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Friday, June 1, 2012

CEOs: Innovation, Collaboration Essential to Future Success

Heads of the world’s major helicopter manufacturers said that technological innovation, R&D spending, affordable designs and collaboration are paramount to the future success of the rotorcraft industry during AHS Forum 68 in Fort Worth, Texas.

By Andrew Parker, Editor-in-Chief

Left: From left to right, John Garrison, Phil Dunford, Lutz Bertling, AHS Director Mike Hirschberg, James Wang and Jeff Pino. Bell Photo

The May 1 panel was part of the annual event from AHS International, with AgustaWestland’s James Wang, vice president of R&D, Bell Helicopter President & CEO John Garrison, Boeing Military’s Phil Dunford, vice president/general manager, Eurocopter President & CEO Lutz Bertling, Lockheed Martin’s Dan Schultz, vice president of ship and aviation systems, and Sikorsky President Jeff Pino. Leading into the CEO Forum was a keynote speech from Jose Gonzalez, director for land warfare and munitions, strategic and tactical systems for the Office of the Under Secretary of Defense for acquisition, technology and logistics.

“We’ve got a train wreck ahead of us, in [that] if we don’t do something now, all we see ourselves doing is trying to keep these old dogs running, and that we just can’t do that,” Gonzalez said. “What the FVL will do for us,” he continued, “with the proper investments in technology and understanding now, we will be able to provide our leadership additional options so that we can have new starts, and again—have that joint family of aircraft, obviously they’ll be variants to it, but that will be the future. That is the future of vertical lift.”

The good news, Gonzalez explained, is that the helicopter industry “has a vision, a strategy, a plan... and this is a team effort. The fact that we have a strategy gives us a leg up on a lot of other communities.”

The rotorcraft industry is “actually in a steady and vibrant growth stage,” said Wang, showing revenue figures for six major helicopter OEMs in 2009, 2010 and 2011. “The key message is all six OEMs show steady growth, every single year. Despite an economic downturn the last few years, the rotorcraft industry is very resilient.” What about the future? “We can see in the next decade the commercial sales will continue to grow, and the military slightly come down,” he said. However, Wang said he recently read that by 2018, the demand from the China market is forecasted to consist of around 1,800 helicopters. “So the future for commercial helicopters is quite vibrant,” he added.

Wang asked whether there is enough funding to cover all of the capability requirements for FVL. “What we need to do is be more efficient,” he said. AgustaWestland currently spends “about 10 percent of our revenue and put it back into R&D.” Another area of efficiency can be achieved by designing similar elements into a series of aircraft, taking advantage of similar parts and systems. “We’re trying to build a family of helicopters,” Wang said, noting that the AW169, AW139, AW149 and AW189 are “all very similar. That’s how we try to maximize a limited amount of money to get the best result.”

Left to right, Wang, Garrison, Dunford, Bertling, Dan Schultz and Pino.
When the commercial industry carries out R&D by itself, “we don’t have to throw 900 engineers and approval sequences into the process,” Pino said. “And we can do it, I believe, in half the time, and a third of the cost.” Pino added that he thinks there is “plenty of runway ahead” for future growth, and that industry can lead government “into a revolutionary future, instead of waiting for them to fund it.”

Garrison said that not only is the industry large enough to handle the current helicopter makers, “I think there’s going to be new entrants to the market. We’ve partnered with almost everybody at the table over time, so I think the industry’s going to grow, the opportunity is there, and you’re going to see new entrants before you see fewer competitors.”

Bertling added that finding new markets means not only finding new operators, but also discovering new uses, such as increased short-haul trips including commuting. “There is room for growth, but there will be new entrants. There will not only be six, there will be eight or nine, some of us might disappear, and those who will disappear are those who are not leading innovation.”

From left to right, Dunford, Bertling and Schultz. Two photos by Andrew Parker
Wang remarked that his biggest concern “is talent, people, the younger generation,” Wang remarked. “Can we get enough young talented people to replace the ones we lose? We can always find money, however, there’s difficulty in finding brilliant young people [to lead] the future, and who like rotorcraft, because we are competing with many, many other industries.”

Pino stressed the importance of learning from past mistakes, and getting the timing right. “We all have to understand that the development cycle for aerodynamic step ahead function is very different than for mission system step ahead. And we need to just forget the fact that those are concurrent developments.” The fact is, he continued, “it takes longer to get the aircraft flying than Lockheed Martin, or us, or anyone can put a mission system in it, so that figure of 5-6 years versus two years—yet we always start them at the same time.”

Pino said that approach led to the Comanche program’s downfall. “So that’s another real opportunity as we move forward with FVL and the demonstrators—get step-ahead revolutionary air vehicle stuff done first, and when you’re two years from thinking you’ve got an airplane ready, put a mission system in,” he said. “When we do it at the same time, by the time we’re ready for first flight, everybody’s saying, yeah but my iPhone will do more than [the helicopter’s] mission system. We need to change that process.”

