Tuesday, March 1, 2011
Future of Bell Helicopter
The short video clip from Bell Helicopter’s website is impressive. “Welcome to the evolution of Bell Helicopter,” says the announcer dramatically, as Bell 4 Series rotorcraft skim effortlessly over the ground. The message is brief, but the intent is clear: This is the new Bell Helicopter, revitalized with new products and decisive leadership.
It will take more than slick advertising for Bell to reverse course on the civil side particularly, but the company appears to be moving in the right direction, according industry observers.
Consider Bell’s flattened management structure. After years of tinkering, Bell seems to have found the right balance of leaders that recognize the operating differences between its civil and military businesses.
CEO John Garrison, a seasoned executive who held senior management positions at Azurix Corp. and Case Corp., leads the quest of rejuvenating the company. Garrison replaced Richard "Dick" Millman, who retired after 43 years with Textron. Millman began the restoration process before his retirement and his contribution should not be overlooked, say analysts who have followed the Fort Worth, Texas-based company. In lengthy two-part interviews, Garrison and other Bell executives shared the future plans for the iconic rotorcraft manufacturer.
“Our overall strategy is to grow all elements of the business: military, commercial and aftermarket services,” says Garrison. “We want to focus on areas to revitalize the business, which includes improving the range of products as well as enhancing existing models,” adds Larry Roberts, senior vice president of the Commercial division. Roberts was lured from American Eurocopter to improve Bell’s commercial business.
Garrison says he doesn’t believe the company will be adversely affected by the U.S. Department of Defense’s planned cutbacks as well as additional reductions in military spending recommended by President Barack Obama’s deficit reduction commission.
“None of the cuts impact us,” says the CEO confidently. In the Quadrennial Review (QDR) of DoD programs, rotorcraft came out “quite well,” says Garrison. Every four years, by congressional mandate, DoD reviews its strategy and associated programs through the QDR.
Not everyone is convinced that Bell’s military programs will dodge the DoD budget ax. Marine Commandant General James Amos, addressing troops at the Miramar Marine Corps Air Station in December, said cuts could involve big-ticket items, such as advanced aircraft. The Marines’ MV-22 Osprey is for now safe, say industry observers, but the F-35B, a special version of the Joint Strike Fighter for the Marines, could be axed. Bell’s ongoing military programs might be safe, but news of cuts “was a wake call for them,” says one Bell advisor, who asked not be identified. “No longer are military programs the sacred cows they once were,” he adds. Bell is under a multi-year DoD contract to provide the Marines and Air Force Special Operations with the Bell Helicopter Textron/Boeing V-22 tiltrotor until 2014. (See related sidebar.)
There are other military programs worth noting. The U.S. Army awarded Bell a $21.7-million contract to install modern cockpits in aging OH-58A helicopters. The A models will be converted to “D” models.
In separate action, the Army awarded a new designation for the OH-58. The F model Kiowa Warrior will receive off-the-shelf enhancements featured on other platforms, such as an advanced nose-mounted sensor, improved cockpit control hardware and software for increased situational awareness, along with three full color multi-function displays. Part of the company’s revitalization effort is the makeover of the H-1, designated UH-1Y (Yankee) and AH-1Z (Zulu). The improved Yankee and Zulu models will have 84 percent parts commonality, including composite blades, hydraulic components, fuel systems, avionics and identical T700-GE-401C engines and gearboxes. Both also have “dramatic performance improvements,” says the company. Due to an operational security requirement, Bell did not provide specific performance improving figures. Upgrades to the H-1 (designated models AH-1W and UH-1N) include four-bladed rotor system, integrated glass cockpits and more robust 10,000-hour airframes.
Fifty-eight percent of Bell’s business is military—the rest is commercial and aftermarket services support. Elsewhere, on the military side, there is noteworthy activity. Engineers from Northrop Grumman and Bell Helicopter continue to develop the cargo carrying Fire-X unmanned aerial system (UAS). First flight was in mid-December near Yuma, Ariz. Fire-X, built on a commercial Bell 407 platform, and larger than Northrop’s MQ-8B Fire Scout, will carry payloads up to 1.5 tons. Fire-X retains the ability to be piloted.
With the success of the unmanned aerial vehicles in Iraq and Afghanistan—both as observers and weapons delivery platforms—the Fire-X could be a significant moneymaker for Bell and its partner Northrop Grumman.
On the civil side, Bell will need new, next-generation rotorcraft if it ever hopes to compete. For now, the $5 million light twin-engine 429 will be the standard bearer of Bell’s civil rotorcraft line. With a 150-knot cruise speed and 390-nautical mile range, the eight-seat helicopter features a large cabin, which can easily convert from passenger to cargo service.
