Saturday, July 1, 2006
Last Round of Renewal
With new aircraft coming on line and defense budgets shrinking, European military forces--and manufacturers-- are looking to make the most of their collective capabilities.
European countries are entering the final phase of a three-part renewal cycle begun in the early 1990s, when a number of NATO members restructured their tank-heavy, Cold War armies into smaller and more maneuverable forces making wider use of helicopters.
The best example of this is the Netherlands, which bought Apache attack helicopters, utility Eurocopter Cougars and heavy-lift CH-47 Chinooks to set up an airmobile brigade from scratch. Britain had earlier procured Apaches and Chinooks to outfit an airmobile brigade, for which it also bought the battlefield transport variant of the EH101 naval helicopter it developed jointly with Italy.
Several other European countries also acquired new helicopter assets, either Chinooks (most recently Greece and the United Kingdom) to bolster their logistic capabilities or utility helicopters, such as the UH-60 Black Hawk (Turkey) or the Super Puma/Cougar (Spain, Turkey, Switzerland), to establish or reinforce battlefield airlift capabilities.
This initial renewal phase mostly entailed buying U.S.-made helicopters, which were at the time the only realistic option, and which were often provided on favorable financial terms through the Foreign Military Sales program.
The naval sector saw far less renewal activity, as NATO countries had long maintained strong antisubmarine warfare (ASW) helicopter forces that did not require updating once the threat from Soviet submarines faded. The only notable exceptions were Spain and Turkey, which both bought SH-60 Seahawks, and Britain and Italy, which completed joint development and production of their EH101. This helicopter provides the transition to the second renewal phase, which began around the turn of the century and which focused, to a large degree, on new European helicopter designs.
In addition to the EH101, which has now been procured by Denmark and Portugal, this second phase hinges on the extraordinary success of the four-nation NH90, which has been ordered or selected by Sweden, Finland, Norway, Portugal, Spain, Greece and Belgium in addition to its four original partners: France, Germany, Italy and the Netherlands.
Attack helicopters were given a lower priority by European governments in the absence of an immediate, post-Cold War threat. France and Germany, recently joined by Spain, are only now producing the Eurocopter Tiger, while Boeing's Apache was most recently ordered by Greece.
Together, these first two phases have renewed most European helicopter fleets, so that relatively few ongoing procurement programs are left. Apart from small orders that are pending, Britain is the only Western European country that still has large, unmet helicopter procurement plans.
Most ongoing competitions are out on Europe's geographical fringes, where military threats are more immediate, such as in Turkey or in Eastern Europe, where new NATO members must replace their legacy Soviet-supplied helicopters with modern aircraft that operate to NATO standards. Of all these countries, Turkey has, by far, the most ambitious helicopter procurement plans.
For the past 20 years, Turkey has had plans to acquire a fleet of 700 military helicopters--a mix of attack, utility and heavy-lift aircraft. However, it has been more modest in execution, and has so far focused its investments mostly on utility helicopters. The Turkish army now operates a mixed fleet of Eurocopter Super Pumas and Sikorsky Black Hawks, many of which were locally assembled by TUSAS Aerospace Industries (TAI), a state-controlled company that is the foundation of the country's aerospace industry.
After several false starts, Turkey is now close to selecting the winner of two separate competitions to procure at least 70, and possibly 90, attack helicopters under the ATAK project and 64 utility helicopters under the Turna and TSK projects.
Those programs have been running on and off for years, but a decision is expected by this month. Turkey requires that 40-50 percent of the value of these contracts be offset to local industry.
Final bids for the ATAK competition were submitted in March by the four short-listed manufacturers: AgustaWestland with the A129 Mangusta; South Africa's Denel with the Rooivalk; Eurocopter with the Tiger and Russia's Kamov with the Ka-50-2 Erdogan. This program is valued at about $3 billion, and calls for delivery of the first 30 aircraft from the manufacturer's production line, with 20 more to be locally assembled from knocked-down kits and a further 20 (or 40) to be locally assembled with some locally made parts and components.
