mmerluzeau@g2globalsolutions.com

The Week in Review:  October 6

Boeing still on strike:   Boeing and the machinists union agreed to return to the negotiating table in an effort to end the now 36 day long strike. So far little to no progress is to be reported. 

NBAA 2008:  Attendance was marginally lower than in 2007 in Atlanta but overall the business aviation pulse remains strong.  Focus will be on execution in the next few years as the financial meltdown resulting from the global credit crisis will eventually impact business aviation.

Gulfstream introduces the G250: The battle for new midsize is on, The G250 promises to deliver strong range and speed performances (3,400 nautical miles at Mach .80) with one of the largest cabin in its class.  G250 comes standard with the now bug free Honeywell PlaneView250.

Eclipse's minimalist presence in Orlando:  Eclipse's presence was noticeably reduced from the previous years of lavishness, irrational exuberance and glitz.  Only two aircraft and a small reception desk made for quite the spartan approach at this year's NBAA.  Eclipse is logically cutting on cost in an effort to survive, which is still debatable at this point.

Lockheed VH-71 First Flight:  The first flight of an operational pilot-production example  has taken place at the  AgustaWestland factory in Yeovil, England, on September 23. The aircraft will be flown to NAS Patuxent River, MD for modifications.

Taiwan needs for additional F-16s ignored by US?   The US DoD has announced  plans to sell 30 Boeing AH-64D Apache Longbow helicopters worth $2.5 billion, upgrade packages for Taipei's four Northrop Grumman E-2C Hawkeye AEWC aircraft, and spares for the RoCAF Lockheed F-16A/B and Northrop F-5 combat aircraft.  Regrettably, still no progress is reported with the sale of additional F-16s.  Taiwan might therefore have to look elsewhere for new aircraft.

Next week:  Focus on an Obama administration:  with polls now clearly favoring Senator Obama, we will take a look at his Defense platform and potential players in his administration.

September 2008

Back to square one

The decision to cancel the KC-X RFP altogether is a significant blow to USAF and may inflict serious damage to  Boeing-Air Force relations for decades. This cancellation also means that a winner will likely not emerge until 2010 at best and that the first KC-45 tankers will most probably enter service around 2015. The future of Mobile as an aerospace hub is also in doubt for the time being. Boeing's fought hard to maintain its monopolistic position in North America and seems to have won a significant battle for now.

Secretary Gates' decision is first and foremost a political one.  It removes a potentially (although incorrectly identified as such) damaging issue for Senator John McCain ahead of the November election.  Although the democrats will be able to use John McCain's role in the cancellation of the first KC-X award, it gives Boeing's supporters in Congress a weaker case to argue.   What Gates' decision also does is reinforce the view that the acquisition process is no longer functioning in the best interest of the customer; in short, politician’s special interests and roles must be reduced to a more objective and realistic level, otherwise warfighters will continue to be penalized.

It is clear to us that KC-X part 3 (or whatever USAF decides to name it) will not be easier especially with a potential Obama administration who is seen to favor the Boeing bid and whose position on the issue has followed a disappointingly partisan line.  Whoever leads our next administration needs to make this program an absolute priority.

Boeing's options are still limited but somewhat improved, however, it is undeniable that Boeing can claim much from SecDef Gates' decision:

- A win:  BA has won a reprieve to prevent Airbus from establishing a production footprint in the US.  This was the key issue.

- Time to propose a revised tanker aircraft if the RFP is not radically altered:  either 764 or 777 are the most logical options now

- A way to further influence the requirements of the customer

While Boeing is clearly getting a last minute break, Northrop Grumman can also further polish the offering and make KC-30 an even stronger proposition.  If USAF decides to proceed with only a slightly revised RFP, NGC and its suppliers can put forward the A330F version and give the aircraft more range and fuel offload capabilities.  The question of GenX re-engining has been addressed before and we do not believe this is yet an option for USAF, although this might eventually change.

For Boeing, the choice is now about the aircraft that will lead the company's third attempt at winning the program.  We however do not believe that USAF requirements will change so dramatically that suddenly 777 will become a perfect shoe in for KC-X.  It never was.  777 is 45% larger than KC-30, it is more expensive, it needs more ramp space and runway requirements are significantly higher than 767 and 330. 

The critical element in all this is that USAF needs to forget about the past.  The only way to avoid feeding future protests is to make very clear that this will be an entirely new contest, and a capability replacement program, not a platform replacement.  The Air Force can then clearly define what it wants from the tanker based on needs and not based on suppliers 'own definitions of what tanker should be doing. The comparative KC-135/KC-767 has plagued the entire competition and has given Boeing critics plentiful ammunition.  At this point, the subject of which aircraft will be better suited becomes irrelevant until the new RFP is available.  It could make 777 the perfect fit, or even A340 or A350 for that matter. As we said, Pontius Pilate lives and his name is Robert Gates.

