Military Space Becomes Increasingly Important As Capabilities Mature

Space assets are becoming ever more important to the the military worldwide, and markets are reflecting this drive

Printed headline: Sky Control

Militaries around the globe recognize that, in the future, the most critical regional battles will be fought in space. The nation that can most effectively leverage military space assets or counter those of another nation, while also managing the budgets for these systems, will ultimately be victorious. It is also safe to say victory will require doing all of these things well. As more and more nations become aware of the advantages offered by military space assets, the desire to counter these advantages will be too overwhelming to ignore. It is for this reason that the military space industry will continue to be a vigorous and lucrative market over the next decade, as more countries seek these systems. No country depends on space systems more than the U.S., which accounts for nearly 90% of global military space spending. However, U.S. defense budget growth no longer seems unlimited, and there are rumblings of major cuts in the post-Fiscal 2010 budget cycles. Nevertheless, the U.S. will continue to place high priority on space systems. In Fiscal 2010, the Pentagon expects to spend more than $11 billion to strengthen space-based capabilities, with $5.1 billion targeted for procurement of selected major space programs. On the research and development side, the major services have budgeted more than $6.1 billion. Military contracts scheduled for the next 10 years, but not yet awarded, total more than $2 billion. In addition, programs underway in the U.S. will provide a comparatively comfortable fiscal pillow for manufacturers such as Boeing, Lockheed Martin and Northrop Grumman. Boeing and Lockheed Martin were in the running to build the U.S. Air Force’s Transformational Satellites (TSAT). These communications satellites were intended to dramatically increase the bandwidth available for military users and would have included laser intersatellite links. However, even after scaling back the program’s technological risks, the Pentagon concluded it was more cost-effective to cancel TSAT and instead procure two additional Advanced EHF (AEHF) satellites from Lockheed Martin. The Pentagon had spent about $1.5 billion on TSAT and planned to award a contract for the space segment in 2009 but despite its cancellation, Boeing and Lockheed Martin will be the largest producers of military space systems in the next decade. Lockheed Martin will be the top military satellite manufacturer over the next 10 years, with anticipated output of 29 spacecraft valued at a total of as much as $11.7 billion. In addition to the AEHF constellation, Lockheed Martin is developing and building the next-generation GPS III navigation satellites, the Navy’s Mobile User Objective System and the space-based infrared high-orbit missile warning system (Sbirs-High). During the same period, Boeing is expected to produce 25 spacecraft for military purposes, including GPS Block IIFs, the Wideband Global Satcom system and as many as four Tactical Data Relay satellites. The value of this production is expected to be more than $5 billion. Spending heavily on new space systems does not always equate to successful deployment. The U.S. military’s space system acquisitions have experienced problems during the past few decades that have driven up costs by billions of dollars, stretched schedules by years and increased performance risks. Several programs have been restructured in the face of delays and cost growth, and some have been canceled. At times, cost growth has approached or exceeded 100% due to technical issues and other problems. Along with the increases, many programs are experiencing significant schedule delays. In some cases the Pentagon has had to reconsider ways to achieve its goals such as pursuing systems with less capability. Despite its well-known troubles with military space system acquisition, the U.S. market will remain in sharp contrast to those in other parts of the world for the next decade, but the gap will close. Europe has been the principal non-U.S. milspace market, and is likely to remain so even as programs in Russia recover and those in China, India and Israel develop. Europe’s military space spending has been characterized by investments in hardware developed and validated by civilian space agencies or the commercial sector—the opposite of the experience in the U.S.—and this is not likely to change. But it is driving two interesting trends. One is the use of private financing initiatives to fund secure communications and advanced imaging capabilities—an area where Europe has emerged as the global leader. The other is increased reliance on dual-use systems. This is enabling Europe to embark on programs such as space situational awareness, satellite data relay and navigation in which the military will be a heavy user. European spending also has been characterized by an inability to embark on cooperative programs. This is slowly changing. The most significant collaborative effort is the six-nation Musis next-generation optical/radar imaging program. Although individual optical and radar satellites will continue to be funded and operated by individual nations—sometimes in cooperation—the system will feature a common ground segment defined through the European Defense Agency. France is teaming with Italy for new secure and dual-use communications satellites, and has agreed in principle to develop its next-generation satcom system in partnership with the U.K. The Lisbon Treaty, which is taking effect this month, is expected to reinforce this trend by allowing the half-dozen or so European Union nations that are seriously engaged in defense to collaborate within a framework apart from the other members, as they do in the euro zone and the Schengen security grouping (comprising several European countries that have abolished border controls between each other). A third area that has characterized European milspace spending is a perennial paucity of resources. While no one expects this to change dramatically, the situation is improving. The biggest spender, France, approved a five-year defense spending plan last year that pledges to double its space spending, to more than €1 billion ($1.5 billion) per year. On the agenda are operational signals intelligence and early warning satellite systems, and a ballistic missile defense capability. Furthermore, milspace was dominated by three countries—France, the U.K. and Italy—but others are entering the picture. Germany and Spain now have or are working on communications and imaging networks and some nations, such as Belgium and Greece, are contributing financial resources. Altogether, these trends are widely expected to double European military space spending, to €2 billion a year, over the next decade.

