U.S. medium/heavy military helicopter manufacturers are losing ground to foreign competitors, precisely because U.S. manufacturers have concentrated on giving the Pentagon what it asked for. That’s the conclusion of a new Forecast International study entitled, "The Market for Medium/Heavy Military Rotorcraft - 2009-2018."
Here’s how pleasing the Pentagon is working against U.S. manufacturers: "In recent years, when the U.S. military has gone to buy rotorcraft, they have concentrated on improved versions of helicopters already in their fleet," said study author Ray Jaworowski in an exclusive interview with Rotor & Wing. To meet this demand, U.S. medium/heavy manufacturers have put their efforts into updating current models rather than developing brand new helicopters. "The result is their product lines for military aircraft are composed of derivatives, going up against new designs from Europe and Asia," he said.
This wouldn’t matter if the Pentagon stuck to buying U.S. products, as has been the case in the past. "But in the last few years, the U.S. military has opened up the U.S. platform market essentially to all comers," Jaworowski said. "As we saw with the LUH program and the presidential transport, the U.S. military is now willing to buy helicopters from non-U.S. manufacturers."
This has put U.S. medium/heavy manufacturers in a "weird Catch-22," he noted. By providing the Pentagon with the derivatives it has requested — in an effort to enhance fleet harmonization and control development costs — U.S. manufacturers have put themselves at a competitive disadvantage for Pentagon contracts. "Ironically, since the U.S. military market is no longer a captive market for domestic manufacturers, the U.S. military is now willing to buy from non-U.S. manufacturers," Jaworowski noted.
The result is that non-U.S. manufacturers are getting traction in the U.S. military market, and improving their competitive position globally. This is not good news, given how high the stakes are for helicopter manufacturers. "In terms of dollar revenue, medium/heavy military rotorcraft constitute the largest segment of the overall rotorcraft market," the Forecast International study warned. "It is this segment where manufacturers compete for the most lucrative contracts in the rotorcraft industry. Thus, it is no coincidence that the medium/heavy military sector is seeing an influx of new models, production of which will help expand and then stabilize yearly output in the segment."
In his study, Jaworowski cited Sikorsky as being the world’s dominant medium/heavy military helicopter manufacturer. So what does Sikorsky think of Forecast International’s report? "I don’t agree completely with these market share conclusions," replied Sikorsky spokesman Paul Jackson. "New development programs entail risk that could eventually hurt market share, while upgrades can generally get products to market much faster. I believe Black Hawk and Seahawk helicopters will continue to hold solid market share through FMS sales, and with new products such as the Armed Battle Hawk and the international Black Hawk continuing to progress toward production, the market share for the overall Hawk line should be poised for future growth. I also would cite the S-92 and H-92 programs, as well as the CH-53K development program, as examples of successful upgrade programs with solid market growth prospects."
As for other helicopter manufacturers, NH Industries did not acknowledge repeated requests for interviews, while Boeing did but declined to comment. But Kaman Aerospace was willing to talk. "Undoubtedly there is a serious threat with Russia consolidating their helicopter industry and the growth potential of India and China," said Mark Tattershall, Kaman’s director of marketing and business development. Part of the threat to U.S. medium/heavy helicopter manufacturers comes from their willingness to transfer technology to non-U.S. companies; an advantage that non-U.S. companies then use to compete in the U.S. military market, he said. "In my opinion, American manufacturers should be very reluctant to transfer technology overseas."
Tattershall also said that U.S. manufacturers must be willing to invest in R&D to keep up with foreign manufacturers in the global marketplace. "We need collectively to ensure that research and development budgets are sufficient to maintain our competitive edge," he told Rotor & Wing. "Defense exports are one of the few major success stories that the U.S. has got."
The bottom line: Forecast International’s study points to a very real vulnerability in the U.S. helicopter sector trying to ride out a recession. "Measured by dollar volume (though not by units produced), the medium/heavy military class is easily the largest segment of the rotorcraft market," the study said. "Near-term growth and longer-term stability in this segment will help rotorcraft manufacturers survive through what may be difficult times in the civil side of the rotorcraft market in the next few years."
This is why losing ground in this market matters so much to U.S. manufacturers. With the civil side cooling down, reliable military revenues are more important than ever.