The Week in Review:  September 5

Unresolved contract issues at Boeing:  A strike will be costly for everybody.  Boeing will lose in the area of $100-$120 million per day, 787 first flight will be delayed to 2009 and with the Seattle Rain Festival running for most of Q1, this might have an effect on flight testing albeit a minor one.  The big losers in this strike will be the unions.  Striking will only rightly encourage Boeing management to proceed with plans to consider alternative sites for the NextGen Narrowbody program and even consider subcontracting larger portions of the work to Japanese suppliers.  The 787 assembly model, despite all the initial problems makes clear business sense and will eventually work out just fine.
 
Bombardier's results, back in the black:  This is good news for the Montreal region however, Q400 sales are a direct consequence of oil prices, and not so much due to a visionary market strategy on the part of Bombardier.  Still one can only appreciate the irony, a few years back pundits were already preparing for the end of the regional turboprops.  Not yet.
 
The SAAB Gripen team offer to the Koninklijke Luchmacht:  That is a seriously disruptive offering right there.  Sure, Gripen is nowhere near F-35 projected capabilities over time, but do the Dutch really need it? It all comes down to the role the Netherlands expect to play in the future of the alliance and what makes good sense from an industrial standpoint. Gripen has strong potential in several markets, but the Dutch will be better off overall sticking with F-35 over the long run.
 
US Presidential elections:  an article in DoD Buzz has outlined some of the priorities of the Obama campaign.  A quick analysis of this article leads us to conclude that there is far more to worry about  in an Obama administration in terms of political and bureaucratic interference. Few names impress us in that team with the notable exception of the excellent Pierre Chao and of course, Dr. William Perry.
 
Mitsubishi and Boeing joint efforts on the MRJ:  this shows us that the Japanese manufacturer gets it.  If, as we expect they turn out a really capable regional airliner, coupled with Boeing’s unique capabilities and customer reach, this will certainly put some serious pressure on Bombardier and Embraer.  The CRJ-1000 will likely be the first victim.
 
And finally, everybody's favorite topic,  the tanker program:  Anything worth mentioning this week?  Yes, the comments from AMC CO General Lichte: "We need a new tanker now. I don’t care which one it is. And we need to get on with this quickly.”  This is a welcome statement and also perhaps sends a message to Boeing not to expect an additional six months to put forward a new aircraft.  It is clear that USAF has priorities driven by the realities on the ground, or the air in that case.
 
This just in:  the Boeing strike is on.  This could mean bad news for the future of the Seattle workforce.

August 2008

July 2008

Chinese  Long Term Naval Strategy: Bases in the South Pacific?

The ever expanding influence of China as a political and military force is often mentioned as an issue of concern when it comes to the Taiwan strait. However, the Chinese are also attempting to expand their military sphere of influence, further sharpening the disconnect between their "stated" intentions and real world facts. With France increasingly looking to disengage from its former colonies in the Pacific, Tahiti and New Caledonia by 2015-2018, China has actively begun to influence politics and politicians in the area.

While the US is keeping watch on the situation, a CRS report in 2007 lamented: "Some experts suggest that the United States should pay greater attention to or more directly engage the Southwest Pacific. In some Pacific Island countries, weak political and legal institutions, corruption, civil unrest, and economic scarcity could lead to “failed states” and/or become springboards for terrorism". Additionally, the report states that, "Some specialists argue that China’s main objectives in the Southwest Pacific are to check and reverse Taiwan’s diplomatic inroads and to garner influence but not replace the United States as the regional hegemonic power. Others argue that China has devised a comprehensive strategy to take advantage of waning U.S. interest in the region since the end of the Cold War, especially in Melanesia."

Those statements would be anecdotal at best if this were just another report concocted by some talented analyst buried somewhere in SE. DC. However, facts on the ground, particularly in Tahiti suggest that there is indeed a concerted Chinese effort to become, over time, the leading island trade and political partner, taking over from France. China is particularly interested in gaining access to Papeete's port facilities, currently used by the French Navy and Faaa's 11,000ft runway. Combined with increased trade, China will continue its effort of corrupting and buying local officials in the autonomous French territory. France and the US in particular must pay particular attention to this worrisome development.

C-Series: Soft Launch

Bombardier's Farnborough announcement came as a surprise to no one.  This was basically the only "prestige" venue available to Bombardier for a launch in 2008.   The surprise, and frankly our disappointment, comes from a borderline mediocre product launch.

What is this limited LoI (letter of Intent) from Lufthansa telling us?  Are operators waiting for a frozen configuration before committing? Quite possibly.  Are Chinese companies going to announce orders toward the end of the year? This is a likely scenario.

Launch orders are indicative of many things; however, the apparent lack of enthusiasm for the product at a trade show must not be interpreted as a definite sign of product weakness.  This does not apply to the C-Series, which has all the ingredients to become a relatively successful product.  However, C-Series’ “poor” showing at Farnborough might be due to a few issues that Bombardier needs to address.  There are elements completely outside of Bombardier’s control such as potential US airline customers’ precarious financials. It might take a couple of years before we see orders from US companies based on a still speculative recovery curve. 