Reusable Launch Vehicles Edge Closer To Reality

Space tourism market beckons to many design teams, but ‘reusability’ poses significant challenges

Printed headline: RLV Hurdles Aplenty

The concept of using a booster repeatedly makes sense, especially if it drastically lowers the cost of placing a payload in orbit. Although a true RLV has not yet been fielded, those looking to stake a claim on the potentially lucrative space tourism market plan to take a step in that direction. Scaled Composites will begin SpaceShipTwo drop and powered-flight tests this year.Credit: CHAD SLATTERY Today, the U.S. space shuttle—which is only partially reusable—is the closest thing to an RLV. Development of a fully reusable launch vehicle, whether by government or private industry, is no easy task. Although many RLV designs look straightforward, the hurdles are significant. To be reusable, a launch vehicle must be more robust than an expendable booster to sustain launch, reentry and landing loads many times during its operation. RLVs also must allow easy access to components for maintenance and replacement, and incorporate monitoring and recovery systems to bring them safely back to Earth. Another major challenge is the launch market itself. Developing a large orbital RLV does not make sense in the current business environment owing to low demand. And in recent years the market has proved fast-changing and unpredictable. While expendable launchers can be adapted to changing demands with stretched stages and larger payload fairings, an RLV’s basic design would essentially remain fixed and potentially uncompetitive. Design-office floors are littered with RLV concepts that never made it off the drawing board, and those that made it to the prototype stage were usually canceled because of escalating costs. RLVs are no less expensive to develop than expendables, and the cost benefits of reusability would not be fully realized until after many successful flights. For these reasons, the development costs of reusable boosters have proven prohibitive. Those still in the game are focused on the space tourism services market, estimated by some to be worth a potential $500 million. Virgin Galactic is just one of a number of companies determined to take a slice of that pie. Reusable suborbital spacecraft that could become potential competitors include the Lynx by XCOR Aerospace and the New Shepard vertical-takeoff-and-landing (VTOL) rocket by Blue Origin. For now, Virgin Galactic, headed by Richard Branson, is a step ahead of the rest; it is working with a tested design—something that cannot be said for its competitors. Also, Virgin is having no trouble funding development of its spacecraft. The company plans to direct initial profits back into the program to make improvements and reduce costs. Virgin should be carrying customers to suborbital space around 2011, when it expects to be able to make about 50 flights with the SpaceShipTwo. XCOR Aerospace’s two-seat vehicle called Lynx is roughly the size of a small aircraft and is being designed to carry people or payloads to an apogee of 61 km. (38 mi.). After powered flight and a coast to microgravity, the vehicle would reenter the atmosphere and glide to a horizontal landing. XCOR expects the vehicle will be able to fly several times a day, and to take flight around the same time as SpaceShipTwo in 2011. Amazon.com founder Jeff Bezos set up Blue Origin in a bid to capture a share of the space tourism market. Since the company’s founding, news on the New Shepard vehicle has been hard to come by. Three test flights have taken place so far, and more are planned. According to a recent time table, Blue Origin will fly the vehicle unmanned in 2011 with the goal of a manned flight in 2012. New Shepard is a wingless, conical spacecraft with a rounded base, similar in design to the DC-X, an unmanned prototype built in the early 1990s to demonstrate the concept of a VTOL RLV. The market for developing and fielding RLVs at this moment is clearly tied to space tourism, and there is little will to develop a suborbital RLV for any other application. The good news for these three companies is that several surveys have shown that interest in space tourism has grown considerably during the past 10 years.