For this contract, both AgustaWestland and Eurocopter, the two favorites, have offered extensive work packages to local industry.
AgustaWestland has "offered Turkey a very open-ended solution, which includes complete transfer of the A129 program and related technology package, including all software source codes, and full re-export rights" Renzo Lunardi, the company's vice president of sales, told Rotor & Wing. The program would be managed through a joint-venture company that AgustaWestland plans to establish with TAI. Four or five years would be given over to joint development of the upgraded A129 and to the transfer of the production line, with initial production of the new helicopter tentatively planned for 2012.
Although the A129 is smaller than its competitors, Lunardi says it will fully meet Turkish military requirements with this upgrade, and
the possibility that Italy will upgrade its own Mangustas to the same standard makes the package even more attractive. Italy operates 60 A129s, delivered beginning in the early 1990s, of which the last 15 were of the improved A129CBT standard. AgustaWestland is upgrading the remaining 45 by adding new electronics (satellite navigation, improved avionics, infrared sensors and self-protection suite) and the dynamic improvements of the CBT (new transmission, five-bladed main rotor, increased maximum takeoff weight).
However, the company believes the Italian army will ultimately require a far more ambitious modernization program, including re-engining with the T800, which it contemplates as similar to the configuration of Turkey's ATAK.
This hypothetical AgustaWestland/TAI joint venture would also manage local production of the AW139 light utility helicopters that AgustaWestland is offering for the TSK and Turna programs. "Our offer entails a gradual increase of TAI's role in the AW139," said Lunardi, "first to local assembly and possibly to local manufacture."
A significant, albeit smaller, role is also being offered to Turkish industry by Eurocopter as part of its competing Tiger package. This envisions a local joint venture, with TAI being responsible for assembly and Turkish electronics manufacturer Aselsan for the customization of the Tiger to Turkish military requirements. This would include local development of the central mission computer and possibly its combat system which, said a senior Eurocopter official, would then be offered to the three Tiger partners (France, Germany and Spain) as a replacement for the original mission computer, which was designed in the late 1980s.
South Africa has also offered an ambitious technology package to support Denel Aviation's Rooivalk bid, reversing its refusal in the 1990s to sell military equipment because of Ankara's military operations against Kurdish separatists.
South African Minister of Public Enterprises Alec Erwin said in Ankara June 1 that "there would be a high level of sharing in transfer of technology and intellectual property rights" if Rooivalk was chosen. The CEO of the Denel group, Shaun Liebenberg, said "Denel has expertise in transferring technology and erecting manufacturing plants anywhere in the world, which is what we would do for Turkey if such a requirement exists." No value estimate of Denel's offsets package has been made public.
Turkey's two other programs (TSK and Turna) are the first step in the replacement of the 100-odd UH-1s it still operates. The TSK competition covers the procurement of 20 utility helicopters for Turkish land forces, six utility helicopters for the Turkish navy, six combat search-and-rescue helicopters for the Turkish air forces, and 20 firefighting helicopters for the forestry directorate-general, a total of 52 aircraft for which Turkey is asking for maximum local content.
The Turna project, on the other hand, calls for procurement of 12 light-medium size surveillance and reconnaissance helicopters for the Jandarma, Turkey's para-military police force, which is heavily involved in internal security operations.
Both projects are being administered by SSM, the ministry of national defense's defense industries under secretariat, whose officials have previously stated that they prefer to select a single design for the TSK's military segment.
However, one scenario envisions Turkey selecting the AW139 for the forestry role, the NH90 for the battlefield mission and the EC725 for the combat SAR mission, with the navy buying additional Seahawks for its own needs. This would satisfy all bidders, while giving Turkish forces a larger range of capabilities.
AgustaWestland and Eurocopter, the two main partners in the NH90 program, are discussing whether to bid this aircraft. The issue is complicated by the fact that Eurocopter holds a dominant share and would thus gain much more than AgustaWestland from a sale to Turkey. AgustaWestland, on the other hand, wants to offer the AW139, possibly bolstered by its future AW149 military variant, as it would not have to share the resulting revenue.