Bombardier is especially taking risk with its Chinese partnership, and this move is possibly dissuading some customers from moving forward at this point.  Consequently, there might be a fair amount of wait and see from the marketplace to assess how Chinese suppliers initially execute their workshare.  This waiting period will help establish a comfort level, if any, on this issue. While we think Bombardier (BBD) is making a fundamental mistake outsourcing the work to Shenyang, this is primarily a financial decision; BBD does not have much choice if it wishes to move forward in time with the program. However, if execution on the part of Shenyang is not on par with expectations, the consequences for the program could be serious, as is the transfer of intellectual property (IP) to a likely future competitor.  Chinese companies have a poor track record in this area and will likely continue to violate agreements despite assurances to the contrary.   

Second, there might be some leftover PR damages from the Q400 saga last fall. Despite being vindicated on the issue, BBD has some ways to go before customers' full confidence in the company is restored.  Furthermore, BBD needs to work on improving supplier relations if C-Series is to run as smoothly as possible, as there is still plenty of discontent from suppliers working with Bombardier on other programs.  Indeed, it is the supply chain that will make or break this program; Bombardier has the right product concept and the market should respond positively. C-Series can move the company to Tier 1 supplier status but there is little built in margin, perhaps a year, at most two to fully maximize the entry into service  (EIS) opportunity window.

C-Series is also largely dependent on the success of P&W’s GTF engine program; if all works well, then we have a winner.  If P&W experiences delays or problems (quite unlikely) with the engine, then the C-Series opportunity window will evaporate and get pushed closer to other OEM aircraft entry in service dates.   Any delays could then intensify the competitive environment and lead to order losses for BBD. 

While Rockwell Collins selection was expected, its Fusion is a very impressive avionics suite, we are surprised that BBD has not selected Thales for avionics and flight control systems.  Thales has a strong nose to tail solution in that domain, and the presence of Thales Canada in the Montreal area could have been a benefit to BBD during the program development and testing phases.

Finally, it is also likely that the marketplace is waiting to see what Embraer is prepared to do in response to C-Series.  Despite all the “vagueness” coming out of São José on the issue, we do not see Embraer sitting idle and conceding this market segment to BBD.  Bombardier has opted to target a specific market segment (100-145 pax); it is possible that Embraer will decide to focus on a higher capacity aircraft together with another (European) partner. 

Embraer also has the advantage of being able to respond with a design that may benefit from advances in technologies if it chooses to wait for the second half of next decade to introduce its new product.  Overall, we think that Embraer’s response to the C-Series could be a much stronger offering and we have more confidence in Embraer’s ability to execute a new program if it partners with established aerospace OEMs in Europe and North America.  Additionally, and despite the potential of the C-Series with US carriers, few have expressed strong interest for the aircraft and are instead planning to procure additional 737s/320s to replace older MD-80s-DC-9s types.  This current approach provides airlines with enough operational flexibility as the market eventually recovers from its current downturn.

June 2008

Now what?

GAO has spoken, but we are still no closer to a final resolution of what is best described now as the tanker soap opera. 

While we felt the Boeing protest had indeed several merits on the technicalities, we still believe a lengthy recompete is unnecessary and might actually lead to further legal complications that would further delay the delivery of these critical aircraft to USAF.

If there is indeed to be a recompete, KC-30 remains the more capable aircraft when compared with KC-767.  However, some have hinted that Boeing would now offer the 777, which could be a very attractive option to the customer, albeit perhaps too much aircraft for the mission as currently defined by USAF. (Perhaps a reason or two why 777 was not offered in the first place).  Let’s not forget that the issue at stake here is goes beyond the lucrative tanker contract and is actually an extension of the Boeing-Airbus turf battle.

Some will now argue, and perhaps we share most of their feelings, that Boeing won a political battle while not proposing a product to the customer that could equal A330 mission performance... When one examines the GAO decision, it remains clear to us that our evaluation of the contest in December 2007 was indeed close, let’s look at the five criteria as presented by USAF:

Mission capability:  This is the key criterion and USAF was reportedly not entirely clear with this metric.  If USAF decides to rewrite those metrics, it might lead to more confusion and feed future protests.  However, it also is clear that the customer perception of mission capabilities was perhaps altered for the better during the competition.  While USAF might need to tweak this to reflect lessons learned, how it will proceed with the evaluation will remove any doubts as to which company has the better product.

Our view:

• December:  KC-30 Wins

• Now: KC-30 wins the recompete

Proposal Risk.  USAF found that the two proposals had a similar level of risk.  Risk can be based on technical approach, estimated cost, teaming arrangements and all factors that can intervene in the overall risk perception.

Our view: 

• December: KC-767 Wins

• Now: KC-767 wins the recompete

Past performance: Boeing lost to the Northrop Grumman-EADS team. The simplistic argument that Boeing has built the majority of the current tanker fleet cannot be entirely used as a past MOP. It appears that GAO had no significant issues with how the Air Force applied this criterion.

Our view: 

• December: Northrop Grumman slightly ahead

• Now: Northrop Grumman wins the recompete

Cost/price: This is apparently where USAF made several mistakes with cost estimates and life cycle costs.  A recompete will be instrumental in devising better cost measurements and strategies.  This is Boeing’s Achilles heel in spite of public proclamations on A330’s increased fuel consumption over the life of the weapons system.

