in FY13. This adds up to a 54 percent reduction and saves $75 billion in those three years.

Since personnel costs both for the current Active members, their dependents,the reserve force and retirees make up about thirty percent of the defense budget there will be reductions and adjustments to their size and benefits. 100,000 Soldiers and Marines will be eliminated from the active military with the Army losing approximately 8 brigades of troops. Even though the Marine Corps has grown substantially since 9/11 it maintains the same force structure of 3 active divisions and 1 reserve so there will be cuts to the size of individual units and support forces. The Pentagon states that even with these cuts the size of the ground forces will be bigger then on 9/11. There will also be increases in medical costs to the individuals and a commission to revamp military retirement benefits.

The Air Force and Navy will too see reductions in their force structure. The Navy will retire some ships early while delaying the construction of others. This means that it won’t grow as fast as currently planned. The Air Force will lose some tactical aircraft, cut transports and reduce planned buys of some F-35 Joint Strike Fighter.

Only a few programs are targeted for elimination so far. These include the C-27 Joint Cargo Aircraft used primarily by the Air National Guard. It is planned the C-130 will provide needed capability there. The new Joint Air-to-Ground Missile (JAGM) which is to replace the Maverick and Hellfire missiles will be scaled back. It was about to select its prime contractor. The Global Hawk Block 30 will finish production and there will be some other nibbling around the edges.

All of this ads up to some significant reduction in business for defense contractors. The JAGM was a large contract that either Raytheon (RTN) or Lockheed Martin (LMT) were hoping to win. The cuts in ship production will affect Huntington Ingalls Industries (HII) and General Dynamics (GD). Reduction in JSF will certainly affect Lockheed and its support contractors.

The contractors who provide support in Afghanistan and at bases across the U.S. will see cuts as there are smaller, less troops to support. Logistics needs will also be cut back so those making things like battle armor, uniforms, and small arms will also be affected.

Overall it will will remove about 9% of planned spending in FY13-17 from the defense budget. That will cause some companies severe pain depending on how broad their product line and customer base is.

Of course Congress is the final say and they could easily keep some of the funding for some of the programs cushioning the cuts and blows to the defense industry. The elections this year will also have a key affect.

A lot more to come as yesterday was just a starting point.

Photo is from U.S. Navy Imagery’s Flickr photostream.

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