ATM Modernization, Business & GA, Commercial, Military

Cover Story: Outlook 2008: Growth Continues

By Bill Carey and Emily Feliz | January 1, 2008

Industry fortunes can be fickle. Airlines once again are profitable. Airframers are experiencing record orders and healthy backlogs. Enabling technologies for safer, more precise and efficient operations are being implemented in Europe, Asia and North America.

Then there’s the flip side. Last summer, most everyone knows, was the worst on record for airline delays in the United States, giving rise to such word pairings as "flight caps," "demand management" and "congestion pricing." Oil prices continued to rise — the global average price paid at the refinery for aviation jet fuel was up 52 percent in November compared to the prior year, according to the International Air Transport Association.

FAA’s NextGen air-traffic modernization effort accelerated with a contract award for Automatic Dependent Surveillance-Broadcast (ADS-B) service, but faced an uncertain funding future. Air-traffic controllers warned darkly of critical staff shortages, and runway near-misses made the news.

The external forces and aging air-traffic infrastructure notwithstanding, airframers cite steady, projected growth in passenger, freight and air-traffic metrics for robust aircraft delivery projections.

Boeing has forecast 28,600 new airplane deliveries from 2006 to 2026, including 17, 650 single-aisle airliners, valued at $2.8 trillion. "The emphasis of the world airline fleet will move substantially toward Asia-Pacific, with well over a third of the deliveries by value going to airlines in the region," the company says.

Airbus is somewhat more reserved, predicting 22,663 deliveries over 20 years, valued at $2.6 trillion. The Asia-Pacific region will account for 31 percent of world deliveries, followed by North America (28 percent) and Europe (25 percent), Airbus says.

Last January, Airbus surpassed 5,000 orders for its single-aisle A320 family of aircraft, including 1,600 orders in the prior two years alone. (As of December, it reported 5,574 total orders.) Under the company’s "Power 8" restructuring program, a third final assembly line for the A320 is being added in Hamburg, Germany, site of A318, A319 and A321 production, adding to existing A320 production capacity in Toulouse, France. In June, Airbus signed a joint venture contract for A320 final assembly in Tianjin, China, for deliveries beginning in 2009.

Despite the overall workforce reductions envisioned by Power 8, the Hamburg plant was preparing for growth. During a visit by Avionics last fall, Hangar 8 supervisor Susanne von Arciszewski, Airbus senior manager of single-aisle equipment installation, said she expected to add a small night shift in 2008 to supplement the two current shifts, with more than 300 workers. Airframes are cycled through the building in circular fashion for the installation of hydraulic, electric and air-conditioning systems.

With the solid order backdrop, aerospace analyst Michel Merluzeau, managing partner of G2 Solutions, Kirkland, Wash., projects a continued strong air-transport avionics market of $8 billion to $9 billion annually, peaking in 2010 at $9.5 billion. Shaping the market are "performance-based" navigation and communications requirements, glass-cockpit display upgrades, capability for Required Navigation Performance (RNP) and electronic flight bag installations for better efficiency and functionality in the cockpit.

Merluzeau sees the air-transport market trending down after 2010 as the Boeing 737 and Airbus A320 near the end of their lifecycles and the industry awaits the next narrowbody airliner around 2015 or later.

"We view that as a period of airline restraint," Merluzeau said. "They’re not going to invest significantly in 737 when you know that there is a new aircraft coming in two or three years.

"This tendency to think that the super cycle is here to stay is, I think, dangerous," Merluzeau added. "Sure, we’ll have continued growth, but this is not going to be a straight vertical line. We can have growth, but with kind of a see-saw effect."

Avionics manufacturers cited an airline industry focus on efficiency to contain high fuel and operational costs.

"There’s a common theme that runs across the market — improve my efficiency," said Bryan Vester, Rockwell Collins senior director of airline marketing. For the avionics OEM, that means close attention to the size, weight, power and cost of systems, resulting in lower acquisition and lifecycle costs to the airlines. "We get that out of higher levels of integration and IMA (Integrated Modular Avionics)-type architectures," said Vester.

An example of that higher level of integration is Rockwell Collins’ CISS-2100 Configurable Integrated Surveillance System, which will debut on the Boeing 787 Dreamliner. The system combines the functions of weather detection, traffic alert and collision avoidance, Mode S reporting and terrain awareness and warning.

Further economies are achieved through central computing resources and networked avionics. Rockwell Collins is providing network switches for both the Avionics Full-Duplex Switched Ethernet (AFDX) on the Airbus A380, and the fiber-optic Ethernet Common Data Network on the Boeing 787, in the latter case as a subcontractor to GE Aviation.