Our view: 

• December: Northrop Grumman wins

• Now: Northrop Grumman wins the recompete

Integrated Fleet Air Refueling Assessment:  Boeing will say that this was applied unrealistically.  However, USAF scenario modeling will remain classified for obvious reasons and GAO is unlikely to have shed valuable insight.  Even if IFARA modeling was partially flawed, USAF’s response to GAO on the issue in May was perfectly reasonable, and while numbers can be manipulated in favor of either platform, realistic scenarios will be crucial, as they will demonstrate that tanker ops in the pacific will require a longer range, heavier aircraft such as KC-30 or KC-777.

Our view: 

• December:  Boeing Wins 

• Now: Tie   

What can USAF do now? Ignore GAO?  This perhaps would set a dangerous precedent going against the best interest of future procurement processes.  Split the award between the two bidders?  This option might eventually materialize. While involving significant added costs, a split buy may have proven a way to avoid all this government waste in the first place (see our January entry on the topic).

The Boeing camp has won a significant battle, as we had mentioned earlier in March, Boeing’s reasonable points have proven valid to GAO, but again, those are technicalities with the procurement process, nothing to do really with which aircraft is better suited for the mission.  USAF needs to move quickly with a recompete and provide all resources necessary to announce a final selection by end of 2008.  Neither Boeing nor Northrop Grumman should continue to receive funding until a final decision has been made.

USAF B-2 Mishap Report and Accident Video

May 2008

USS Truman Temporary Residents

US Navy Video

A350 overweight, so what?

There is something fundamentally wrong at times with some elements of the media. A recent story in the German press claims that the A350 is about eight tons over initial weight targets.  While this come as no real surprise to us, it however is not the weight problem that really is interesting, but the increasing voracity of the media to jump on any story for the sake of a story.  News travel very fast in the internet age, and what was previously considered anecdotal is now positioned as news with little to no analysis or research behind it.  As for A350, now 6-7 years from her entry in service, it is somewhat expected that initial designs would come higher than planned.  If the aircraft is indeed suffering from weight issues, Airbus will now work with suppliers to find ways to meet more aggressive weight targets while making the necessary improvement with the aircraft carbon fiber fuselage barrel design. With oil hopefully at half its current price around 2015, aircraft weight might not be as critical as it is now... Time to take a longer term perspective, not just with 350, but also with C-Series, MRJ and the rest...

A reminder of what lies ahead for Airbus, Bombardier and Boeing...

It will take some time for the Chinese aerospace industry to get up to par with western standards and manufacturing efficiencies and procedures.  However, G2 Solutions' experience with China leads us to suggest that the ramp up will accelerate, and that it will much faster than what some might have suggested in previous years.  While we are not talking of dog years,  we would not be surprised if China makes an attempt to develop that 150-200 pax aircraft by the end of next decade to propose a solution, albeit inferior to Airbus and Boeing's new narrowbodies.  Even if by that time China is not able to compete on the same levels in terms of evolutionary technologies and especially will lag behind in terms customer support and service, price positioning will allow them to take some minimal market share away from Toulouse and Seattle in what we believe will initially be "political" purchases.  With the Chinese government able to exert political and financial pressures on potential buying countries, the Chinese domestic market alone will support product growth, with the real threat materializing between 2025 and 2030.  By that time, Alabama will look like a real nice place to live and work...

April 2008

Guessing Game...

With all the talk about Airbus and the GTF option for the 320 upgrade, here is a slide we put together early last fall to discuss some of the options available to the two major aircraft OEMs.  Some of the terminology might have changed since, but it clearly highlights, in our opinion, that Airbus might have the upper hand as far as the timing of upgraded/new products.  However, as we all know, what looks good and promising now might be an altogether different story in five years time.  With an economic slowdown clearly affecting the market, Boeing might be able to delay the 737RS enough  to match the new Airbus narrowbody innovations.

Northrop Grumman awarded BAMS contract  

DoD Announcement:     

The Department of the Navy announced today that the Northrop Grumman Corp. has been awarded the system development and Demonstration (SDD) contract for the Broad Area Maritime Surveillance Unmanned Aircraft System (BAMS UAS).   The BAMS UAS contract award is the culmination of a year-long source selection process since the Navy received industry proposals in May 2007. The $1.16 billion cost-plus-award-fee contract is to develop a persistent maritime intelligence, surveillance and reconnaissance (ISR) data collection and dissemination capability that fulfills the maritime war fighter's requirement for continuous battle-space awareness.  The BAMS UAS will be developed using Northrop Grumman's RQ-4N platform.  "This announcement represents the Navy's largest investment in unmanned aircraft systems to date.  The extraordinary efforts leading to this announcement have helped the BAMS UAS program begin to develop a persistent ISR capability never before available to the fleet," said Capt. Bob Dishman, program manager for the BAMS UAS program. "This is a significant milestone for the BAMS UAS program, concluding a deliberate and meticulous source selection process that adhered to stringent Federal Acquisition Regulation and Naval Air System Command source selection processes and documentation requirements."  The BAMS UAS is an integral part of the maritime patrol and reconnaissance Force. As an adjunct to the P-8A Multi-Mission Maritime Aircraft, the BAMS UAS will provide persistent maritime and littoral intelligence, surveillance and reconnaissance to joint forces and fleet commanders worldwide. This capability will enhance battle-space awareness, improve force projection capabilities and protect and defend the fleet and the nation.