Schultz agreed, recalling a time when the V-22 program spent a long period of time addressing obsolescence. “But I don’t agree with Jeff that unmanning helicopters is easy stuff,” he said, reacting to an earlier Pino statement that it wouldn’t cost much more to develop optionally manned versions of existing variants. “I think the key on all of this unmanning business, is it’s here, so the question is how do we manage that process?”

Schultz pointed to the success of the unmanned Kaman K-Max being used to deliver cargo in Afghanistan as an area where collaboration is working. What the military is finding is that when it’s nighttime, raining or when potentially facing hostile fire, “pilots are saying ‘make that thing do it,’ and it does really well. So it really is an amazing innovation,” he said.

“I think I’ve heard a change in tone,” observed Pino, who will retire as Sikorsky President on July 1 (see story on page 13). He described Sikorsky’s X2 technology demonstrator as the “X, and from the U.S. government side, we’re not moving from Xs to Ys, and we’re not paying to move from Xs to Ys. Finally I’m hearing [industry leaders] starting to say, maybe we move to Ys on our own dime.” Helicopter makers should “invest in the future, instead of waiting for them to fund it,” Pino added.

“When you look at our business in the medium-term, we’re in a relatively good position,” explained Garrison. “With that said, there’s some very significant storm clouds brewing on the horizon with the production shutdowns that need to be filled in. But overall, on the military side we see opportunity.”

On the commercial side, there are “huge markets that are virtually untapped—the BRIC countries, India and China specifically,” Garrison continued. “There’s more turbine helicopters within a 100-mile radius of where we’re sitting, than there is operating in India and China. That speaks to the opportunities that the future brings in the commercial segment as we move into that.”

“What do we need to do as an industry to capture and help drive this growth?” Garrison asked. “The first two are around collaboration. The industry can collaborate—we’re intensely competitive, there’s no doubt about that, but there’s a couple things that we can work on together. The first is around the rules and regulatory framework in the emerging markets that fosters the growth of the helicopter/rotorcraft businesses, and we’ve done that, and need to continue to do that.” The other area, he continued, “is around safety—we need to do more of this. There’s more work for us to do, but collectively working as an industry we can drive improvements and a safety focus.”

According to Bertling, cooperation “goes beyond the regulatory framework, beyond safety, beyond research and development.” There is a “dramatic change in front of us,” he said. “For the first time last year, the Asian civil helicopter market was larger than the North American market. Still, Europe and the CIS region combined are the largest market but they are clearly in decline. Asia will be number one. Of course, the U.S. military market is still dominant, with 60 percent of the value, but if you look at the forecasts, the world military market and the world civil market, somewhere in the next decade around 2025/2027, will be of equal size,” Bertling said.

“The center of gravity will move, and there will be new entrants,” he continued, adding that in five years, the table at the CEO Forum will need to be longer. “There will be someone from Russian Helicopters sitting here, AVIC, there might be Koreans sitting here—Korea has declared the aerospace industry as their next strategic industry. … So global competition will change from new entrants to the helicopter market like Robinson, with the R66 and Marenco [Swisshelicopter with its SKy SH09] and so on, and market drivers will change. In particular the commercial market, where it’s not only operators who are seeking higher range and higher speed, but low-noise, low-emission, eco-friendly new technologies with reduced lifecycle costs.”

Boeing’s Dunford read a quote from U.S. Army Aviation Maj. Gen. Anthony Crutchfield: “Revolutionary change in vertical lift aircraft must happen by 2030 to prevent the current helicopter fleet from becoming technologically obsolete.” Describing that concept as “hugely important,” Dunford said, “what worries me is that if we don’t get paranoid about it, we are all going to think we’re doing good and it’s going to fall down a crack. So it’s really important for all of us as an industry and a government, to really focus on what [we’re saying] here collectively.” There’s a five-to-one ratio between helicopter budget and fixed-wing budget, in favor of fixed-wing, Dunford continued. “Because of the relevance of helicopters and rotary wing aircraft, I think it’s time that changes. The S&T budget isn’t sufficient right now.” He also quoted Maj. Gen. Tim Crosby, who said: “$107 million a year spent on Army Aviation R&D is inadequate. How can you look to the future when you have a $7-billion budget, with just over $100 million spent on S&T? How can you look at the next vertical lift technology with a pittance budget like that?”

Dunford explained the importance of “driving those numbers up to get the sort of attention that the fixed-wing community’s got,” because of the relevance of helicopters.

“It’s about affordability,” Garrison said. “We do provide incredible machines, but affordability’s vitally important not only to our military customers but also our commercial customers. Those that compete in the commercial sector can tell you just how aggressive that market is, and so as an industry, as a technology group driving affordability and technology … is incredibly important.”

Gonzalez praised the work of the Vertical Lift Consortium, which is a joint government-industry group that meets regularly, including with representatives from all the military branches, OSD, joint staff, helicopter manufacturers and others. “In my mind, this is how we move out Future Vertical Lift, we have to collaborate. We’ve got the structure here, we just need to follow through. Yes there’s going to be problems and yes we’re going to make dumb mistakes, and yes we’re going to have challenges and all that, but we have the foundation in place. We have a plan, and we have a structure in place to carry this out into the future.”

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