Prices Soar In Robust ELV Market

Geostationary satellite launch demand underpins ELV market, with some growth likely in low-Earth-orbit missions

Printed headline: ELVs Rebound

Production of expendable launch vehicles is set to rise during the next decade, although the landscape of the ELV market itself will remain unchanged. Europe will continue to grab the bulk of the market, and few new providers beyond Space Exploration Technologies are expected to emerge as global players. EADS has begun developing an uprated Ariane 5 with new upper stage and enhanced avionics.Credit: ARIANESPACE There were some lofty goals set for 2008 by launch providers, but none achieved its planned launch rate expectations that year. Ironically, by not meeting the desired launch tempo and therefore decreasing supply, they all enjoyed increased launch prices. According to FAA statistics, commercial launch revenues grew almost 100% between 2004 and 2008, to nearly $2 billion. Payments for launch services are typically spread over one to two years prior to launch, but for the purposes of the FAA’s calculations, revenue is counted in the year a payload launches. In 2008, 69 launches were conducted—one more than in 2007 and two more than in 2006, representing an all-time high for the new millennium. The 69 launches in 2008 carried 106 payloads into orbit, 42 for commercial purposes. The remaining payloads were used for government, military or nonprofit purposes. Twenty-eight of the commercial launches carried 46 payloads into orbit. Two launches resulted in failures to reach orbit: a Russian Proton-M carrying the AMC-14 for SES Americom; and a SpaceX Falcon carrying four small payloads. The 2008 tally compares to the 52 launches conducted through the first nine months of last year that carried 62 payloads into orbit. Of these payloads, 17 were for commercial applications, 33 for government or military uses, and seven involved cargo or passengers to the International Space Station. Five launches resulted in failures. Since 2004, about 70% of commercial launches have been to geostationary Earth orbit, a segment that generates more revenue than the non-GEO market and generally deploys larger payloads. Steady, albeit limited, growth for GEO communications satellite services is expected in the near term, which should translate to about 15 commercial launches annually for launch service providers. Indeed, of the 17 commercial payloads launched in the first three quarters of last year, 15 were GEO-bound communications satellites. A near-term trend of heavier GEO satellites bodes well for launch providers. Some growth in launch demand for low-Earth-orbit communications satellites is expected as existing LEO constellations such as Globalstar, Iridium and Orbcomm are either replenished or replaced with next-generation systems. In the near term, science satellites will continue to account for about half of the demand for non-GEO launch services. Governments continue to be the prevailing customers of the launch industry, accounting for 59% of the total global launches in 2008 and about the same percentage for the first three quarters of last year. This trend will continue in the decades to come. Stabilization and increases in prices mean launch providers no longer have to offer their ELVs at near-losses. Also, many of the major players in the commercial satellite arena are expected to be in the market for fleet replenishment. The above will lead to a nice spike in commercial launch activity. The anticipated resurgence in demand for both geosynchronous and nongeosynchronous satellite communications capacity and continued substantial government demand indicate that despite razor-thin profit margins, the world market for ELVs is robust. The following is a closer look at the major international launch providers: •Arianespace. Arianespace ordered 35 Ariane 5 ECA launch vehicles from European manufacturer EADS in early 2009. The deal is worth more than $5 billion and brings the total number of Ariane 5 ECA rockets in production to 49. The new launchers are to be used beginning in the second half of this year and should cover the needs of Arianespace through about 2016, based on typical annual launch tempo as calculated by Forecast International. Now that the Vinci engine is well into the bench-firing phase and its re-ignition capability has been demonstrated, a slightly modified version of the Ariane 5 ECB—renamed Ariane 5 ME (Mid-term Evolution)—is set to be proposed. The ME would be operational by 2015 and could lift 12 metric tons into geostationary transfer orbit (GTO), compared with 10 tons for the ECA. The European Space Agency (ESA) is also looking at an intermediate solution between the ECA and ME that could increase the ECA’s lift capability by 1-2 metric tons to GTO. This upgrade would primarily involve increasing the propellant load of HM7B, and would be compatible with a later switch to the Vinci engine. The Ariane 5 enjoys a comfortable position in the commercial market relative to its competitors, thanks in part to the limited launch rate of the Sea Launch Zenit-3SL and past failures of the Russian Proton-M rocket. Although available for commercial launches, the U.S. Delta