The Last of the Bandits

Today will mark the end of major era of military aviation history.  F-117A will officially be retired at ceremonies at Holloman AFB and Palmdale, CA.  The four ship flight will then head north to their original base on the Tonopah test range, in the North West corner of the Nellis Range.  There, they will stored in the original hangars that were built in 1982 to house the first operational 117 squadron.  With the entry in service of F-22A and other exotic new manned or unmanned platforms, the days of the Nighthawk were indeed numbered.  Here are some of the individuals who had a significant role in the emergence of the first operational stealth aircraft in the world:

- Ben Rich, Lockheed Aircraft
- Denys Overholser, Lockheed Aircraft
- Dr William J. Perry,  Former DoD Engineering Chief and later Secretary of Defense
- Senator Samuel Nunn, Jr.,  Chairman of the Senate Armed Services Committee

and many more...

Two KC-10s, the Moon and a PDLCT

This is not the title of a new Chronicle but rather an interesting airborne combination courtesy of NATO air forces joining in the skies over central Asia.  The Mirage 2000D crew has got some interesting creative flair...Almost looks like those two USAF KC-10s are on their way to the moon.

It's a long Road...

There’s no question the elusive first Rafale export sale is getting closer and closer but the buyer seems to be changing every six months.  Morocco collapsed last year, Libya emerged as the next likely buyer shortly thereafter, but since then things have gone very quiet.  Russia has reportedly offered a deal to Libya for a squadron of Su-35 including a full weapons package. This could be an advantage since France has apparently not included MICA in the pending Rafale transaction.   Recent information circulating in the French media is now suggesting that the UAE is at an advanced stage of negotiation with Dassault for the procurement of 20-30 Rafales to replace or complement its fleet of remaining Mirage 2000s (upgrades near completion) and 2000-9s (Bader 21 agreement). The deal could also involve the transfer of the 2000s to a potential buyer with India reportedly expressing strong interest.  It however remains unclear as to which aircraft will be sold.  Transferring the 2000-9s to India would be a strong signal that Delhi is leaning Rafale for the MRCA tender and is using the -9s as a bridge to Rafale since both aircraft share common modular avionics and some other systems, including part of the weapon system.  To date India has only expressed interest in upgrading its 2000s to the -5 standard; procuring -9s would lead to a hybrid fleet of 2000s, however a switch to -9s could perhaps be on the table (the 2000-9 is a suped up -5, the type difference is not a stumbling block).    It is also not clear if the UAE AF would decide to keep some of the newer -9s and sell the remaining aircraft to India.  Judging by the recent announcement that France will have a permanent base in the UAE soon, this bit of news seems rather logical and perhaps represents the strongest Rafale lead since…ever.  With the rumored announcement of a Greek AF buy for a squadron of Rafale reportedly imminent, this could be the year Rafale makes it to the big league.

                    Photo:  Dassault Aviation

GAO Report:  Defense Acquisitions: Assessments of Selected Weapon Programs

From GAO :

This report is GAO's sixth annual assessment of selected weapon programs. Since 2000, the Department of Defense (DOD) has roughly doubled its planned investment in new systems from $790 billion to $1.6 trillion in 2007, but acquisition outcomes in terms of cost and schedule have not improved. Total acquisition costs for major defense programs in the fiscal year 2007 portfolio have increased 26 percent from first estimates, compared with 6 percent in 2000. Programs have also often failed to deliver capabilities when promised. DOD's acquisition outcomes appear increasingly suboptimal, a condition that needs to be corrected given the pressures faced by the department from other military and major nondiscretionary government demands. This report provides congressional and DOD decision makers with an independent, knowledge-based assessment of defense programs, identifying potential risks when a program's projected attainment of knowledge diverges from best practices. The programs assessed--most of which are considered major acquisitions by DOD--were selected using several factors: high dollar value, acquisition stage, and congressional interest. This report also highlights overall trends in DOD acquisition outcomes and issues raised by the cumulative experience of individual programs. GAO updates this report annually under the Comptroller General's authority to conduct evaluations on his own initiative.

The report can be accessed here

A few interesting articles have caught our attention lately.  The first one, published in Airline Business is a remarkably rational piece from Doug Parr, Greenpeace's chief scientist.  His point about biofuels cannot be contradicted; it's a fact, they will do more harm than good.   The environmental zealots mafia litigation lobby now needs to come up with practical solutions besides "airplanes are bad", and moderate their (ideological not factual) view that global warming climate change is primarily due to business and commercial aviation growth.  The solution lays with scientific research, and from our point of view, it begins with more aggressive MPG for every car in the Western World,  a minimum of 35-40 MPG by 2015 seems reasonable enough.