While pushing the NH90, Eurocopter also has an alternate candidate in the EC725, a much-improved Cougar that has much in common with those already operated by the Turkish army. The EC725 has a highly capable CSAR version and, as TAI has also assembled the Cougar in the past, the industrial aspects would be relatively simple to implement.
A complicating issue is that Turkey wants to develop and manufacture the TSK's avionics and mission equipment package, and fitting it to a helicopter that has completed development, like the NH90, would create substantial technical and financial problems.
[Sikorsky is discussing offering variants of its H-60 to Turkey as part of a launch of an expanded International Black Hawk program.]
Turkey's selection is being closely watched as manufacturers see it as a possible indication of how the military market is leaning in the choice between smaller and less expensive utility machines or larger and more expensive battlefield transport aircraft. "Looking forward, the alternative for the UH-1 replacement market will be either a one-for-one replacement by aircraft the size of the AW139, or a smaller number of larger and more capable aircraft like the EC725 and NH90," said the Eurocopter official. "The jury is still out on this."
While it announced its selction of the NH90 last year, with long-term plans to buy as many as 120 aircraft to completely renovate its helicopter forces, Spain is still working to define the contract for the first 45 aircraft, which is unlikely to be signed before late 2007. Currently, Spanish authorities are focusing on technical definition of the aircraft and industrial work package, and on the financing arrangements that will involve the defense and industry ministries.
Ultimately, the NH90 would replace Spain's entire fleet of utility Eurocopter Super Pumas and Sikorsky Seahawks. One prime--and secret-- requirement is to equip a new airmobile brigade, which is to be capable of independent operations south of the Strait of Gibraltar, a recurring scenario to which the Spanish general staff attaches great importance.
In the attack helicopter field, Spain is the launch customer of the new HAD version of the Franco-German Tiger, and has ordered 24 to replace the old BO105 light anti-tank helicopters that form the backbone of its army aviation command.
Poland, the largest of NATO's new members, has also launched the largest helicopter procurement project. In 2005, it selected the EH101 for an initial order of six VIP helicopters. That was to be followed by orders for over 30 more for military transport. However, this project was finally dropped before any contract was signed once the government finally realized that it didn't have enough funds to buy and operate a large fleet of EH101s.
This competition will now be re-opened, and a request for proposals is expected shortly. This is expected to call, as before, for initial procurement of six VIP helicopters to be followed by 30-40 similar utility ones, since Poland has an urgent requirement to replace 40 Soviet-era transport Mi-8s still in service.
Competing for this contract are AgustaWestland, with its AW139; Eurocopter, with the NH90, and Sikorsky, whose S-92 is considered the leading contender, although it is rumored that AgustaWestland and Eurocopter may still revise their plans once the RFP is issued, and might submit a joint offer based on the NH90.
As in Turkey, AgustaWestland is offering a local assembly line, which would be based at PZL Swidnik, the local manufacturer that already makes airframe components for the AW139, with more than 900 workers employed on this subcontract alone.
"Swidnik's role in the program could grow on the back of a large order," said AgustaWestland's Lunardi, "up to and including an assembly line for the AW139."
The potential market is even larger, in fact, as the health ministry is expected to shortly launch an ambitious program to buy as many as 20 EMS helicopters. For that, the A109 Power or Grand (whose fuselages are built in Poland) would be well suited, he added.
In the initial VIP program, Eurocopter had entered the NH90, and expects to renew its bid for the new competition, on the grounds that the NH90 is, in practice, the new NATO-standard utility helicopter. Eurocopter would also offer Polish industry a partnership, although it is waiting for the RFP to fully define its offer.
Eurocopter's offer is also expected to provide for Polish industrial participation in the Tiger program, if it is selected to replace the current fleet of combat Mi-24 Hinds. This project is not a high-priority one, but would follow once the utility helicopter procurement is completed, as previous plans to modernize the Mi-24s with Western avionics and weapons have been shelved.