Airlines are showing "a lot of interest" in the equipage necessary for RNP, said Chad Cundiff, Honeywell vice president of crew interface products. A type of area navigation (RNAV), RNP allows aircraft to fly precise, predetermined paths into terrain-challenged airports or through complex airspace, saving time and fuel with more direct routes and lower landing minimums. FAA planned to have 70 approved RNP procedures by the end of last year and 200 or more by 2011. The agency planned around 200 RNAV arrivals and departures by year-end.

RNP capability involves an aircraft’s GPS and inertial reference systems, multimode navigation receiver and flight management system (FMS). Honeywell provides such capability with a tightly coupled GPS and inertial solution it calls "HIGH Step 2."

But RNP is more than equipment — to exploit the capability, airlines must obtain operational approval and use FAA-authorized flight procedures. Honeywell is active in these areas, too. In November, the company was approved by FAA as a consultant for strict RNP Special Aircraft and Aircrew Authorization Required (SAAAR) procedures, joining a handful of certified RNP providers.

Still evolving are standards for ADS-B. Last October, FAA issued a Notice of Proposed Rulemaking (NPRM) proposing that ADS-B "Out" capability, in which an aircraft broadcasts its GPS-derived position to other aircraft and ground stations, be mandated by 2020. The agency deferred a decision on requiring ADS-B "In" capability, whereby an aircraft receives other aircraft position signals and weather and traffic data from the ground and displays that information to pilots.

FAA estimates the aviation industry would begin incurring costs for ADS-B avionics equipage in 2012, and would incur total costs ranging from $1.27 billion to $7.46 billion. "We did not estimate the cost for aircraft operators to equip with ADS-B ‘In’ because we concluded the requirements for ADS-B ‘In’ are insufficient in detail and do not yet support the development of a cost estimate," FAA states in the NPRM, promising to provide that estimate in the final rule. Late last year, the comment period for the rule was extended 60 days until March.

Whatever the final standards for ADS-B, performance-based requirements founded on advanced avionics represent the "cornerstone" of the promised NextGen air traffic management system, Cundiff said.

"FMS, inertial systems, ADS-B traffic computers, data link, display to the pilot — through that chain I would say is where the growth is," he said.

Military

Demand for military avionics will be seen in areas including helmet-mounted displays, data communications for Link-16 and other data links supporting joint operations, jet trainer upgrades, UAVs and sensor pods, said Merluzeau.

Coming off 2006 — its best year since the early 1990s — the jet fighter market remained strong in 2007 with 308 deliveries worth $16.3 billion, according to Teal Group, Fairfax, Va. The firm projects deliveries will decline slightly from the current peak to $15.7 billion annually. It forecasts production of 2,946 fighters worth $157.5 billion between 2007 and 2016, representing 32 percent growth in value over the previous decade, in 2007 dollars.

Two years since entering operational service with the U.S. Air Force, Lockheed Martin F-22 Raptors were being delivered at a rate of one every six weeks, with 107 delivered by late last year and 114 built. Operational testing of upgrades including integration of synthetic aperture radar and GPS-guided weapon retargeting is scheduled to begin in 2009, with fielding beginning in 2010.

Production of F-22s beyond the contracted 183 aircraft was seen as likely, a case strengthened by the fleetwide grounding of aging F-15s in November following the crash of a Missouri Air National Guard aircraft.

The next fifth-generation fighter after the F-22, Lockheed’s F-35 Lightening II Joint Strike Fighter, took to the air for the first time on Dec. 15, 2006. The first flight of the short takeoff, vertical landing (STOVL) variant is expected this spring.

Series production of the Eurofighter Typhoon is well underway, with 142 deliveries, including six Instrumented Production Aircraft (IPA) expected by 2007. The British Royal Air Force will have received 52 total aircraft, the German Luftwaffe 39, the Italian air force 28, the Spanish air force 19 and the Austrian air force 4, according to the Eurofighter GmbH consortium.

The first flight of the IPA6 Eurofighter with Tranche 2 avionics took place Nov. 1 at BAE Systems’ Warton, U.K., facility. The Tranche 2 upgrade includes new mission computers with higher processing and memory capacity to integrate weapons such as the Meteor, Storm Shadow and Taurus missiles. Deliveries of 251 Tranche 2 Eurofighters to the U.K., Germany, Italy and Spain are expected to begin next summer and run through 2013.