Then there is this article in Human Events which raises a very troubling point if indeed correct.  If, as suggested by the article, the Integrated Fleet Air Refueling Assessment (IFARA) model is partially flawed, this might have helped KC-30 and penalized KC-767. We do not have the details and the AF most likely has a reasonable explanation, but this could have some traction, though probably not enough to reopen the competition.

General Chuck Horner (USAF Ret) often brings clarity to complex situations. He proves it again with this (refreshing) piece for NR Online.  We do not entirely agree with him about France's intentions vis a vis the CFM-56 engines. Commercial considerations and the fact that a good chunk of the A320s flying in the world since 1988 use that engine are the key reasons for France's "good behavior".  Add to this the fact that the entire KC-135FR fleet in service with the French Air Force also uses the above mentioned engine.  The list could go on and on.

The article can be found here

This week's edition of the Thud Factor is available here

Inside look into a RTO sequence (courtesy of a patient Airbus flight test aircrew)

March 2008

This week's edition of the Thud Factor is available here

Veritas Liberabit Vos

Graham Warwick of Flight International recently listed this "bipartisan" blog about the tanker program. This site does little in terms of new and/or pertinent information.  Still, we would "recommend" it as a read for those interested in trying to understand how some on the Hill and K Street are trying to influence or interpret Boeing's protest. 

http://tankerblog.blogspot.com/

The Center for a New American Security (CNAS) and Foreign Policy Magazine Health and Future of the U.S. Military Survey Results

Very interesting & revealing read (click on image to be redirected to Foreign Policy's website)

It’s getting crowded at the top

Gulftsream’s G650 announcement introduces yet another airframe at the top end of the business aviation market. The range is an impressive 7,000 NM at .85 Mach and 5,000-NM at 0.9 Mach.  This all looks very good but speed costs money, and the DOC/hour of  the G650  is likely to be around the $3,500 mark (perhaps more).    Competition with the Global Express will be interesting, but might come down to a matter of personal requirements, not necessarily comparative aircraft performances. One of the most notable pieces of news coming out of this announcement has to do with the selection of Thales for the design of the Fly By Wire system,  perhaps Bombardier will read the signs here.  Now Gulfstream can also work on their website loading speed too…

Of Politicians, Tricycles and Professionals…

As the tanker saga continues we are tempted to drop the topic from this blog altogether. However, comments we hear in the “news” media and from Capitol Hill might give Jay Leno and Jimmy Kimmel some interesting competition.  In all seriousness, the storm is gathering strength and the aftermath of the competition is seemingly losing all elements of logical thinking. It is regrettable that the Boeing protest is driven mostly by complaints related to technicalities in the USAF selection processes. It looks increasingly like this is being managed by a group of lawyers  advising BA that the only way to overturn the NGC win is to show how USAF made mistakes in changing requirements during the competition.  We are in no position to judge if Boeing’s strategy has legal merit (we think it regrettably might).  

What is conspicuously absent from the whole debate, and especially from the media comes down to this simple question:  What is the best aircraft for the warfighter to execute this strategic, long-term mission (and give US forces an advantage when our Beijing friends get their own tricycles over to Taiwan)?  We have not heard a single lawmaker ask the best for the warfighter question during subcommittee hearings; Sue Payton was only there to face the so predictable ire of congressmen “angry” from WA and KS (thou shalt rename temporarily nameless here).  The way Ms. Payton handled some of our elected representatives’ questions (correction: posturing) deserves the Nobel Peace Prize or its US equivalent since the previously nameless would probably complain that the Nobel Prize is a threat to national security due to its high foreign content and should be presented in the 6th district of the great State of Washington. 

Our sarcasm is noticeable because the protest’s banner holders have  contributed to Boeing’s (reasonable) questions causing the argument to lose any logical sense and defensibility. Weak arguments, short-term political needs and emotional temper tantrums are a common thread.  Boeing’s case, and we believe that some of the points raised by Mark McGraw have merits, now needs to be handled by professionals that can re-ignite a rational and defendable case for the 767.   Who better but USAF to do this?  They (and Boeing) need to tell the non-Boeing crowd to tone down, as the rhetoric will get them nowhere.  Similarly, Northrop Grumman needs to keep a lid on  dubious claims suddenly doubling the number of incidental jobs created by KC-45A; the tit–for-tat is frankly getting a little old.    The best of the media reporting about the KC-45 aftermath can be found here, here and here.  Those are the professionals that deserve some attention.

What we find interesting is that Boeing is seriously pointing to the many risks with the production model (multiple sites, multiple partners) that NGC is planning for KC-45A.  When one looks at the many problems encountered by an even more decentralized program like 787, one may wonder why Boeing chooses this line of criticism.   It is regrettable that  criticism toward KC-30  often omits the name Northrop Grumman  from (surprisingly) inferior selective reporting such as CNN’s Lou Dobbs.   Northrop Grumman is one heck of a great American organization and how they managed to trump the equally great American Boeing Company speaks volumes about the strength of their tanker strategy.  Case closed.

