For the moment at least, while traditional high-spending military customers from Europe and North America are being put to the sword by their financial masters (motto: fear naught—apart from accountants), industry is having to radically rethink its global military business strategy. The markets for high-price ticketed items such as attack helicopters and those designed specifically for military missions are already decreasing. Yes, there are the BRIC countries (Brazil, Russia, India and China), but Russia and China are not open to companies selling highly specified military equipment from the western countries. Both India and Brazil are, but India is now naturally keen to increase the development its own indigenous industry at a rapid pace and Brazil is progressing steadily in the expansion of its own defense industry sectors.
The “lion’s share” of military orders over the next 10 years, outside of the traditional markets (and largely existing programs of record), will be from countries with growing ambitions yet still without the financial muscle to acquire volume. Their requirements will depend largely on their perceived regional threat, and how they can meet it without incurring a huge step change in their own defense budgets.
The killer for systems such as Eurocopter’s Tiger, Boeing’s AH-64D and the Bell-Boeing V-22, is the high price of purchase and ownership and, in the case of the attack helicopters, the increasing availability of more simple weapons platforms that can deliver good-enough lethality downrange without the need for all the complexity, connectivity and ISTAR systems.
Manufacturers need to keep selling helicopters, of that there is no doubt. But declining military sales have to be made up elsewhere in the business model. There are, it appears, at least two solutions to this. The first is to change the product offering—but without requiring any new investments in research and development (R&D) or technology. The second course of action is to develop one of the other business sectors. Eurocopter is one manufacturer that appears to be doing both.
“We are offering derivatives of our civil helicopters which are less expensive and easier to optimize,” said Eurocopter’s Dominique Maudet, speaking at the French defense industry gathering in mid-June at the Eurosatory event in Paris. “Now is not the time for brand new military programs—it is the time for painting civil helicopters in green [militarizing them].” The main work required with this option is the systems integration and the level of capability the platform will need to provide individually and as part of customer’s defense network.
While Eurocopter’s Tiger and NH-90 helicopters were being displayed on the French Army stand, the company preferred to show its EC645 T2 (the militarized EC145) and well-established Ecureuil/Squirrel at the front of the EADS pavilion outdoors. Eurocopter’s delight at the good things the U.S. Army has said about its utility Lakota UH-72 is already well documented, but the flexible and relative simplicity of the AS550 Fennec (the military version of the AS350) is being seen as a good selling point. This is not a new policy to Eurocopter, which has long believed in offering military versions of its civil products.
To support the second course of action, developing new business, Eurocopter recently acquired Canadian-owned MRO specialist Vector Aerospace. At the time, Eurocopter CEO Lutz Bertling revealed that the purchase was intended to strengthen the company’s global position in the aviation support and services industry. Said Bertling, “While Vector will continue to operate as an autonomous company, keeping its successful brand name, the complementary nature of our respective worldwide networks will enable us to develop our activities, both faster and more efficiently….” In other words, buying into a new revenue stream that is already firmly established. Vector Aerospace in the UK of course has provided the UK’s Ministry of Defence with MRO services for its Boeing Chinook, Westland Sea King and Lynx fleets for the Royal Air Force, Royal Navy and Army. This is one of the opening moves in a battle that will see all of the OEMs knocking each other out of the way to offer an even more comprehensive service than before—from platform provision to the maintenance of any type of helicopter (subject to the usual military system caveats).