Navy’s fast-track helo; USAF’s cutting-edge program office; Boeing’s uncertain stock, and more.
Happy fiscal new year! Budget jokes never get old.
We begin fiscal 2020 under a continuing resolution, and with a yet-to-be passed defense authorization act, even though lawmakers had previously agreed to a two-year budget deal. The CR expires on Nov. 21, and several projects hang in the balance.
One of them is a Navy effort to buy pilot-training helicopters to replace the nearly four-decade-old TH-57. (That’s a version of the Bell 206 Jet Ranger, for all of you #avgeeks.) Bell, Airbus and Leonardo are all pitching commercial helicopters for the 85-aircraft order.
The Navy has been moving fast, planning to choose a winner in the first quarter of fiscal 2020, which began on Tuesday. Officials hope to receive the first of those 85 helicopters by next September, and the full order by 2023.
For a Pentagon acquisition program, this is quite speedy. And it’s very, very rare to “buy and fly” a new aircraft in the same year. It’s yet another example of the Pentagon’s efforts to speed up acquisition. But it can’t be started under the existing CR.
Chris Emerson, president of Airbus Defense and Space Inc., said on Wednesday that his company has already begun assembling an Airbus H-135 for the Navy on its own dime at its Mississippi factory, and has begun buying parts for at least five more.
“In order to be able to deliver an aircraft in the calendar year ’20, you’ve got to get it in production now,” Emerson said.
That first helicopter is an operating model, not a prototype. It even has a special high-pressure refueling port used by the Navy.
It certainly seems like a big gamble, but for Airbus, which hasn’t significantly expanded its defense portfolio in the U.S. over the past decade, the payoff could be large.
“Our experience with these other military programs is that first on-time delivery sets the tone for the whole program,” said Bradley Garber, Airbus director of business development.
In 2005, Airbus used the build-early strategy to entice the Army to buy its UH-72 Lakota. As of last year, Airbus has delivered more than 400 Lakotas. Current orders will take production into 2022 and deliveries near the 500 mark.
Beyond the 85 Navy training helicopters, winning would open the door for foreign sales.
And there’s one more big reason this project is a big deal for Airbus.
“This is the last big helicopter training program that’s going to be competed for quite awhile,” Garber said.
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USAF Creates New-Aircraft Program Office
How will the Air Force build its future warplanes? There’s an office for that. “The new office was created to transform the Next Generation Air Dominance (NGAD) program into the Air Force’s Digital Century Series initiative, using digital engineering, modular [open] systems architecture, and agile software development to design advanced airplanes faster and enter production with a significantly lower learning curve,” the Air Force said in a statement. “The Digital Century Series aims to improve the speed and flexibility with which aircraft can be fielded by using all-digital design and manufacturing technologies, but will not alter the warfighting technologies pursued in NGAD.” Col. Dale White has been appointed the Program Executive Officer for the Advanced Aircraft Directorate.
Wall Street Analysts Split on Boeing
There appears to be a consensus that the plane maker’s stock will rise from its current $370-ish level — about the same as a year ago — but how much higher is anyone’s guess. Its 737 Max remains under investigation and grounded indefinitely.
Last month, Morgan Stanley set a price target for the company’s stock at $500. This week, Baird analyst Peter Arment lowered his target from $470 to $445. Buckingham analyst Richard Safran set his at $395; Citi analyst Jon Raviv, $430; Cowen, $460.
The New York Times reported Wednesday that a “senior Boeing engineer filed an internal ethics complaint this year saying that during the development of the 737 Max jet the company had rejected a safety system to minimize costs, equipment that he felt could have reduced risks that contributed to two fatal crashes.”
It’s still unclear when the Max will return into service, but some believe that might not come until 2020. Bloomberg reported Wednesday that the fate of Boeing CEO Dennis Muilenburg “is inextricably tied to that of the plane.” Muilenburg is scheduled to testify before Congress on Oct. 30.
One more thing about Boeing. It’s “preparing to launch a joint venture” with Embraer “to promote and develop markets for the multi-mission medium airlift KC-390.” The two companies announced the KC-390 joint venture as part of their “strategic partnership” last year.
Air Force Orders More Tankers
Despite refueling issues and other problems that will prevent the KC-46 tanker from going to war until 2022 or 2023, the U.S. Air Force is going ahead with orders. On Friday it placed a $2.6 billion order for 15 more planes. To date, Boeing is under contract to build 67 planes. The Air Force is expected to order 179 tankers from Boeing.
Textron Systems Joins Raytheon-Rheinmetall Armor Team
Textron will build the chassis for the Lynx Infantry Fighting Vehicle that Raytheon and Rheinmetall Defence are pitching for the U.S. Army's Optionally Manned Fighting Vehicle. The companies also announced they submitted their bid to the Army.
AI Conferences on Tap
- The National Security Commission on Artificial Intelligence (a bi-partisan, independent federal commission) is hosting a Nov. 5 conference dubbed “Strength through Innovation: The Future of A.I. and U.S. National Security.” The conference will bring together “members of Congress and leaders from industry, academia, and government to discuss the Commission’s initial assessments on the state of A.I. and U.S. national security as outlined in their interim report and develop concepts for the way ahead,” the commission said in an emailed statement. The event is at the Liaison Washington Hotel on Capitol Hill. More info here.
- AI firm SparkCognition has its Time Machine event on Nov. 13 and 14. There’s a long list of speakers, including former DepSecDef Bob Work; retired Adm. John Richardson, former CNO; retired Army Gen. Tony Thomas; Will Roper, the head of Air Force acquisition; and a number of additional government and private industry officials. And I’ll even be there too.
- Rep. Mac Thornberry, R-Texas, the ranking Republican on the House Armed Services Committee, won’t run for re-election in 2020.
- Recently retired U.S. Army Lt. Gen. Tony Ierardi — who was the Joint Staff J8 and had become a regular in the Pentagon press briefing room when DoD sent its annual budget to Congress — is now with Pallas Advisors. Earlier this year, former CAPE director Bob Daigle joined the consulting firm.
- Former Army Undersecretary Patrick Murphy has been appointed to the board of BAE Systems Inc. for a term that runs through April 2022. Murphy is an Iraq War veteran and former congressman.
- Timothy Cahill, has been appointed senior vice president of Lockheed Martin International. He succeeds Richard Edwards, who will become strategic advisor to the CEO. The appointees are effective Oct. 14. Cahill has worked on missile defense projects at Lockheed.