ISTAT and the unanswered questions

John Leahy is a brave man.  He has, for better or worse, become the official voice of Airbus for many years and thus has earned, deservedly at times ("The 7E7 is not a threat"), but not most of the time, his fair share of criticism.  Most recently, he has been right on the money when he indicated that about 27% of recent commercial orders are “on shaky grounds”.  We said 25% last summer, but again, that was before the credit bubble of August.  However, it is reasonable to question his recent point as reported by Flight here “People are "smoking something" if they say we really need to come up with a new narrowbody sooner than now being projected”.  Is there any truth behind his statements or does this need to be filed into the Leahyism section?

2017 is a long time; airlines such as Air France and a few others would have ideally liked a new generation narrowbody aircraft by 2012.  Airbus suggestions that they might have to wait until 2017 earliest is indicative of two things:  either Airbus is ready to introduce a 320NG that can serve as a bridge to the new narrowbody or Toulouse is now engaged in not so subtle disinformation warfare. 

As far as engine technology is concerned, GTF is likely to remain the best choice; we believe that propfans have too many risks (speed, certification…) and unknowns associated with airline operations that basically outweigh the benefits.  We feel Boeing will launch its replacement narrowbody aircraft first as the 737NG will not be easily upgradeable, unlike the A320, and thus has entered its downward product cycle.  737 will have to go by 2014.  Competition will intensify for Toulouse and Everett and it will come from Montreal and may be from San Jose (and partner(s)?) if rumors are indeed correct.

A Desjardins Securities analyst recently hinted at a 150 pax C-Series, and we believe this is a likely development for the yet to be officially launched new Bombardier aircraft.  The C-Series has a serious window of opportunity that may extend from 2014 to 2017 if Airbus and Boeing decide to postpone their new narrowbody introduction to market.  What is the opportunity for a 130-155 pax C-Series?   If Bombardier hits its market window it will be in direct competition for an addressable market estimated at 3,500+ aircraft…

Now if you wonder why we keep mentioning tricycles, see the first cartoon below.

Friday 4 PM humor (follow hyperlinks below by clicking on image)

(click here to view)

J.D. Crowe Mobile Register Mar 12, 2008 EditorialCartoonists.com

 

 
      Click here to view
       Eric Devericks
       Seattle Times
       March 13, 2008
         

The February 29 Earthquake

The dust has settled; is this the end of the beginning or the beginning of the end?  Familiar words indeed, yet we cannot be but surprised at the immensely logical decision our Department of Defense announced yesterday Feb. 29.  The Northrop Grumman team win is a slap in the face to conformism, petty protectionism, pork and short-term business considerations. With the benefits of hindsight, most of the signs were already there. 

In 2004, I spoke at a conference in Los Angeles, and made the so predictable call that Boeing would win the tanker program and anybody even thinking  EADS had a shot was out of his/her mind. I even offered to pay for dinner at one of the most expensive Georgetown restaurants if it did happen.  A couple of years later, my offer was off the table and so was my thinking that Boeing could engage cruise control and win KC-X.  The EADS team, and its new partner Northrop Grumman, had just put one very strong offer on the table and my conversation(s) with the crew at the Alabama economic development office impressed me in terms of the KC-30 team’s vision and motivation.  To the end I would have favored a split award; it appeared to be the most logical decision from the end user standpoint, although it probably would have been cost-prohibitive to develop two types concurrently.

We have expressed our view in this blog that a KC-X win for EADS-Northrop, whether a split or sole source, would have tremendous consequences for the US based aerospace industry.  For the first time in decades, our country would witness an expansion of its large airframe production facility footprint as a result of the KC-30 team win. The opportunities created by this win are many and could eventually have positive consequences for Boeing and its customers. A shake up at Boeing is likely, now the game is afoot, and Northrop Grumman plans as an EADS gateway into the US market will grow. With A330F coming to Mobile, we expect the partnership to work on future programs, including the new A320RS and perhaps pitching the A400M to the US military sometime in the middle of the next decade. Boeing now needs to reexamine its internal decision making processes and understand that old strategies no longer works in this global market driven by the ever-changing concept of “best value”.

Boeing’s loss is regrettable, because of its impact on the Everett, BFI and Wichita workforces in particular (although the job losses figures used by opponents to the NGC-EADS team are grossly exaggerated).  KC-767, although not as capable in many areas as KC-30, is still a product that could have served USAF very well.  Information will slowly emerge, but we believe that classified scenario modeling showed USAF that KC-30 was better suited for future engagements and added much-needed airlift strategic capabilities.  That alone was probably the deciding factor in the selection of the KC-30.  The information and measurement criteria were reserved to USAF and the bidding teams and thus will remain classified for years.  Economic considerations, price and other elements were important but did not appear to have been the primary deciding factors.

Was price a deciding factor?  Of course, but Boeing should have been able to easily match any EADS offer in that regard. If not the case, then this was a serious mistake. Steve Trimble gives us a pretty good idea of price and its impact in the DEW line. 