Analysts tend to play down the competition to manned fighters posed by UAVs. Teal Group sees the force-multiplier effect of network-centric warfare (NCW) as more of a long-term threat to the fighter market. "NCW is designed to reduce the time needed to find and strike enemy targets, making each ‘shooter’ asset more effective. As a platform multiplier, NCW will naturally reduce demand for strike platforms, resulting in force structure cuts," the firm says.

Teal Group also forecasts:

  • Production of 12,643 rotorcraft worth $138 billion between 2007 and 2016, comprised of 5,505 military helicopters worth $108.8 billion and 7,138 civilian helicopters worth $28.9 billion. "These numbers understate the actual importance of this market," Teal Group said. "Very high levels of utilization in tough operating environments, coupled with aging fleets, mean strong and profitable aftermarket work for the primes."

  • Worldwide UAV expenditures will increase to $3.37 billion in 2008, up 17 percent from 2007, and reach $8.3 billion by 2015. Valued as an asset for intelligence, surveillance and reconnaissance missions, UAVs such as General Atomics Aeronautical Systems’ MQ-9 Reaper, armed with Hellfire missiles and guided GBU-12 or GBU-38 bombs, now fulfill the "hunter-killer" role.

  • Production of 687 military transports between 2007 and 2016, worth $51 billion. Leading platforms in terms of units produced will be the Lockheed C-130 (190), Alenia Aeronautica C-27J (172) and Airbus A400M (104).

Last June, the U.S. Army and Air Force awarded a $2 billion contract to L-3 Communications Integrated Systems and Alenia North America to build the Joint Cargo Aircraft, based on the C-27J Spartan. In November, Alenia Aeronautica said the twin turboprop C-27J, in service with the air forces of Italy, Greece, Lithuania and Bulgaria, had accumulated 4,600 flight hours.

Meanwhile, European Aeronautic Defence and Space Co. in October announced that first deliveries of the four-engine A400M turboprop to the French air force would be pushed back at least six months to 2010, confirming ongoing programmatic troubles at its Airbus subsidiary.

Teal Group predicts the market for jet trainers, worth between $900 million and $1.5 billion annually, will be limited by shared training fleets, outsourced training and improved simulation technology. With defense budgets in western European countries being consumed by the Dassault Rafale and Eurofighter programs, Merluzeau sees service-life extensions overtaking the traditional replacement cycle of trainers.

A recent example — Alenia Aermacchi last October announced a 41 million Euro contract from the Italian Air Force to upgrade 14 MB-339 trainers to "Batch 2" configuration. The upgrade adds digital maps, night-vision goggle compatibility, new radio and IFF systems, an Autonomous Air Combat Maneuvering Instrumentation pod, crash data recorder and emergency locator transmitter, for delivery in 2009.

For avionics, if not for new airframes, the jet trainer market holds out potential for growth, Merluzeau said.

"There will be a strong market, already emerging, for avionics replacement in trainer aircraft," Merluzeau said. "...If it means you can extend the life of your aircraft 10 years with a $2 million, on average, avionics upgrade, there is value. Arithmetically speaking, for the price of two or three Rafales, you can retrofit your entire fleet of (Dassault Dornier) Alpha Jets in service to the French Air Force. If that does not happen, the training requirements at the squadron level are going to increase."

Research reports by Teal Group and G2 Solutions are available through our Web site, www.aviationtoday.com. Under Aviation Toolbox, click on the "Research Reports" link.

Business

The business aviation boom shows no signs of slowing in 2008 as new jets hit the market, retrofits increase, backlogs grow and international demand intensifies.

Where will the growth be in avionics? Suppliers say Enhanced Vision Systems (EVS), Synthetic Vision Systems (SVS), and air-traffic management applications, including ADS-B, RNP and ground surveillance equipment, will be key technologies in the years ahead.

"Using space-based navigation to have precision approaches is a great benefit across the markets and one that I think we’ll see more and more of starting next year and continuing on," said Tim Rayl, Rockwell Collins senior director of marketing for business and commercial systems.

Reflecting the interest in SVS and EVS systems, Gulfstream Aerospace last September flew a G450 experimental aircraft with fused SVS and EVS. The company’s "EVS II" system provides real-time imagery detected by a forward-looking infrared (FLIR) camera mounted in the nose of the aircraft. Plus, the system confirms the validity of terrain and airport images projected on the Synthetic Vision-Primary Flight Display (SV-PFD). The SV-PFD provides three-dimensional, color terrain images derived from data stored in the Honeywell Enhanced Ground Proximity Warning System.

