Graham Warwick/WASHINGTON DC
Reshaped by the consolidation of recent years, US military aircraft manufacturers are undergoing another transition as programmes that have sustained the industry for decades reach the end of their lives.
With fewer new programmes coming on line, US manufacturers are moving to become more efficient and competitive. Reducing costs has become key to protecting domestic business as well as winning international orders.
The driving force behind consolidation of the industry was the dramatic reduction in the US defence procurement budget. The resulting overcapacity sparked a frenzy of mergers and acquisitions, but the pressure to reduce costs has continued. Now the survivors are looking internally for further savings.
Despite their different corporate scales, Boeing, Lockheed Martin and Northrop Grumman are roughly equals in the military aeronautics sector. Despite the differences in their business mixes, they face the same cost-cutting challenges.
Boeing's Military Aircraft and Missile Systems group, which brings together heritage Boeing, McDonnell Douglas and Rockwell businesses, is cutting the workforce at its St Louis, Missouri, fighter plant because production of both the F-15E and F/A-18C/D will end next year. The cuts are intended to make the new F/A-18E/F more affordable.
Lockheed Martin's Aeronautics sector is also making workforce cuts at its Marietta, Georgia, plant, to reduce overhead costs on the C-130J and F-22 programmes. The company has committed to achieving substantial production cost reductions for both aircraft.
Meanwhile, Northrop Grumman, barred by the government from merging with Lockheed Martin, executed an "internal merger" at the beginning of the year, creating three sectors from seven divisions with the aim of saving about $200 million a year. The new Integrated Systems and Aerostructures (ISA) sector brings together all the company's aircraft work.
While industry is making progress, it is looking to the government to do its part. One consistent call is for multi-year procurement (MYP), which reduces costs by enabling manufacturers to gear up for longer production runs. "Multi-year has got to come," says Lockheed Martin Aeronautics sector president Micky Blackwell. "The USA is the only country that has year-to-year procurement."
Multi-year a must
Multi-year procurement is at the heart of efforts to reduce the cost of the C-130J and F/A-18E/F, and is expected to play a key role in making both the F-22 and Bell Boeing V-22 tiltrotor transport more affordable. Traditionally approved only for mature programmes, MYP is now being considered early in production because of the cost pressures.
The US Navy is pushing for multi-year procurement of 222 F/A-18E/Fs to achieve savings of up to $750 million. The five-year programme would begin in fiscal year 2000 with the first full-rate production batch of aircraft. Boeing aims to stabilise the configuration by the third and final low-rate initial production batch, and to include provisions for anticipated upgrades such as active-array radar in this standard.
While MYP is essential if the navy is to afford the number of aircraft it wants, it is also crucial to Boeing's plans to export the F/A-18E/F. With the F/A-18C/D going out of production, the company is working with the navy and potential customers to secure export release for the upgraded aircraft. "MYP will help get the cost down to where the aircraft will be viable internationally," says Bill Lawler, general manager, business development.
Boeing hopes to secure export release for the aircraft by the year-end and plans to include the active-array radar in the export configuration. "We will sell a full-capability E/F, not a stripped-down aircraft," says Lawler. "We are looking at a 2004-5 timeframe for delivery. For customers looking at the C/D, the E/F timeframe is not that different."
Lockheed Martin, meanwhile, is offering the USAir Force multi-year procurement of the C-130J in a bid to reduce costs and accelerate production. MYP is key to plans to cut the aircraft's price by $10 million and make the upgraded Hercules transport more affordable for both domestic and international customers.
The company recently restructured the private-venture programme to write off costs incurred by development delays and production shortfalls. Because of USAir Force procurement delays, production will drop from the planned 24 a year to as few as 16 until 2002, when a 150-aircraft USAF programme is expected to get under way.
The multi-year proposal is an effort to accelerate USAF procurement and stimulate international orders by reducing the aircraft's cost. Lockheed Martin's offer of the C-130J for the European Future Transport Aircraft requirement is based on MYP pricing.
Boeing, for its part, proposes an extension of the current C-17 multi-year programme that would offer the USAF substantial savings on additional aircraft. "We are offering multi-year procurement of 60 aircraft at a very good price, and international customers can benefit," says Lawler. The additional C-17s are being offered for $149 million each, compared with an average of $198 million for the 120 aircraft being built under the existing MYP. They would be built at a rate of 15 a year after completion of the current production run in 2005.
Looking out for Hawkeye
Northrop Grumman is also manoeuvring to extend its existing multi-year programme to build E-2C airborne early warning (AEW) aircraft for the US Navy. The company believes the E-2 airframe offers the most affordable solution to the USN's long-running Common Support Aircraft (CSA) requirement, and is pressing the service to move ahead while the aircraft is still in production.
The CSA would replace the USN's E-2Cs, carrier on-board delivery (COD) C-2s and aerial-refuelling tankers. "CSA has been on the agenda since 1983," says ISA sector president Ralph Crosby. "The desire is there, but the budget is not. The burden of maintaining the current aircraft means there is not enough money to develop a new aircraft."
But a new airframe is not needed for the CSA, says Crosby. "Aerodynamic performance does not drive this requirement - $5-10 billion in non-recurring expense [for a new airframe] is not justified." Instead, he says, Northrop Grumman is proposing a "modest upgrade" to the E-2 aircraft to allow it to perform both the AEW and the COD missions.
"The action is not in the platform, it is in the systems, so why pay to develop a new platform?" asks senior vice-president, business development, Paul Bavitz. "We think it makes sense to use the E-2, but we need to start before the MYP goes away."
CSA is one of the few future programmes that could see competition between all three manufacturers. More often, Northrop Grumman is expected to team with one or other of the two big primes. This is happening already, with the company joining forces with Lockheed Martin and British Aerospace to compete against Boeing for the JSF programme. "We want to get a valuable role on a team," says Bavitz.
