Since Defence Review Asia last looked at the sales battles underway to supply replacement fighters to the growing Asia Pacific market, the efforts of the US government to encourage exports of military aircraft have increased noticeably, and with increasing success.

8th Apr 2013

 Aircraft sales


Byline: Richard Gardner / London

Since Defence Review Asia last looked at the sales battles underway to supply replacement fighters to the growing Asia Pacific market, the efforts of the US government to encourage exports of military aircraft have increased noticeably, and with increasing success. According to the Stockholm International Peace Research Institute, 44 US defence companies dominate the “Top 100” arms sales list, representing 60% of global sales. Lockheed Martin has a 9% share worth $36.3 billion, Boeing has an 8% share worth $31.8 billion, General Dynamics a 6% share worth $23.8 billion, Raytheon a 5% share worth $22.5 billion and Northrop Grumman a 5% share worth $21.4 billion. So defence remains a massive business, despite all its challenges and the aviation sector is an export leader.

In part this reflects a natural replacement cycle for aircraft that were first delivered 30 years ago, and which may have become dated in their capabilities, but which need more maintenance and spares support, which is increasing the overall costs of ownership. Many of these aircraft fleets have served extremely well and have been upgraded from time to time to maintain their value to their operating services, but with the rapid advance of such developments as advanced digital sensors, precision weapons and automatic self-protection systems, the tipping point has been reached with some front line air assets where replacement becomes a more attractive option than the costly struggle to maintain viability by yet more life extension measures. Another reason why the US aerospace sector is making good progress with military sales in Asia Pacific is because the US government has made the region a priority for balancing the growing military potential of China and North Korea, while at the same time cutting defence procurement at home. Apart from seeking new outlets for military aircraft production, helping to keep factories busy that might otherwise face closure, the US is anxious to encourage pro-Western allies to play their part in maintaining a capability balance in the region. This is easier said than done when the regional arms race is being fuelled by nations that are not democratically answerable to their populations, and those that are, may be unwilling to commit to ever-increasing defence budgets.

As the rising cost of supporting ageing air assets becomes a more significant share within squeezed defence budgets, opportunities are arising for new sales, even though replacement orders may not be on a one-for-one basis. Indeed, as newer generation military air platforms offer more flexibility providing multi-role capabilities, savings can often be made by reducing the inventory of specialist aircraft types. This greatly reduces support costs by consolidating not only the repair, maintenance and spares back-up, but also brings training and operational benefits, as crews can be trained more efficiently using common simulators and other systems, and task-changing can become easier with crews able to undertake more varied missions.

In many cases, the procurement of new military aircraft fleets now brings with it new opportunities, involving through-life package solutions, for sharing training and support costs across a wider operator base. This all adds up to air solutions that help keep modernization affordable. While this might not be so critical for fleets of small training aircraft, which might be supported in the traditional in-house service style, or via contracted-out service contracts, when it comes to training air and ground crews, and technical specialists, on large or very advanced combat aircraft, the sharing of support facilities and equipment can become a significant factor in keeping the programme within budget. As the Asia Pacific defence market picks up momentum in its replacement plans, the US government is very active in promoting Foreign Military Sales as a way of making defence sales packages attractive and competitive.

In the last year or so, the US has made important inroads into several key Asia Pacific military air markets. This has covered a very wide cross section of the market, from large airframes, such as the C-17, to combat aircraft, and helicopters, and most other categories in between, though there are some gaps where US manufacturers do not produce a suitable product, and this is where licence-built foreign design aircraft can be found. In many cases US industry bidders have not had the competitive field to themselves. Europe and Russia have been major bidders for new contracts in Asia Pacific defence competitions, and have products that have overtaken the US offerings in many sectors of the market, such as for trainers, medium military trainers, and helicopters. Fighters, transports and helicopters are amongst the most hard fought over competitions, where some US designs are now showing their age in comparison to what else is on offer. But the US is still ahead of the game when it comes to fifth generation combat aircraft and combat-proven Unmanned Air Systems, such as the General Atomics Predator family.

