SPECIAL REPORT: AVIATION
Drone Sales Flourish in a Time of Austerity
By DANIEL SOLON
Published: June 16, 2013
The use of unmanned drones for surveillance and targeted anti-guerrilla strikes has recently been a focus of ethical and political controversy.
Yet for all the criticism, and at a time when austerity budgets are causing deep cuts in orders for manned combat, transport and tanker aircraft, drone builders are thriving.
For defense planners and military strategists, the multiple mission capabilities of drones, their sophisticated technologies and their suitability for unconventional warfare gives them a clear edge over manned aircraft programs, which increasingly look like a holdover from Cold War planning.
Ranging in size from hand-launched reconnaissance units for urban combat to giant experimental solar-powered surveillance craft intended to remain aloft for as long as five years, drones, formally known as unmanned aerial vehicles, or U.A.V.’s, are not cheap, but they are increasingly ubiquitous.
David Kilcullen, a counterinsurgency adviser who worked with Gen. David Petraeus of the U.S. Army in Iraq and Afghanistan, said 70 nations were already involved with drones in some fashion.
Michael Richter, head of aerospace and defense investment banking for the investment bank Lazard, in Los Angeles, said the U.S. budget sequestration law would cut U.S. defense spending to $551 billion next year from $587 billion this year, with a further fall in prospect to $505 billion in 2015 and 2016.
Still, cybersecurity and drone programs are likely to be relatively resistant to cuts because of their perceived critical importance, he said.
U.S. drones already in operational use include the hand-launched AeroVironment RQ-11 Raven, effectively a flying camera that provides support for troops in close combat, and the Northrop Grumman RQ-4 Global Hawk, which can be programmed to operate almost autonomously, without a land-based controller. The Global Hawk can take off from California, fly across the United States to map the state of Maine, and then return to California.
More familiar to the public because of high-profile strikes against Al Qaeda and other targets are General Atomics’ MQ-1 Predator and MQ-9 Reaper.
Development programs include the Northrop Grumman X-47B, an experimental carrier-based combat drone. The program took a step forward recently with a catapult launching from the U.S. aircraft carrier George H.W. Bush, following successful on-shore tests of landings using arresting wires.
Micah Zenko, a fellow at the U.S. Council on Foreign Relations, said he expected that armed drones would be capable of carrying out carrier-based missions five years from now.
Another high-technology venture is Boeing’s Solar Eagle research program, slated to start testing next year and intended to develop an aircraft that could stay airborne for up to five years.
Philip Finnegan, director of corporate analysis at Teal Group, an aerospace consulting firm based in Fairfax, Virginia, said he expected the 2014 U.S. budget to propose reductions in existing drone programs in favor of “next generation systems, stealthier, with more power, and capable of operating autonomously if jammed by opponents.”
Among major competitors to the U.S. drone makers, Mr. Finnegan lists Israeli companies — in some cases working with Indian partners — and Brazilian programs aimed at that country’s need to patrol far-flung jungle borders and a long Atlantic coastline.
Also emerging as future competitors, in Mr. Finnegan’s view, are Turkish Aerospace Industries; Denel, the South African state-owned aerospace and defense technology group; and some Chinese companies.
In the more traditional field of piloted military aircraft, some new players are aiming at niche segments with substantial long-term potential. A case in point is Embraer, of Brazil, which is adding both conventional military and unmanned flight capabilities to its core commercial aviation business. On the conventional military front, its KC-390 twin-jet tactical airlift and tanker plane is scheduled to make its first flight by the end of 2014, with entry into service planned for 2016.
The KC-390 is aimed at a potential global market as large as $50 billion, according to Luiz Carlos Aguiar, head of Embraer’s defense and security division. Mr. Aguiar said that the company was projecting $1.25 billion in military revenue this year, a 25 percent increase from 2012. His staff has identified 2,000 older aircraft in the KC-390’s market segment, of which 723 are within Embraer’s potential reach, leaving out markets closed to it by export controls or other factors. The program already holds 60 letters of intent from air forces in Argentina, Brazil, Chile, Colombia, the Czech Republic and Portugal.
“We will soon announce possible future partnerships, including a joint study with Boeing,” Mr. Aguiar said.
On the unmanned aircraft front, Embraer holds a controlling interest in a joint venture with Avibras of Brazil and an Israeli company, aiming to build and sell drones for surveillance work to strengthen Brazilian border controls.
For manned military aircraft, in contrast, the outlook is dour.
For Lockheed Martin’s F-35, the stealthy so-called fifth generation multirole fighter plane that is the world’s largest current military development program, Richard Aboulafia, a vice president at Teal Group, anticipates that the U.S. Air Force procurement is “likely to fall to around 1,200 to 1,400 units,” barely half of current plans to buy more than 2,400 and far below the initially projected 3,100. The U.S. Marine Corps could take another 420, modified for conventional carrier or short-takeoff and vertical landing operations, and the U.S. Navy 260, he said.
Britain, which is a partner in the program — BAE Systems has a 12 percent stake — has agreed to buy 138 units.
Other buyers, for now, include Turkey, which could take 116 and potentially as many as 200; Australia, as many as 100; Italy, 90; Canada, 65; the Netherlands, 60 to 85; Norway, 56; Japan, 42; Denmark, 30; and Israel, 20.
Several customers are reported to be unhappy about delayed deliveries and rising prices, however, and all of those numbers may still change. Italy has already cut its order from 131 and Denmark from 48.
Looking outside the United States, Mr. Aboulafia said most European military programs have limited potential.
France has already announced a reduction in its total procurement of Dassault Aviation’s Rafale fighter to 225 from 286. India, meanwhile, early last year named the Rafale as its first choice for 126 planes — but has not committed to an order.
With the economies of Southern Europe in full austerity mode, the Eurofighter Typhoon is also seeing cutbacks in projected purchases by Spain, which confirmed in August it planned to defer its procurement of 12 of the planes.
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