The prospect of Boeing and Lockheed Martin getting together voluntarily on a major military aircraft programme, as they did on the F-22, looks unlikely. Instead, the companies seem set to become increasingly competitive. A sure sign is Lockheed Martin's continued overtures to Airbus Industrie.
Although these started out as an effort to influence the design of Airbus' planned A400M military transport, in order to eliminate a direct competitor to the C-130J, they have evolved into continuing talks on the potential for collaboration between the US and European entities.
Although Lockheed Martin has ruled out taking an equity stake in the European consortium's A3XX large airliner programme, it says it is still discussing the possibility of a substantial subcontracting role on Airbus commercial programmes.
The biggest draw for Lockheed Martin, however, remains the potential for using an Airbus airframe as the basis of a replacement for the USAF's 800-plus Boeing KC-135 tankers and Lockheed C-141 transports. While the US company continues to study all-new designs under its Advanced Mobility Aircraft project, its preference is to base the solution on a commercial airframe.
"I need a partner to go tap the KC-135 replacement market," says Blackwell. "I hate to give Boeing a free ride on 400-plus aircraft. We've been talking to the Airbus partners for the last five years and we're still a long way off, but the temperature is beginning to rise. In the next two years, I expect to conclude a deal or go our separate ways."
Blackwell sees a market opportunity for an aircraft that fits between the C-130J and the C-17, for a swept-wing, turbofan-powered tanker/ transport priced at $80-100 million. It is a long-term opportunity, however - the USAF's KC-X replacement programme is not expected to get under way before 2012.
Boeing sees the C-17 as the solution to the USAF's transport needs and is studying a KC-767 derivative of the 767 airliner for domestic and international tanker markets. It also has low-level design efforts under way on both the Advanced Theatre Transport - a tilt-wing, ultra-short take-off and landing aircraft intended as a C-130 replacement - and the Blended Wing Body, a large, long-range aircraft suitable for both tanker and transport roles.
Closer connection
Northrop Grumman, meanwhile, has entered the Airbus picture through its link with the European consortium on the long-running NATO Airborne Ground Surveillance (AGS) requirement. But Bavitz says it is "premature" to talk about any closer connection between the US and European entities.
Earlier this year, NATO agreed to a two-year study of two AGS alternatives, one of which is the US-backed Radar Technology Insertion Programme (RTIP) under way at Northrop Grumman. The RTIP involves new active-array radar for the USAF's E-8 Joint STARS battlefield surveillance aircraft, which are produced by the US company.
Northrop Grumman expects to begin engineering and manufacturing development of the RTIP sensor later this year under a contract potentially worth $2.5 billion. Under the NATOAGS effort, the company has teamed with Airbus to study installation of the RTIP system in one of the consortium's aircraft types.
"We will work with Airbus, but we are not committed to use an Airbus airframe until we know the size of the [AGS] platform," says Bavitz, noting that the modular RTIP radar can be scaled to fit into anything ranging from an unmanned air vehicle, through a business jet to a large airliner.
A link with Airbus on anything other than military programmes seems unlikely, given Northrop Grumman's role as Boeing's largest subcontractor on commercial aircraft aerostructures. Lockheed Martin has no such constraints, however, and a commercial subcontracting role remains a possibility.
In the meantime, the US firm is forging a link with the European consortium through smaller deals with its partner companies. Lockheed Martin has teamed with Aerospatiale Matra to pursue international airliner-to-tanker modification programmes and the two companies have joined forces to bid for the role as foreign investor in South Korea's consolidated aerospace industry.
Lockheed Martin's original offer was rejected for having too little commercial content, hence the link with Airbus partner Aerospatiale Matra. The US company is seeking to protect an investment in South Korea's industry built through licence production of the F-16 and now co-development of the KTX-2 supersonic trainer/light combat aircraft.
The company proposes that South Korea build additional F-16s in the near term while the KTX-2 is being developed and the F-22 is being cleared for export to meet the country's F-X future fighter requirement. "It is quite critical for Lockheed Martin to be the foreign investor [in Korean Aerospace Industries] if we are to do business there in the future," says Dain Hancock, president of Lockheed Martin Tactical Aircraft Systems.
Making the break
This is a relationship Boeing would like to see severed to improve its chances of selling the F-15 to South Korea. The prospects of such a sale dimmed earlier this year when Greece and Israel rejected the F-15 in favour of improved versions of the F-16, making a break in the production line inevitable.
Although US Congress is likely to vote funds later this year for more USAF F-15Es as part of a compromise deal to restore production funding for the F-22, the programme's future looks uncertain. "We have announced that there will be a gap in production," says Lawler. "The future will depend on the market."
Lockheed Martin no longer faces a gap in F-16 production after securing orders for 132 aircraft from Egypt, Greece and Israel this year. The USAF also plans to buy 30 more F-16s and the company is optimistic of finally signing a contract with the United Arab Emirates in December for 80 advanced F-16s. Production will continue "for the next five to seven years at least", says Hancock.
With F-16 and F/A-18E/F production secure, the C-130J on firmer ground and the threat to the F-22 seemingly defeated, the reshaped US military aircraft industry appears to be positioned for the next decade.
The achievement of US industry in weathering the recent changes is not to be underestimated. As Boeing's Sears points out: "The number of tactical aircraft bought by the USA has fallen from 500 in 1985 to just 50 in 1995." The industry has faced up to the challenge that cut has posed and now expects the US Government to follow suit. "We have to continue acquisition reform," says Lockheed Martin's Blackwell. "The headway made so far is not nearly enough."
Source: Flight International