"People are working to fuse Enhanced Vision and Synthetic Vision together. I think that will be big," said Larry Riddle, L-3 Avionics Systems vice president of business development. "Those are probably the two nearest term evolutionary-type technologies we will see in the B/GA marketplace."

In its annual business aviation forecast, issued last September at the National Business Aviation Association (NBAA) convention in Atlanta, Honeywell projected delivery of 14,000 new business aircraft from 2007 through 2017, generating industry sales of $233 billion.

"With backlogs exceeding two and one half years worth of deliveries, 2008 will likely be another banner year for the industry," said Rob Wilson, Honeywell Aerospace president of business and general aviation.

For the first nine months of 2007, aircraft deliveries were up 11 percent year-over-year, and sales were up 12 percent, according to Honeywell. A total of 446 aircraft worth $8.3 billion had been delivered. For the full year, Honeywell forecasted deliveries of more than 1,000 new business jets for the first time in history, up from 861 in 2006. Deliveries in 2008 are expected to exceed 1,300 aircraft.

Brazilian airframer Embraer forecasts demand for 13,150 business jets over the next decade, valued at about $201 billion. An emerging air-taxi market may add 3,500 to 4,400 aircraft in the Very Light Jet (VLJ) segment, Embraer said.

"The experience we all get on the airlines today isn’t what it used to be," noted Denny Helgeson, Rockwell Collins vice president and general manager of business and commercial systems. "There’s a lot of people looking for other alternatives to the airlines. I think that’s one factor boosting some of the growth you see."

As a region, North American purchase expectations declined slightly, but demand in Asia, the Middle East and Europe is expected to surge, according to Honeywell.

"Seven consecutive years of strong purchase intentions in Europe is a great track record, and confirms the value operators receive from using business jets," Honeywell’s Wilson said.

"Geographically, our single largest market is still the U.S.," said John Rosanvallon, president and CEO of Dassault Falcon Jet. "But, markets like Western Europe, Brazil, India, Russia and the Middle East are experiencing a more rapid growth. Most surprising, though, is Hong Kong and mainland China, which has started to emerge as a growing market for business aviation. We’ve enjoyed increased success in that area."

Rockwell Collins and L-3 Avionics both introduced flight deck suites at NBAA. Rayl said the Rockwell Collins’ "Pro Line Fusion" flight deck addresses customer desires for situational awareness, pilot interface, an open architecture and information management. The system will accommodate technologies for current and future airspace requirements such as Controller Pilot Data Link Communications (CPDLC), RNP navigation and self-separation, he said.

Wide Area Augmentation System (WAAS) and localizer performance with vertical guidance (LPV) approaches will also be important to the market next year, avionics suppliers said.

Last October, FAA expanded WAAS coverage to thousands of general aviation airports throughout North America. FAA published more than 900 LPV approaches throughout the United States. Some 18,000 aircraft are equipped to fly LPV approach procedures, FAA said.

"WAAS Beta 3 is a huge technology driver because you need WAAS Beta 3 to transition to LPV approaches," said Riddle. "The WAAS Beta 3 technology is a must for a system like SmartDeck."

Business aircraft operators also are focused on the benefits and operational efficiencies gained by RNP, which allows aircraft to fly curving, precise approaches in order to navigate terrain-challenged airports or to achieve more efficient use of crowded airspace. Gulfstream plans to certify RNP capability on its G450 and G550 business jets.

Like the rest of the business aviation segment, VLJs are expected to surge. According to the Honeywell forecast, VLJ deliveries between 2007 and 2017 are expected to top 3,300, compared to about 175 units in 2007. Honeywell attributes the increase to new VLJs hitting the market, including the Embraer Phenom 100 and Cessna Citation Mustang.

G2 Solutions predicts the VLJ market will grow from $344 million in 2007 to $427 million in 2013 then decrease to $342 million in 2018.

The value of forward-fit avionics for VLJs will near $4 billion from 2007 to 2018. Avionics retrofit value is estimated at $760 million.

"The entry in service of VLJs is reshuffling the cards in the light jet avionics market segment," the G2 forecast states. "Because cost is such a primordial requirement for those airframes, the majors such as Rockwell Collins, Thales, and to some degree Honeywell, have been unable to develop competitive solutions."

