Before it was renamed the ScanEagle in 2004 and marketed to the US Marine Corps, the Insitu SeaScan was supposed to revolutionise tuna fishing. Its wingspan is shaped partly by a requirement to fit through a hatch on the Shackleton, an 18m (58ft) tuna boat that Insitu used for demonstrations in the early 2000s.
But nervous tuna boat insurers and the outbreak of insurgencies in Iraq, Afghanistan and elsewhere have conspired to shift Insitu’s focus towards military operations over the past decade. As military demand grew dramatically after 2003, the small start-up founded on the banks of the Columbia River in southern Washington became an attractive acquisition target for Boeing.
In a twist of fate, Insitu is now turning back to the commercial market to drive sales growth as military demand slows. The launch last October of the ScanEagle 2, featuring a new leap in engine reliability and power, is aimed at capturing a commercial market expected to grow dramatically over the next decade.
“We as a company have come full circle,” says Ryan Hartman, president and chief executive of Insitu.
Noting Boeing’s centennial anniversary looming in 2016, Hartman compares Insitu’s evolution to that of its corporate parent’s early existence. In its first two decades, Bill Boeing’s management team pursued an uncertain and rapidly evolving commercial market, but finally began to flourish on the eve of World War II with the development of the B-17 and later the B-29. As the war ended, Boeing returned to the commercial market just as the jet age began.
“That’s exactly what we’re going through,” Hartman says.
Only a few years ago, a fee-for-service business operating ScanEagles for US and foreign militaries accounted for 90% of Insitu’s sales. The ratio has slipped to roughly 50% as the procurement of the larger, more advanced MQ-21 Blackjack for the US Navy and Marine Corps has ramped up, along with a small but growing commercial business concentrated in remote areas of the Arctic and Australia.
All change
The commercial business for unmanned air vehicles bears little resemblance today to the market Insitu largely abandoned a decade ago.
Those sceptical insurers who were unwilling to price the risk posed by operating UAVs near large and expensive vessels are no longer the biggest obstacle. The ScanEagle has amassed nearly 900,000 flight hours in the last decade alone, providing volumes of data for insurance appraisers to examine.
“The progress we’ve made, that we’ve continued to make, is very well understood now,” Hartman says.
That progress over the past decade is undeniable, but so have been the challenges. The reliability of UAVs in military service has been frequently criticised, particularly for the quality of engines largely repurposed from non-aviation-related applications.
“This industry has been hamstrung by propulsion, no doubt – two-stroke hobbyist engines,” says Hartman.
As Insitu plotted an improved ScanEagle 2 design aimed at the commercial market, engine selection became a critical decision. Insitu drafted a specification for the engine and ran a global competition that drew 12 proposals. The company shortlisted four proposals for a technical evaluation, before selecting Western Australia-based Orbital’s proposal based on a spark-ignited, heavy-fuel engine featuring a proprietary technology called flexible direct injection.
The engine passed FAR Part 33 certification requirements in internal testing by Orbital, although Insitu has not submitted the engine to testing by the Federal Aviation Administration. Hartman says many UAV manufacturers claim only to have completed FAR 33 testing. Receiving certification, however, means the engine completed testing and needed only normal maintenance to run again operationally.
“Lots of companies claim to have gotten through FAR 33 testing, but actually passing FAR 33 testing is a completely different scenario,” Hartman says.
As of mid-February, Insitu had taken delivery of the first three engines from Orbital and flight testing on the ScanEagle 2 is expected to begin imminently.
After clearing flight test, the ScanEagle 2 will face a challenging commercial market for unmanned air systems. Some industries hope for deregulation, but the unmanned aviation industry in many areas craves to first be regulated. In most cases, flying unmanned aircraft commercially is strictly prohibited with a few, tightly controlled exceptions.
As regulations are being developed, Insitu has found remarkable success in the fledgling civil market. The first ScanEagle was the first aircraft to be certificated to operate by the FAA, but only in the remote Alaskan Arctic. Insitu also has developed a business with the wildfire response force of Australia’s Queensland territory, in a country that has been more welcoming to experimentation with unmanned aircraft in certain roles.
That Queensland experience has helped shape a new business model that Insitu will seek to apply in other markets, including the USA. There is a small but growing number of industries that are starting to use small unmanned air systems under a special exemption called Section 333, but Insitu has no interest in that part of the market.
“We’re not out actively pursuing 333 exemptions,” Hartman says. “We think that’s for much less capable platforms. We are a professional aviation company. We need to act and behave as a professional aviation company. Working with the FAA and getting certification is the right thing to do.”
Instead, Insitu has targeted the market for civil government services, ranging from federal agencies that manage wildlife and forests to local law enforcement. It is a customer with a wide range of requirements, compared to the relatively straightforward and consistent need of a military customer for extended surveillance. In Australia, Insitu augmented the ScanEagle with a kit including small quadcopters, such as the CyberQuad.
“We’ll start in the civil market, supporting state and local governments,” Hartman says. “We’re making tremendous headway. We’re out making money. There’s not a lot of companies that can claim that in the commercial space.”
As the commercial market develops, Insitu also has a steady pipeline of work as a defence contractor, despite slower military spending growth globally. The MQ-21 programme is beginning to ramp up production and the fee-for-service business based on the ScanEagle is still active.
“The need for [intelligence, surveillance and reconnaissance] aboard navy ships is very important and we have created a stable business and provided organic ISR to destroyers and frigates around the world. That will be an ongoing and enduring business for us,” Hartman says.
In the past year, Insitu has opened a new factory on the banks of the Columbia River. Its head offices still occupy a former winery a few blocks away on Main Street in tiny Bingen, Washington. It has risen from an experimental start-up to a dominant, mature player in a still rapidly developing market.
Its corporate parent in its earliest days survived a series of disruptive innoviations, such as the shift from wood to metallic aircraft structures and from piston engines to turbojets. The future is likely to confront Insitu with a wide range of new competitive threats. Multibillion-dollar innovation laboratories funded by Google and Amazon, for example, have targeted the UAS sector as a key area for disruptive breakthroughs.
Insitu is aware of the potential threat, but Hartman returns to the company’s unlikely, 20-year growth trajectory anchored by a corporate parent with a nearly 100-year track record in the commercial aviation market.
“At some point I believe there will be an intersect between what [Amazon and Google] are trying to do and what we provide. I don’t know when they’re going to do that, but I believe there will be an intersection,” Hartman says.
But “go back to the importance of the commercial market being serviced by a professional aviation company”, Hartman says. “I believe that there is a place for what [Google and Amazon] are trying to achieve and a company like Insitu – there’s no company like Insitu. There’s just not. We’re about to celebrate our 20th anniversary, approaching 1 million flight hours. The difference between us and other companies is beyond the fact that we’re a professional aviation company. We’re also an innovative company and the culture mixes well.”
CORRECTION: Article is updated to reflect that the ScanEagle2 engine has not yet completed FAR 33 testing by the FAA, but Insitu says the engine has completed internal testing that meets FAR 33 requirements.
Source: FlightGlobal.com