Certified in mid-2009, the maintenance program of the 429 is approved by the European Aviation Safety Agency and that feature could boost sales in the region. “The 429 gives us the ability in developing markets that are moving up to twins (twin engine helicopters),” says Garrison.
To help “broaden Bell’s footprint worldwide,” adds Roberts, the company recently opened a service center in Prague for the 429 and other Bell products. In addition to the U.S., the 429 has been sold to Russia, Ukraine, Chile, Australia, China, India and the UK; sales are pending in the Philippines and Brazil. As of late December, the initial block production of 33 aircraft was sold, says Roberts.
In November 2010, Bell delivered two 429s to Chevron as part of the energy company’s efforts to upgrade its rotorcraft fleet operating in the Gulf of Mexico. The 429s are outfitted with modern avionics capable of integrating automatic dependent surveillance-broadcast (ADS-B). That’s significant news because numerous Gulf operators are ordering ADS-B equipped helicopters because of its safety and efficiency value. ADS-B is an integral component of FAA’s NextGen air traffic management system. In December 2009, FAA began controlling traffic over the Gulf of Mexico using satellite-based technology, including ADS-B.
Sales of other Bell civil rotorcraft are picking up. In October 2010, Bell announced the sale of 32 new helicopters to three leading air medical transport service providers at the 2010 Air Medical Transport Conference. Sixteen Bell 206Ls will go to Air Medical Group Holdings, 15 Bell 407s to Air Methods Corp. and one 428 to Mercy West, with an option for two more aircraft.
Like Bell’s plans for some military aircraft, upgrades to civil aircraft are part of the revitalization effort. Bell now offers a significant upgrade to the workhorse Bell 412EP light twin. A supplemental type certificate (STC) enhanced and extends the various missions of the 412EP. The improvements include: a BLR Aerospace FastFin system to increase tail rotor effectiveness; full authority digital engine control (FADEC); a new glass cockpit similar to that of the 429; and new, more powerful Pratt & Whitney engines. Each engine provides a 15 percent shp increase and better hot & high capability. Other upgrades of the 412 EP include an improved tail rotor that Bell says eliminates the need for pre-flight visual inspection, and a new communications system is also offered.
Bell ceased production of the 210, 427, 430, and the 206B3 over the last 12–18 months as part of its long-term strategy to provide an “effective and comprehensive product line-up,” according to a Bell spokesman. The company continues to produce other commercial aircraft including the 206L, 407 and 412.
Despite the 429 and enhancements to existing civil models, industry observers remain either cautiously optimistic or highly skeptical that Bell has evolved to compete effectively in the civil market. The company needs a new rotorcraft to replace the JetRanger as well as one to compete with the turbine-powered, five-seat Robinson R66, analysts agree.
“I would say that Bell is on the right path,” says Raymond Jaworowsky, senior aerospace analyst for Forecast International. “They had been stuck in their own vision of the future,” placing too much emphasis on the commercial viability of the tiltrotor.
Thinking the civil market for tiltrotor would blossom was a costly error. That misdiagnosis, says Jaworowsky, allowed Eurocopter to pounce on territory once held by Bell. Richard Aboulafia, VP of analysis for the Teal Group, described Bell’s past history as “the failure to invest adequate resources in the civil product line.” The entire company, he says, was focused almost entirely on one customer—the U.S. military.
Even with the advanced 429, customers want to see a “consistent pattern of new investment,” says Aboulafia, adding that the aircraft is fighting an uphill battle against the Eurocopter EC135 lightweight twin-engine rotorcraft. The good news is that “civil helicopter build rates will be rising at the same time that military helicopter production is forecast to be declining,” says Jaworosky, referring to Forecast’s new 10-year projection, “The Market for Light Military Rotorcraft.”
The 429 program faced several challenges—certification delays, strikes, management shuffles, unsustainable order books and rumored weight problems. But every program has its share of snags, says another analyst. Whether the 429 had more than other programs no longer matters. What’s noteworthy is that “those problems got sorted out during a market slowdown, which is a most convenient time,” points out Brian Foley, president of Brian Foley Associations, an industry consultancy.
Another point: Despite the tendency of industry observers and competitors to pile on, some of Bell’s troubles were not of its own making. Most OEMs are just now recovering from one of the worst recessions in recent memory. Orders were cancelled or deferred over the last two years. Employees were furloughed or let go permanently. Companies lost billions of dollars. It was a mess. And recovery is slow. At present, Bell maintains a 9 percent share of the civil and military markets in terms of rotorcraft built, estimates Forecast International. That figure includes both piston and turbine-powered helicopters, but excludes the joint venture with Boeing on the V-22 Osprey, as well as the Bell-AgustaWestland partnership on the civil tilt-rotor version, the BA609. Excluding the pistons, Bell’s market share rises considerably, Forecast states. Bell says that a full market turnaround won’t happen until 2012 but that could be too conservative. Says Foley: “We believe it may well happen sooner because of more robust worldwide stock markets, a lowering dollar and rising energy costs.”