KC-30 is a like the Big One in California.  It is not a matter of if the quake will happen but when. Well, it happened on February 29, and it signals a departure in DoD thinking where best value has triumphed over pork and the business-as-usual mentality.  The strategic implication for the occidental aerospace industry is also clear.  Note my use of the word occidental.  I, for one, believe strongly that a rapprochement between the European and US aerospace industries is not only desirable but also required to counter emerging Asian capabilities and support both continents defense budgets.  To rethink our agreements and bury our differences will be necessary if our common industries are to remain competitive through 2020 and beyond.  Failure to partner and engage in joint programs will only leave our industries vulnerable, reduce innovation capabilities, affect NATO’s ability to operate and adversely impact our ability to remain globally competitive.  Let me be very clear, the Airbus vs. Boeing battle is nothing compared with what our aerospace industries will face from China and others in the future.

For the Boeing worker on the floor in Everett, this prose may be interpreted with pessimism and categorized as a complete misunderstanding of the realities faced by American workers today.  The sentiment of abandonment and betrayal are probably very real and completely understandable.  However, for future generations of Aerospace workers in America and Europe, this deal signals that our government customers are now prepared to address and intervene directly to put an end to our industrial base rate of departure. 

Boeing cannot reasonably argue that KC-767 was the all American solution (75%+ US content).  KC-30 perhaps has a lower US content (60%+) but the loss is bitter because it comes so close after years of tension with France and Germany in particular.  Regardless, American companies are going to benefit tremendously from this deal, from engines to avionics to maintenance, so the argument that America lost and France won is “null and void”.  

Perhaps Boeing failed to take risks.  This is where Northrop Grumman CEO Ron Sugar needs to be commended for taking the initiative to go after this deal with a solution many ridiculed at the time.  Going with a mostly Franco-German product for DoD on the back end of one of the most serious diplomatic crisis in US-EU relations was a risky gamble that paid off.

Did Boeing also fail to measure the impact of the KC-30 in the mind of the customer?  I think USAF came to KC-30 with little or no knowledge of the aircraft and its capabilities, and as the competition progressed it became clear that KC-30 better suited the mission.  This also was our perception at G2 Solutions.  The more we looked into the value propositions of both teams, the more value we began to see emerging from the KC-30 product. 

Now what can Boeing do?  Should they protest or will they be forced into protesting by the usual, yet logical, political pressure of a few?  If Boeing is to protest, they must not do so because they know they might be able to reverse DoD’s decision with support from the Hill.  Boeing should now think hard about whether or not it can change DoD’s mind based on the KC-767’s merits.  In our opinion, KC-30 has won once, and would win again in a recompete scenario.  Boeing was reluctant to throw 777 into the KC-X fight and this might have been why they lost.  The footprint and other “best fit” arguments have been tossed back at Boeing with the KC-X decision and USAF’s underlying message to Everett has been that institutional inertia and risk aversion lead to failure. Boeing’s decision to continue selling a 767 airframe solution perhaps better suited to U.S. allies than its own DoD is in short a colossal failure of vision. Such shortsightedness is not limited to Boeing, but to all, including we who had predicted Boeing would win outright or at least garner (in G2’s case), a portion of KC-X.

Loosing KC-X is a bitter pill to swallow for Boeing and for Washington State; despite the monumental denial of cash, its impact on Boeing's Everett operation should be minimal in the short term.  This is certainly not the gloom and doom that many in the industry or in the sensationalist politico-media complex have incorrectly described.  Boeing, as an aerospace organization, is doing very well for the foreseeable future and with 787 issues being resolved rigorously, the KC-X loss will motivate and help the company refocus and develop stronger competitive offerings in the future.

mmerluzeau@g2globalsolutions.com

 

The Thud Factor: Keeping Track of US DoD Spending

February 2008


Week Ending 2-29-2008



Tanker Award Announcement Tomorrow,Thursday, Friday at 1700 Eastern


Northrop Grumman awarded KC-45A contract

Full Pentagon Press Conference
Transcript



Boeing Protest unlikely to overturn decision. 

Boeing statement:

We were just informed that our KC-767 Advanced Tanker proposal was not selected in the KC-135 Replacement Program known as KC-X. Obviously we are very disappointed with this outcome. We believe that we offered the Air Force the best value and lowest risk tanker for its mission. Our next step is to request and receive a debrief from the Air Force. Once we have reviewed the details behind the award, we will make a decision concerning our possible options, keeping in mind at all times the impact to the warfighter and our nation.
The Boeing Company would like to thank the many people who helped us in this campaign. We have received tremendous support from our suppliers, elected federal/state/local leaders, unions, community groups, and the 160,738 men and women who work for Boeing.

Northrop Statement:

February 29, 2008—Northrop Grumman announced today that it has been selected by the U.S. Air Force to provide the KC-45A aerial refueling tanker for the KC-135 tanker replacement program. The Air Force’s KC-45A is based on the highly-successful A330 commercial airframe, produced by EADS.