Among the business aviation highlights last year:

  • Canadian airframer Bombardier Aerospace in October launched a new Learjet, provisionally named Learjet NXT, positioned between the mid-size and super-midsize segments. With a cruise speed of Mach 0.82, the Learjet NXT will offer transcontinental range of up to 3,000 nautical miles. Bombardier said it is on track to roll out the new jet in October 2008.

  • The Dassault Falcon 2000LX, unveiled at the EBACE exhibition in Geneva, Switzerland, last May, is billed as a more efficient replacement for the Falcon 2000EX. The updated aircraft was set to begin deliveries in the third quarter of 2008. The 2000LX has a range of 4,000 nautical miles at Mach.80. It will come standard with Honeywell’s EASy flight deck, auto throttle and optional Flight Dynamics’ head-up Guidance System.

    Dassault said its Falcon series was on pace to set a high mark in 2007, with 87 orders booked for the six months ending June 30, up from 52 during the same period in 2006.

  • Cessna Aircraft expected to deliver 380 business jets, including 44 Citation Mustangs, 86 turboprop Caravans and 839 single-engine pistons in 2007. This year, the company plans to deliver 470 business jets, including 100 Mustangs. The new Citation CJ4 should make its first flight in the first half of 2008 and enter service in 2010.

Cessna in 2007 booked orders for more than 600 business jets, topping the total in 2006. The company’s $11.9 billion backlog is at a record high, representing more than 2,700 aircraft, half of them business jets. Cessna plans to add 1,500 new jobs in 2008.

"I think this is strong proof the recent bullish forecasts on global business jet sales are right on target," said Roger Whyte, Cessna Aircraft senior vice president of sales and marketing.

Industry’s Shifting Fortunes: A Tale Of Two Planes

Two marquee airliners, the Airbus A380 and the Boeing 787 Dreamliner, exemplify both the technological progress and challenges of the global aerospace industry.

Airbus, slowed by wiring and other production problems, a management shake-up and late-breaking insider trading scandal, persevered to deliver the first A380 Superjumbo to Singapore Airlines on Oct. 15, albeit 18 months late. Days earlier, Boeing, flying high with 700-plus orders for the 787 Dreamliner, was forced to postpone the first flight and delivery of the aircraft due to assembly issues. The Dreamliner’s first flight is planned for the end of the first quarter; first delivery to All Nippon Airways has been delayed by more than six months to next November or December.

"The work we are doing now is the hard work of building the first airplanes and getting our overall production system prepared for delivering airplanes to our customers beyond that," Jim McNerney Jr., Boeing chairman, president and CEO said Oct. 10 in a conference call. "While we’ve made some progress over the past several weeks completing work on our early production planes and improving parts availability across the production system, the pace of that progress has not been sufficient to support our previous plans for first delivery or first flight. We have always acknowledged the challenges inherent with game-changing innovations like the 787, but we are disappointed by today’s schedule changes and deeply regret the impact these delays will have on our customers."

Parts availability from fasteners to structural pieces and "travel work" — wiring and systems installation done by Boeing on the first production aircraft, but later the responsibility of partner companies — were behind the program delays, explained Scott E. Carson, president and CEO of Boeing Commercial Airplanes.

"It has simply proved to be more difficult than we anticipated to complete the structural work on the airplane out of sequence in our Everett (Wash.) factory," said Carson. "Individual installations and jobs have taken longer than planned due in part to unplanned rework for sections delivered to us. Parts availability from remaining structural pieces to fasteners to other small parts has affected the sequencing of the work in the factory, compounding these delays."

Avionics suppliers for now predict no upheaval from the schedule stretch. Navigation system provider Honeywell said it delivered 787 flight-control software in September to support the aircraft’s power-on and build verification testing. "We are working with our Boeing customer to meet their developmental schedules. We anticipate no material impact to Honeywell as a result of Boeing’s 787 schedule changes," the company stated. Rockwell Collins, which is supplying the Dreamliner’s pilot controls, display and crew alerting systems, integrated surveillance system and core network cabinet, declined comment.

On Oct. 16, Boeing announced a management shake-up in the 787 program, naming Pat Shanahan vice president and general manager in place of Mike Bair, now Commercial Airplanes vice president of business strategy and commercial marketing. Shanahan, previously vice president of Missile Defense Systems, "knows how to deliver results, understands our customers and their requirements, and has the leadership skills to get the job done," the company stated.

Shanahan is a "troubleshooter — he fixed the Missile Defense program," said Michel Merluzeau, managing partner of G2 Solutions. "He’s the type of guy who comes in, identifies the problem and fixes it." — Bill Carey

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