Defense Business Brief: AFA conference preview; Raytheon loses $2B R&D tax-break; Lockheed’s new slogan; and a lot more.
It’s that time of the year! The busy defense conference season starts Monday at the annual Air, Space, and Cyber conference hosted by the newly rebranded Air and Space Forces Association.
At the event—which many still call AFA since the association did not change its well-known acronym—we’re expecting to hear from leaders across the Air Force and Space Force about Russia’s invasion of Ukraine, strategic competition with China, aircraft and satellite modernization, and other top issues.
This year’s conference program has a strong focus on new drones and space technology, as well as next-generation weapons, digital engineering, artificial intelligence, and Joint All-Domain Command and Control.
But circle Tuesday on the calendar; we’re scheduled to get a update about the super-secret B-21 stealth bomber, which later this year is expected to be rolled out from behind the classified curtain.
The conference is a good chance to take the pulse of not only the Air and Space Forces, but also the industrial base. With hundreds of exhibitors scheduled to be in attendance, ranging from Big 6 defense contractors to smaller suppliers, we’re expecting to hear a lot about how high inflation rates, worker shortages, and supply-chain bottlenecks are affecting weapons projects.
Some Air Force-related news dribbled out this week ahead of the show. Defense startup Anduril unveiled a scalable mobile operations center that can back up larger regional command centers. Read about that here.
Also next week: Ukrainian President Volodymyr Zelenskyy will make a pitch to the U.S. defense industry to support his country’s military, now six months into a fight for their lives. On Wednesday, Zelenskyy and Ukrainian Defense Minister Oleksii Reznikov are scheduled to speak via video to attendees of the National Defense Industrial Association’s Future Force Capabilities Conference and Exhibition in Austin, Texas. “Zelenskyy is expected to discuss Ukrainian defense needs and the critical primacy of the United States in advanced technology and hardware for the fight,” NDIA said in a statement. “His speech marks a rare moment for the Eastern European leader, as he directly addresses American military leaders and the defense industrial base.”
On the topic of Ukraine and Russia, the U.S. Navy nonchalantly mentioned on social media that it has fielded a truck-mobile version of the SM-6 interceptor. The Raytheon-made interceptor, designed to shoot down missiles and aircraft, is typically installed on ships. U.S. Navy Europe tweeted that its “personnel conducted convoy protection rehearsals” with a “modular SM-6 launching system within” Europe on Sunday. The War Zone has some context about the significance of the modified SM-6 here. Recall: back in 2016, the Pentagon’s Strategic Capabilities Office modified the air-defense missile to sink ships.
And there’s yet another U.S. weapons package heading to Ukraine. This one totals $600 million and includes HIMARS ammunition, 105-millimeter artillery rounds, counter-drone technology, counter-artillery radars, mine clearing equipment, and more. The U.S. has pledged more than $15.8 billion in security assistance to Ukraine since January 2021. More, here.
China sanctioned two U.S. execs: Raytheon Technologies CEO Greg Hayes and Boeing Defense Space and Security CEO Ted Colbert. Reuters notes that a spokesperson for China’s foreign ministry “did not elaborate on what the sanctions would entail or on how they would be enforced.” Of note, Beijing did not sanction Boeing CEO Dave Calhoun. China’s airlines are a major customer of Boeing’s commercial airplanes. The sanctions come one day after Calhoun and Boeing CFO Brian West said the company would seek new customers for 737 MAX planes built for Chinese airlines but not delivered. China has not re-certified the MAX to fly in its airspace following deadly crashes in 2018 and 2019. “We've deferred this decision long [enough] and now we have to think about investors," West said Thursday at a Morgan Stanley investors conference. "We've got confidence and conviction that we can remarket them."
Raytheon Technologies said the expiration of a research-and-development tax break would cost the company $2 billion. There had been hope that Congress would extend the 2017 law that allowed companies to write off R&D expenses, but that still hasn’t happened. “The amortization-expensing fix should be in a year-end tax extenders bill, and it's likely trade bait for Dems to get a child tax credit included,” Cowen & Company analyst Roman Schweizer wrote in an August note to investors.
Boeing opened a new Advanced Composite Fabrication Center in Mesa, Arizona, which the company says “has been purpose-built to produce advanced composite components for future combat aircraft.” The company said it’s the first in a “series of new innovative factories being built” by Boeing’s defense and space arm. The factory is operated by Phantom Works, the company’s secretive R&D division that designs next-generation aircraft. Work at the new facility will focus on “proprietary research, development and prototyping division. The construction phase of the 155,000 square-foot facility is now complete, and the center is expected to be fully operational this fall,” the company said.
