Demand for military avionics over the next five years is expected to level off, then decline, says Frost & Sullivan. This will shift more emphasis toward upgrade programs–a crucial aspect of increasing an aircraft’s lifespan.
The Military avionics arena has changed considerably over recent years, with the advent of commercial-off-the-shelf (COTS) systems, upgrade programs and new technologies such as satellite communications. Overall, however, growth will be slow in the military market, according to Frost & Sullivan, and promises little acceleration soon.
In 1999, fighter aircraft avionics equipment accounted for 57% of the total worldwide military, non-mission avionics market, amounting to $1.36 billion in revenues. Now the market is experiencing slow to moderate growth, which is expected to level off in 2003.
Meanwhile, transport aircraft avionics equipment accounts for 27% of the total military non-mission avionics market, amounting to $633 million in revenues. This segment of the military electronics sector is significant in terms of retrofit activity due to the number of programs in progress or about to start in the United States and, to a lesser degree, in other countries. The market is currently experiencing moderate growth, says Frost & Sullivan. However, a progressive decline is expected beginning in 2003 and continuing through 2006, to 0.1%.
Rotorcraft and GATM
Military rotorcraft avionics equipment accounted for 16% of the total non-mission avionics market in 2000, amounting to $377 million in revenues. Like transport aircraft, the rotorcraft market is experiencing moderate growth, which is expected to peak in 2002. This growth largely derives from the increasing complexity of systems being installed on combat helicopters.
Rather than selecting new equipment, air forces around the world will maintain older fleets while investing a significant portion of their budgets in avionics and electronic warfare and weapons upgrades, says Frost & Sullivan. Avionics upgrades are considered a major enhancement for older aircraft because they integrate the aircraft into a C4I infrastructure, and this optimizes their mission capabilities.
The conversion to Global Air Navigation System/Global Air Traffic Management (GANS/GATM–the military version of Free Flight) also drives the upgrade of all navigational systems for military aircraft in the world. GATM-related upgrades to figher aircraft will peak towards in about five years, says Frost & Sullivan.
Rafale, F-22, JSF, et al.
Still, on top of the upgrade activity, new aircraft will be introduced. In Western Europe and the United States in particular, a new generation of fighter aircraft entered service from 2000. According to Frost & Sullivan, France received its first Rafale M fighters in 2000; the United States will proceed with pre-production of the F-22A and Joint Strike Fighter (JSF) and receive more F-18Es; and the first production units of Eurofighter Typhoon will be delivered to Germany, Italy, the UK and Spain. These examples alone account for more than 700 aircraft that are scheduled to enter service over the next five to seven years.
Frost & Sullivan anticipates that air forces will increasingly utilize equivalent systems across their aircraft categories to reduce costs and to more easily familiarize student pilots with fighter aircraft systems. The use of modular avionics, too, will allow air forces to optimize training and minimize aircraft down-time, thus allowing better operational capabilities. Modular avionics now can cover all requirements, from basic to advanced flight training as well as combat training.
High-speed data link communications will grow significantly, adds Frost & Sullivan, because they are difficult to jam and provide fighter pilots with better combat situation awareness. With secure data links, groups of fighters will be able to control wider areas with advanced missiles. The use of radar may no longer be required in many cases because fighter groups will instead rely on the information transmitted via data link to the wing by the Airborne Warning and Control System (AWACS) or other platforms such as advanced unmanned air vehcicles (UAVs).
In addition, intervention in Kosovo in 1999 helped focus attention on the interoperable capabilities of NATO countries. Because the varying levels of equipment presented a challenge to interoperability, a number of NATO countries are re-examining their military transport requirements for the next decade.
Those requirements will be addressed, in part, by the new military transport aircraft to be introduced within the next three to five years. These include the C-130J in the United States, and in Europe, Airbus Military’s A-400M.
In the rotorcraft arena, Eurocopter is finally ready to market its Tiger, and France recently allocated funding for the NH-90 multirole helicopter, becoming the first of NH-90’s partners to fund production. However, export versions of these aircraft may face an uphill battle, as the United States has captured much of today’s market with versions of the Apache combat and Blackhawk transport helicopters. Still, demand for military helicopters will remain strong in Europe and will emerge in the Asian continent, driving avionics requirements in these areas, says Frost & Sullivan.
Helicopter upgrade programs, largely involving new avionics and mission equipment, are impacting a relatively large number of platforms. These upgrades will maintain the U.S. and NATO tactical airlift capabilities for the next 10 years, until the next generation of tiltrotor aircraft becomes available.
Frost & Sullivan sees future combat helicopters offering a significant reduction in pilot workload, particularly in the areas of navigation and flight control. These new systems will allow pilot and gunner to concentrate more intensively on combat tasks, while avionics assume a greater role in flying and managing the aircraft. However, increased complexity and cost may slow down development and adoption of such systems.
Restraints on Growth
Although funding priorities have favored the avionics industry, it must be noted that overall military spending growth is at a standstill. The avionics replacement and retrofit market is growing rapidly, though not as fast as the new weapons market.