The Belgian government last year decided to buy the NH90 to replace its obsolete Sea Kings, but has not yet signed a contract. One is expected to be formalized before year's end. Belgium plans to buy a total of 10, split between the NFR90 naval version and the TTH90 transport version.
The Norwegian government is to decide shortly on whether it will take up an option for 10 additional NH90s, which would be operated by the armed forces in the search-and rescue role, but financed by the justice ministry. The option lapses in early 2007.
These helicopters would be naval NFR90s, but without the ASW equipment fitted to the other NFR90s on order for the Norwegian navy.
The German navy is finalizing negotiations for the purchase of a batch of 30 NFR90s. If approved by the defense ministry, the draft contract would be submitted to parliament budget committee in the next few months, possibly leading to contract award before the end of the year. This contract would also contain an option for an additional 30, but the timing of this order is not clear.
Germany also has a long-standing requirement for 20-25 combat SAR helicopters, which were initially due to be taken from the first batch of TTHs it has on order, but this project appears to have been placed on the back burner.
The British government has announced plans to spend up to �3 billion ($5.5 billion) through 2015 on its Future Rotorcraft Capability blueprint, which comprises the Lynx replacement program, the replacement of Puma and Sea King medium helicopters and the renewal of its search-and-rescue component. A decision to outsource the last to the private sector was announced in April, but the other two are still pending.
In March 2005, the defense ministry said AgustaWestland's Future Lynx project was its preferred option to replace the Army and Royal Navy Lynx fleets, subject to "acceptable contract conditions and prices" for a program that will cost about �1 billion ($1.83 billion). A go-ahead on the development and production program for Future Lynx, which calls for procurement of up to 70, is due shortly.
However, British intentions as to the replacement of its fleet of Pumas and Sea Kings are still very much unresolved. The defense ministry is assessing several options for the medium-lift requirement, ranging from procurement of new helicopters to upgrades. It is even considering leasing helicopters. Plans may be finalized by year-end. This program is now designated the Land Advanced Concept Phase.
In the interim, Britain has launched upgrade programs for the transport EH101 Merlins operated by the Royal Air Force (30 aircraft, plus eight options, under the Merlin Capability Sustainment Plus program that extends service life to 2030) and for the Apache AH Mk.1 (a �194-million, or $357-million, contract to fit new sight and targeting systems). No decision has been announced for its future medium helicopter requirement, but one could be made at the same time as the Future Lynx.
This is the only area left in which European countries have ongoing military requirements but no firm programs as yet. Several countries need to upgrade, and ultimately replace, the CH-47 Chinooks that are in widespread European service, while the CH-53Gs operated by the German army, presently being upgraded, will also require replacing
The Netherlands is leading the way in Europe, and in January signed a preliminary agreement with Boeing opening the way for possible procurement of new CH-47Fs with an option for additional aircraft and modernization kits for the current fleet of 11 Dutch CH-47Ds.
In parallel, AgustaWestland and Boeing are discussing how to approach this potentially highly lucrative market, initially focusing on the Italian army's requirement to modernize its fleet of CH-47Cs, although the solution they ultimately come up with would likely be offered to all European operators of the type. Britain, Greece and Spain are other European CH-47 operators that will require either upgrades or replacements in the medium term.
Germany, jointly with France, earlier this year launched a request for information for a large helicopter (designated Heavy Transport Helicopter, or HTH) to replace its CH-53Gs and to meet an emerging French requirement for a similarly-sized helicopter for logistic support.
Eurocopter hopes to obtain French funding to develop a larger version of the U.S. Marine Corps' CH-53K, which could also meet German requirements, but the French army staff is just as happy to lay low until it can buy the CH-53K off the shelf. Germany's position depends on funding availability, and rumored cuts in future defense spending to be enacted shortly by Chancellor Angela Merkel could well delay plans for a CH-53G replacement by several years.