Today, Japan is still dependent on 150 locally-assembled F-15J Eagle air defence fighters and around 100 F-4EJ Phantoms, plus 60 locally manufactured F2A light fighters, based on a local interpretation of the F-16. But following the lengthy F-X competition to find an F-4 replacement that would lift Japan’s air defence and first strike attack capability to a more appropriate level as China and North Korea expand their own offensive capabilities, the selection of the Lockheed Martin F-35A was understandable. Japan’s aerospace sector had been working quietly on R&D programmes to develop an indigenous fifth-generation stealthy design, which reached mock-up stage, but these initiatives were a fall-back option dating to the final attempts to acquire F-22 fighters before the type went out of production.

The decision to join the Joint Strike Fighter programme, with first deliveries starting in the second half of this decade, was welcomed by the US Obama Administration, which has shown concern over clashes between Japan and China in the South China Seas over disputed islands and surrounding undersea oil and gas exploitation rights. The initial order for the JSDF is thought to cover the sale of 42 aircraft and will offer a truly 21st Century stealth capability that will help counter larger numbers of potentially hostile Chinese fighters. The high level of operational commonality with US F-35s, exploiting its unique connectivity features, will also assist in developing more integrated operations, if deemed to be required. The US Navy and US Air Force maintain substantial military bases and airborne assets in the Western Pacific, and the US Government regards Japan as the major bulwark against Chinese expansion in the region. The unstable and fanatically ruled North Korean government has developed a more threatening military posture towards pro-Western regional neighbours with its nuclear programme and long-range missile developments, and in response to this, the US government has actively sought to upgrade anti-missile defences in the area, both land and ship based.

Australia’s commitment to the F-35A has remained firm, though in the last year it has cut its initial order to just two F-35As with 12 more to be confirmed in the 2014-2015 time frame. Concerns over cost and continuing development delays in bringing forward the initial in service capability for the US customers have created a degree of uncertainty within the Australian (and other) F-35 customers who must now decide if they can just wait patiently for the aircraft to come up to its promised performance – or take steps to find another way to fill the operational gap that is emerging between existing combat jets and the new generation Chinese and Russian stealthy fighters. The recent Australian re-think on delivery rates is quite a step back from the previous procurement plan which would have seen an initial 14 aircraft ordered followed in 2012 with another order for 58, and a further 28 three years later.

The RAAF is looking at the possibility of buying more F/A-18E/F Super Hornets, including buying new or converting existing aircraft to the EA-18G Growler Electronic Warfare version. This would provide a powerful regional EW threat suppression capability, plus additional ISR benefits, but the un-stealthy performance of the basic F/A-18 airframe would not make up for the multi-role fully stealthy F-35. Boeing has been trying hard to find new export customers to keep the Super Hornet production line flowing and the Asia Pacific market has been a priority target. Having lost out in fighter competitions in South Korea, Japan and India, Boeing sees a repeat Super Hornet order from Australia as the best remaining sales prospect, along with Canada, for the aircraft, especially as the RAAF is delighted with the 24 it has on its current strength, together with 70 earlier F/A-18A/B Hornets.

There can be little doubt that many air forces across the region are watching with great interest to see what Australia decides to do. The RAAF has shown no sign of wanting to back away from the F-35A, which it still sees as a vital future weapon with its distributed aperture system and very low radar signature giving it a clear situational awareness advantage against long-range supersonic adversaries beyond 2020. But the decision to buy Super Hornets in the first place was forced upon the RAAF by delays in replacing the F-111 attack aircraft with F-35s and so the RAAF as a consequence will end up with a mixed fleet of fighters with a long time to go before the Super Hornets become obsolete, possibly not until 2030. If this service does acquire more Super Hornets it will have to be at the expense of the planned total F-35 buy. The US defence cut-backs at home and technical problems keep delaying the F-35 programme and the knock-on impact on loyal foreign customers cannot be ignored, as much as they all want the aircraft - and at an affordable price. If delays continue, and costs continue to rise, then many would-be new customers may well turn to alternative Russian fifth generation fighters in a few years time. Europe does not have any fifth generation combat aircraft beyond the fourth generation Typhoon, Gripen and Rafale.

