Wednesday, June 1, 2005
Helicopters as Commodities?
One of the more intriguing comments made about the U.S. presidential helicopter decision is that the choice of airframe didn't really matter because helicopters have become commoditized and only exist to carry around their high-tech systems payloads.
Another said the contract went to Lockheed Martin because its systems-integration expertise, in the final analysis, mattered much more than Sikorsky's know-how in building airframes.
If true, it points to a worrying future for the industry, where its products will command as much of a premium and, more pointedly, as much pricing flexibility as trucks do today. But are those statements really true?
There is little doubt that, with the growing complexity of mission systems, the power curve is sliding towards systems integrators. But it is equally true that this is not a recent trend. In the late 1980s, Britain's defense ministry shifted the prime contractorship for the Royal Navy's EH101 Merlin helicopter to then-IBM Government Systems when Westland Helicopters proved incapable of integrating its mission systems on time and on budget.
It is also true that Lockheed Martin is prime contractor for the MH-60R helicopter and designed the aircraft's common cockpit. Sikorsky, who designed the H-60, now simply builds some versions--and then only partly, as it has sub-contracted substantial production work on the Black Hawk.
Looking at these developments, it is hard to dispute that airframe manufacturers are losing their footing in the industry. The growing shift to upgrades and refurbished airframes does seem to give more importance to what on-board systems can do, rather than to airframes.
Having cancelled the Comanche, and pending a final decision on the V-22, the Pentagon is concentrating its acquisition funds on a slew of "new" helicopters based on airframe designs that are 30 to 50 years old. The Marines are funding the "Y" helicopter family derived from the UH-1 Huey; the Army is investing more than $11 billion dollars to develop yet another upgrade of the venerable Chinook, and is considering "new" helicopters based on the Vietnam-era OH-6/MD-500 and the Model 407 (a JetRanger at heart) to meet its requirements for an Armed Reconnaissance Helicopter (ARH) and (again) the Huey for its future Light Utility Helicopter (LUH).
And the U.S. Army's FY 2006 Budget request calls for funding the AH-64 Apache in a new, improved version, while more long-term plans include deriving new versions of the venerable CH-53, known as the CH-53X.
Other examples abound. India's Hindustan Aeronautics Ltd., for example, is re-engining its venerable Chetak (locally-built Alouette IIIs) and Chetan (Alouette IIs) with the latest TM-333 turboshaft from Turbomeca, and could end up with a contract to re-engine about 200 Alouettes still flying in India rather than producing modern--and more profitable--Dhruvs to replace them.
Britain's defense ministry is looking to develop new, more capable versions of its Lynx helicopter family with, again, a view to rebuilding at least part of the existing fleet rather than replacing it with an entirely new design.
Among helicopter-producing countries, only on the European mainland is production of new-design, new-build helicopters such as Tiger, NH90 and EH101 gearing up to replace older models, not only in France, Germany and Spain but in many other NATO countries. And Eurocopter, jointly with China, is looking to enter the heavy-lift segment with an entirely new design provisionally known as the EC-175.
Clearly, Continental Europe takes the view that producing entirely new helicopter designs is a better way forward than upgrades. Just as clearly, it believes that new designs bring a slew of added capabilities that, together, provide a competitive edge, in both military and industrial terms. Certainly, Europe does not appear to believe that helicopters are becoming commoditized.
Who is right? Probably both to some degree. But looking down the road, it is hard to imagine U.S. industry being able to remain competitive on export markets with helicopters whose basic designs are decades old.
It also is not clear that older airframes will retain enough growth potential to indefinitely incorporate the new engines, dynamic components and mission systems that will be required to complete their future military missions.
However attractive the idea of helicopters as simple, interchangeable commodities may superficially appear, the fact is that payload, speed and range will always matter to customers, as will ease of maintenance and low operating costs. However versatile older airframes may be, and however capable their upgrade packages, there always comes a point where further improvements become economically or technically counterproductive.
At that point, only new technologies can offer further improvements. The danger is that focusing on upgrades takes money away from R&D, slows technological innovation and, eventually, leads to an irreversible decline.
Rather than betting all its money on upgrades, and a single all-new program based on an uncertain technology like the V-22, the Pentagon should invest in new rotorcraft technologies and programs. In a decade or two, after all, it will need them to replace today's "upgrade generation."