Much of Bell’s and other OEMs new commercial business will come from “traditional sources” initially, says Foley. Longer term, “a nice boost” will come from countries, such as China and India. Increased rotorcraft production will rise, but the “absolute numbers will be rather small,” Foley cautions.
As for the BA609, Bell continues to work with AgustaWestland to “bring the aircraft to market,” says Garrison. No sales have been recorded for the not-yet-certificated BA609 and certification could take two more years, says Bell. Despite the various challenges, Bell’s financial situation is relatively stable. Third-quarter revenues increased $197 million over the year-earlier period, due primarily to deliveries of military and civil rotorcraft. Segment profit rose $28 million.
In 2009, Bell posted operating revenues of $2.842 billion, a slight hike over the $2.827 billion posted in 2008, according to Textron’s 2009 annual report. Profit margin increased slightly to 11 percent in 2009 compared to 10 percent in 2008.
Even with the financial improvement, and a bump in sales of commercial rotorcraft, Bell has no immediate plans to hire more factory and white-collar workers.
In October 2008, the manufacturer announced plans to eliminate 220 full-time positions and many part-time workers, mostly in the Dallas/Fort Worth area. The layoffs were prompted by DoD’s cancellation of the Bell ARH-70 Arapaho helicopter program because of cost overruns and program delays. None of those positions, now described now as a permanent reduction in force, will be revived, according to Bell’s human resources department.
However, there remains the possibility of ramping up employment to support specific programs, says the company. No further details were provided.
Bell is known for innovative engineering and research and development (R&D) programs. In a follow-up interview, Bell officials provided details about current R&D projects. Many programs are for the Defense Advanced Research Projects Agency (DARPA), so only general details were provided. But even with the lack of specifics, there is widespread belief that some of the research will eventually trickle down to the commercial side.
“A lot of the technologies we’re looking at today are to help advance the military’s next multi-role helicopter,” says Jeff Lowinger, executive vice president of engineering. The company is working with Fokker to help develop a faster and quieter helicopter with a higher gross rate. The company is researching advanced rotor and drive system technology, better power-to-weight ratios and increased payload capacity. In addition, Bell is working on blade tip shape development, fly-by-wire technology, enhancing the crashworthiness of rotorcraft and better situational awareness for the pilot.
Much of the work on the civil side is directed at reducing gearbox and tail rotor noise, says Lowinger. Bell also is experimenting with lightweight composite structures. But the next breakthrough in rotorcraft related technology will be in “usage monitoring” of aircraft systems, over and above present health and usage management system (HUMS) capability, which focuses mainly on prognostics, says Lowinger. HUMS technology does not truly consider the flight regime in which the aircraft has flown, he says. Bell continues this HUMS-related R&D through its operational support and sustainment program.
In 2009, Bell began research “on the next-generation of advanced flight control laws” at its Xworx facilities in Arlington, Texas. The focus of the research was to enhance safety by reducing pilot workload through automated flight.
One question being bandied about: Will parent Textron provide Bell with sufficient funds to continue with advanced R&D? Yes, apparently. Garrison says Textron plans to increase investment in R&D at Bell by 50 percent over the next five years.
Adding new rotorcraft and enhancing existing vehicles are just part of the Bell’s revitalization efforts. The company has invested $600 million developing production and support facilities for the V22, H1 and 429, among other models, since the production makeover began in 2006. Some of the production facilities are shared with other models to enhance efficiency.
“We’ve enhanced our capacity from supporting spares for older aircraft to adding capacity for newer aircraft,” says Pete Riley, executive vice president of operations. “We’ve done a lot of work on being flexible in the civil and military production.”
To improve efficiency, Bell adopted several principles of Lean manufacturing. Riley serves on the board of governors of the Lean-related Shingo Prize, which recognizes companies for operational excellence in manufacturing.
Whether Bell will be able to regain all the ground it lost on the commercial side is unknown. The 429 and next-generation upgrades to existing models are a step in the right direction, along with the recognition by upper management and parent Textron that derivatives are no longer acceptable. Significant sums must be spent to ensure that Bell remains a player on the civil side. Bell will continue to rely on its military programs to ensure the revenue stream keeps flowing. But there could come a point where the civil side has to stand on its own merits.