During Heli-Expo, the U.S. Federal budget was announced with the confirmation that the Department of Defense will indeed spend $486.9 billion less than was planned in last year’s budget (savings to be gained through reductions in force structure and modernization). The headline was that base defense spending will reduce by 1 percent to $525.4 billion in 2013, while DoD Overseas Contingency Operations funding will fall by 23 percent (primarily gained from the end of operations in Iraq and the planned drawdown of forces in Afghanistan.)
Most of the CEOs and industry leaders are already looking away from the U.S. to other international markets. Only Roberto Garavaglia, senior vice president for marketing at AgustaWestland, held out some expectation for future DoD spending, saying that his company was still hopeful of competing in the VXX Presidential helicopter replacement program, the U.S. Air Force CSAR replacement, the Air Force’s Common Vertical Lift Support Program (CVSLP), the Army Armed Aerial Scout (AAS) and the Joint Multi Role (JMR) program. Most other manufacturers only view AAS as a near-term possibility.
What has been interesting is the rise of smaller, normally civil sale-based helicopter manufacturers such as Enstrom into the training/utility end of the military market. Jerry Mullins, speaking at the CEO Forum, said that 2011 had been the best year in Enstrom’s 52-year history. The company completed 12 out of 16 orders for the Royal Thai Army for turbine trainers and Mullins said there was an expectation for up to another 16 aircraft. The second of 30 helicopters had been delivered to the Japanese Ground Self-Defense Force and Mullins confirmed Enstrom as the winner of the Ukraine Border Guard competition, with an initial order of three helicopters, but potentially rising to 24 aircraft. He also said that he understood how important supporting the local operator was in these type of ‘big wins’ to a company the size of Enstrom. Perhaps more international military buyers will look to simplicity and low cost in the next few years over those of much bigger manufacturers.
Back with the big dogs and Bell CEO John Garrison announced that the AH-1Z Cobra and the UH-1Y have been deployed together by the U.S. Marine Corps for the first time. This must be a relief to the Marines, as they have endured many years of waiting. The original upgrade contract to transform the H1’s (AH-1W to Z and UH-1N to Y) was signed in 1996—15 years before this first deployment. The ambition, now achieved, was to create two helicopters with design commonality (which now stands at 85 percent through common tail boom, engines, rotor system, drive train and avionics). The new designs are good—with the Marines deployed praising the new lift capability of the UH-1Y (the crew chief no longer has to run alongside the aircraft while it gets airborne), but the process has been long.
In fact, the first AH-1Z flew in December 2000. Many delays to the program ended with a four-year operational evaluation that concluded in 2010. Following this the U.S. Marine Corps were finally able to clear the aircraft as combat ready just before entering full rate production. USMC is expected to receive 189 AH-1Zs (both new and remanufactured), with production running through to 2019.
So with no outstanding U.S. military contracts visible, the OEMs are turning to what they can find elsewhere in the world. Europe, the western part anyway, has its pockets turned inside out as the Euro-zone battles to save itself as an economic entity. Russian and Chinese military markets are closed to western OEMs, so the heat will be turned up to sell to India, the Middle East, the Far East and more than ever, Latin America.
The competition is increasing for the small to medium-sized military orders and the participation of Russian Helicopters, with its two design bureaus and five helicopter plants, is intent on improving its position as both a civil and military helicopter provider to the world markets. CEO Dimitry Petrov revealed that both Mil and Kamov are working on their own advanced high-speed helicopter projects, where the best will be selected for further prototyping. Petrov said that, in the current financially restrained times, the market wouldn’t be prepared to pay the high prices they once had, something that would be in the Russian’s favor. With a much-increased focus on improving the supply chain and providing training, not to mention increased dialogue with western engine and avionics providers, the intent to take market share is a real one. “We have now attended Heli-Expo three times,” said Petrov.
“This is not so much a public relations exercise as a working tool for engagement with our new partners.”