Lockheed Martin will unveil a new advertising campaign next week with the tagline “ahead of ready.” The new slogan “is about our focus on helping customers not just be ready for today’s threats, but be ahead of them,” Trent Perrotto, Lockheed spokesman, said on Friday. “It’s emblematic of our purpose as a company, which is to ensure those we serve always stay ahead of ready.” Since becoming Lockheed CEO in June 2020, Jim Taiclet has directed the company to invest in new types of technology, including secure, military 5G communications networks, that he believes will give the company a leg up over China, Russia and other competitors.
Hellfire replacement greenlit for full production. The U.S. Army has approved Lockheed’s Joint Air-to-Ground Munition, or JAGM, for full-rate production, the company announced. The decision “enables Lockheed Martin to produce the JAGM system in higher quantities for its customers without restrictions. The milestone also marks the successful completion of operational testing of JAGM on the US Army’s AH-64E Apache and the Marine Corps’ AH-1Z Viper helicopters.” JAGM will replace the Hellfire missile, which is also made by Lockheed.
General Electric and the Air Force have finished six years of testing the company’s XA100 adaptive cycle engine. GE hopes the Air Force decides to buy its engine for its F-35 fleet, which are powered by Pratt & Whitney-made engines. In the future, the F-35 is expected to need a more powerful engine to run new types of weapons. Pratt, like GE, has also developed a new, adaptive engine. Last year, Raytheon Technologies CEO Greg Hayes, questioned whether the Air Force would have the cash to buy a completely new engine. He noted that Pratt has a plan to upgrade the F-135 engine that currently powers the F-35, which would make it a more powerful. Pratt & Whitney is part of Raytheon.
Former Boeing CEO Dennis Muilenburg has joined private equity firm Green Eight Capital, where he will help launch the company’s new Aerospace Innovation Fund. “[T]he Aerospace Innovation Fund will direct capital into aerospace and aerospace-adjacent industries to address a global need for reconstituted supply chains, resilient industrial bases, and foundational technologies with the aim of delivering positive impact and generating competitive financial returns for clients,” the firm said.
Maxar CFO Biggs Porter intends to retire next year, the company announced this week. A search is underway for a replacement. After retiring, Porter will remain with the company “in a consulting role…through March of 2024 to assist with the transition of the CFO office.”
The National Defense Industrial Association named Jennifer Stewart executive vice president for strategy and policy effective Sept. 26. Stewart was a former House Armed Services Committee staff director and was chief of staff to Defense Secretary Mark Esper.
The Aerospace Industries Association has hired Marta Hernandez, a former Senate Armed Services Committee and the House Appropriations Committee staffer, as senior director of communications.
From Defense One
Defense Firms Sound Inflation Alarm as Congress Mulls 2023 Budget // Marcus Weisgerber
One trade association says Pentagon would lose $110 billion in buying power.
Anduril Unveils Deployable Military Operations Center // Marcus Weisgerber
The company hopes the military will test its tech during an upcoming exercise.
Army Wants to Double Or Triple Some Arms Production As Ukraine War Continues // Caitlin M. Kenney
GMLRS, HIMARS, and artillery rounds top the list.
Lawmakers Highlight 'Urgency' To Train Aussie Submariners As AUKUS Celebrates One Year // Jacqueline Feldscher
"Whether you're developing a workforce to build it or those to operate it, the sooner we begin that training pipeline, the better off we will be," Rep. Donald Norcross said.
Space Chief Nominee Worried About Launchpad 'Traffic Jams' // Jacqueline Feldscher and Lauren C. Williams
The Space Force will "need to look at other opportunities" as launch cadence grows, Lt. Gen. Chance Saltzman told lawmakers.
Ukraine War Offers Clues to Future War, Joint Chiefs Chairman Says // Patrick Tucker
Don't expect any more tank columns massing on highways like sitting ducks.
After 5 Full-Throttle Years, Kessel Run Is Settling In for the Long Haul // Lauren C. Williams
The new leader of the Air Force "software factory" wants data and architecture standards that stand the tests of time.
The Air Force Has A Plan To #Fixourcomputers and More // Lauren C. Williams
After airman complaints go viral, USAF CIO promises to make the service's IT more generally reliable and capable.