Funding for defense programs from legislative bodies has become increasingly difficult, as politicians and public opinion question further spending, given the successful air campaigns with exsiting equipment in Kosovo and Bosnia and on-going supremacy over Iraq. In addition, upgrade programs are sometimes delayed or cancelled in anticipation of the introduction of new aircraft.
As is often the case in government programs, the acquisition of new equipment is delayed by political changes, as well. All told, it appears that the trend has been to reduce fleets while keeping older airframes in service through fewer upgrade programs. Not an optomistic picture.
On a brighter note, with help from the 1995 reforms in U.S. defense acquisitions, a fundamental change exists in the way the avionics industry and the military cooperate to provide state-of-the-art technology at lower costs. The result is a high percent of funds allocated for avionics in U.S. military programs.
The export market is sometimes restrained, as governments often place export restrictions on avionics technologies that they classify as being important to national security. In the international marketplace, these restrictions seriously limit export activity, which was recently the case with the supply of F16-60s to the United Arab Emirates.
The percentage of the market share accounted for by the top three market competitors in the world military avionics marketplace is currently 50%. This market concentration is shared by Honeywell, Litton and Rockwell Collins. Mid-level market participants include Thomson-CSF Sextant, BF Goodrich, BAE Systems and Kaiser Electronics.
Partnerships allow niche market players in military avionics to team with other market participants, preferably market leaders. The market leader, in turn, gains access to a technology relatively unfamiliar to them.
Sometimes market leaders join together, too. For example, Rockwell Collins, the lead integrator on several U.S. Air Force upgrade programs such as the KC-135 or C-130, is working with Honeywell and Litton to complete these upgrades.
The year 2000 was a milestone with the merger between AlliedSignal and Honeywell (and then together with General Electric), the creation of EADS in Europe, and the emergence of the BAE Systems powerhouse. Such consolidations are prime examples of companies merging complementary technologies and product lines in order to gain increased market share and improve access to international markets, while optimizing shareholder values. Frost & Sullivan expects further consolidation in the military avionics industry.
On the technology front, helmet-mounted displays (HMDs) have been around since the 1970s. The U.S. Navy and Marine Corps used Honeywell’s Visual Target Acquisition System in their Phantom fighters, while Russia and Israel pioneered new systems for aircraft such as the VVS MiG-29s. Elbit’s DASH system also became available at the end of 1986, and France and Great Britain have started the development of HMDs (helmet mounted displays) for use in conjunction with their new Rafale and Eurofighter programs.
New HMDs will be lightweight, despite their sophistication and new visual systems, and their accuracy will be primordial. Also, the HMD system must be strong enough to meet the requirements of day-to-day flying operations. The top companies involved in military HMDs include Elbit, Kaiser Electronics, BAE Systems and Thomson CSF-Sextant.
The U.S. currently relies heavily on satellite technology for worldwide military communications. This ability is expected to expand to other countries in conjunction with the emerging air traffic management system in the commercial arena.
As the commercial system becomes operational, military operators will follow suit, if not lead, in the transition to satellite communications (satcom). This will greatly expand the range of radio communications for both the commercial and military sectors, and through data link, allow pilots to download information covering all aspects of flight conditions in near real-time. Aircraft not outfitted with data link capabilities will need to be upgraded for the Free Flight environment, says Frost & Sullivan.
Challenges for Avionics
A major challenge facing the avionics industry and the military will be to define how aging avionics systems can be kept up-to-date, operational and supportable. New avionics systems will need to be designed with the capabilities of having their electronics easily substituted over the life of the aircraft, suggests Frost & Sullivan. This means that avionics systems will be more thoroughly evaluated in the areas of eventual supply loss, discontinuance of product, ability to react to new threats, operational requirements, and the integration of new technologies.
Helping resolve this challenge is the fact that, as digital and integrated avionics equipment continues to penetrate military platforms, software becomes the core of avionics equipment. Software can be used to enhance the performance of an aircraft’s avionics systems by increasing the efficiency in organizing and presenting aircraft information without replacing any major component of the aircraft hardware.
Often avionics companies with existing software development resources are finding that they must either upgrade their capabilities or outsource their needs to third-party companies.
In terms of avionics certification, Frost & Sullivan claims this process has been streamlined for the military as a result of its applying commercial-off-the-shelf (COTS) technology. Instead of following a separate, Mil-spec approval process, COTS equipment maintains a single certification, applicable to both the military and civil marketplace.
Competition in the worldwide military avionics market could heighten, according to Frost & Sullivan, and it could come from new suppliers. Countries such as China and India now have access to millions of man-hours of avionics research and development work, and their resulting technologies could both enhance competition and contribute to a greater threat to NATO forces.
Opportunities exist in the military avionics market for companies that can technologically meet the stringent military requirements, primarily based on performance. A period of slow growth will persist for military avionics suppliers until 2006.
The second half of the decade will be more promising, with the entry in service of the Joint Strike Fighter, A400 and F-22, and the advent of the GNS/GATM, which will drive avionics upgrades worldwide.
Issues for 2001
- This will be a crucial year that will define the future of the European Defense industry: Will EADS overcome its partner’s national interests and cultural barriers?
- Will BAE Systems look internally and start work on its centers of excellence?
- Can the F-22 and Joint Strike Fighter avionics programs get back on track and meet budget and performance requirements?