The well-proven Lockheed Martin F-16 family and the rejuvenated Boeing F-15 still offer a potent mix of multi-role capability and supersonic speed, with the bonus of affordability, even if both date back to a 1970s in-service date. Where the extra expense of stealth is not seen as a cost effective requirement, the enhanced performance, load-carrying potential and advanced onboard sensors and systems combine to offer a combat package with a lot of bang for each buck. The addition of advanced AESA radar and a range of electro-optical and radar/laser sensors, plus modern cockpit displays, or helmet displays, can transform the combat utility of these war platforms. The F-15C from the mid 1970s bears little resemblance in terms of delivery performance compared to the latest version of the E model, the SG, as supplied to Singapore. Streamlined conformal tanks between the fuselage and wing can carry much extra fuel as well as new weapons bays. With these improvements the F-15 may yet find a few more export customers before the US lines finally shut later this decade. As F-16s and F-15s are retired from US service and enter long-term storage, new export opportunities arise and batches can be released for Foreign Military Sales. The FMS defence sales mechanism can also be used by the US government to sell new-build aircraft, such as F-35s to Japan, and not just US-built products, as in the case of the Italian Alenia C-27 Spartan aircraft to be delivered to the RAAF.

But the US defence sales push in Asia Pacific can also be seen in some very high profile contracts involving large air platforms including the Boeing C-17, Lockheed Martin C-130J, Boeing KC-767 tankers, P-8A Poseidon Maritime Patrol Aircraft and other military applications for the Boeing 737, such as the Wedgetail AEW&C. The European aerospace manufacturers are offering hot competition in this market for large military aircraft. Led by Airbus Military, the A330MRTT (KC-30A) tanker/transport is making big inroads in Asia Pacific with sales to Australia and India, and other sales are expected. Boeing’s rival KC-767-based tanker, as selected for the USAF, has got off to a slow start and it remains to be seen if this will eventually divert any orders from Airbus. By 2020 the 767 platform will be starting to show its age even though it will only have entered USAF service towards the end of this decade.

Airbus Military is also soon to introduce its new A400M heavy lift transport, which falls between the C-17 and C-130 in size, but which threatens to eat into both markets for these US transports. The C-17 is nearing the end of its production run for the USAF and needs new export orders soon if it is to sustain a production flow beyond the next couple of years. The recent order for ten aircraft for the Indian Air Force was a big boost for Boeing Military, and India has indicated it may take up to ten more. But if the line comes to an end this is where Airbus could fill the gap with its A400M.

Lockheed Martin’s C-130J has a more healthy orders backlog, and is well sized to replace earlier C-130 models, but here again the A400M could cost the US sales as the A400M has more than twice the capacity of the venerable but versatile Hercules. Now that Beechcraft has emerged from its insolvency period, having disposed of its Hawker business jet line, the popular King Air 350 is back on the menu for many air forces seeking a robust multi-role twin turboprop aircraft that can be adapted for a multitude of tasks including crew training, VIP transport, light communications, maritime patrol, battlefield surveillance, electronic warfare and signals intelligence. This aircraft has become the industry standard platform of choice for special missions as it can be fitted with a wide range of radars, video cameras and other electro-optical sensors, and has a cabin that can accommodate several system operators and their equipment. Lockheed Martin has also been active promoting its own family of battlefield surveillance radar systems, using the Grumman Gulfstream as a suitable platform.

If the US government can manage to steer its defence sector through the potential minefield of sequestration (imposed additional 10% year-on-year budget cuts) it should be able to offer a good mix of export aircraft, systems and missiles for the Asia Pacific market, but other suppliers are waiting in the sidelines to fill any more gaps that might appear in product lines. Brazil and India are rapidly expanding their aerospace manufacturing activities, with new aircraft under development, and this will only add to the competitive pressure on US manufacturers from Russia and Europe. Another major factor in defence sales in the 21st Century is the growing value of through-life support contracts. It is not uncommon for the value of major procurement programmes to be doubled by such long-term support contracts. These make much sense for the customer, who can gain from the economies of scale in spares support, but they can also bring savings in how training and maintenance are provided, and in sharing the cost of through life upgrades.


Defence Review Asia at a glance