IV and Atlas V are mainly courting government customers, which also should bode well for the Ariane 5. •International Launch Services. ILS has exclusive rights to market Proton launch services to global commercial satellite operators. The Khrunichev State Research and Production Space Center manufactures the Proton and is the majority owner of ILS. ILS secured six firm launch orders and three mission assignments in the first half of 2009. It also witnessed a significant trend in which customers moved from other providers to ILS Proton to meet their launch requirements. The Russian supply chain concerns that are impacting some launch operations are not affecting ILS. In fact, the consolidation of the Russian space industry has been a boon to the company, as the suppliers for Proton are now vertically integrated and the manufacturing process is much more streamlined. ILS marked a milestone with the first mission of last year—the 50th ILS Proton launch with the W2A satellite for longtime customer Eutelsat of France. The outlook for this year is robust, with at least nine missions anticipated for the year. Last September, ILS reported a backlog of 25 firm missions valued at more than $2 billion. •Orbital Sciences Corp. OSC provides the Minotaur, Pegasus and Taurus vehicles for orbital launch. In early December 2007, OSC provided an initial glimpse of its plans for a new medium-class launch vehicle named Taurus 2. According to the company, Taurus 2 will carry Delta II-class payloads by combining elements of Orbital’s existing Pegasus, Taurus and Minotaur launchers with other hardware. The Taurus 2 is a medium-lift vehicle under development to support communications satellite efforts to provide cargo resupply to the International Space Station, among other applications. OSC expects the Taurus 2 to begin launching late this year or early in 2011 from the Mid-Atlantic Regional Spaceport at Wallops Island, Va. Orbital will spend $45 million to develop launch facilities there for the Taurus 2. •Sea Launch. Sea Launch offers the Zenit-3SL for commercial launches to GEO, from the mobile Odyssey Launch Platform along the equator in the Pacific Ocean. Last June, Sea Launch filed for Chapter 11 bankruptcy protection but said it would continue operations while it restructured. The multinational venture stated in its filing that it has assets of $100 million to $500 million but liabilities in excess of $2 billion. Boeing, Sea Launch’s largest creditor, is also its largest stakeholder. Sea Launch owes Boeing nearly $1 billion in loans, trade debt and partner liabilities, according to the bankruptcy filing. Boeing holds a 40% stake in the partnership, providing support services and hardware for the Zenit-3SL rocket’s payload unit. Russia-based Energia, which holds a 25% interest, builds the rocket’s Block DM-SL upper stage and supports vehicle integration and mission operations. Aker, a Norwegian shipbuilder, constructed the company’s command ship and launch platform and owns 20% of the company. Ukrainian rocket manufacturers SDO Yuzhnoye and PO Yuzhmash control a 15% share of Sea Launch. Sea Launch has experienced supply chain problems that have limited the number of launches it can complete, and the late deliveries also made it more difficult for Sea Launch to meet its customers’ schedules, causing more payloads to be bumped to other rocket providers. •SpaceX. The Falcon 1 uses some innovative technologies, such as a tank design with pressure-assisted stabilization, a unique common tank bulkhead, a lithium-aluminum upper stage to reduce weight and engines that are built by SpaceX. These factors separate the company from the higher-cost contractor community. SpaceX is targeting NASA and the U.S. Defense Dept. to slowly convert the masses to the low-cost launcher. If the Falcon series can prove successful from a flight standpoint, and the pricing stays at suggested levels, SpaceX could revolutionize the industry and put serious pressure on the established players. The Falcon 1, offered at about $10 million, will mainly compete against Orbital Sciences’ Pegasus and Taurus for the half-ton-to-LEO market. Meanwhile, the Falcon 9 will target the evolved expendable launch vehicle class in the U.S.; again, if the $41-58-million price projections are accurate, the Falcon 9 could win a big share of the market. In the long term, SpaceX hopes to conduct about six Falcon missions annually. •United Launch Alliance. ULA was formed in December 2006. The company conducts launches for the noncommercial U.S. government market. Boeing heritage Delta vehicles and Lockheed Martin heritage Atlases are manufactured and operated by ULA. The company is a 50/50 partnership between Boeing and Lockheed Martin. In 2008, ULA conducted four U.S. government noncommercial launches. Three Delta II vehicles launched the Navstar GPS 2RM-6 for the Defense Dept. and the Gamma-ray Large Area Space Telescope and Jason 2 ocean topography spacecraft for NASA. A ULA Atlas V vehicle was launched in April 2008, placing the NRO L-28 reconnaissance satellite into an elliptical orbit. ULA will continue to lean on strong government demand and launch 4-6 spacecraft annually in the near term.

Discovery Mission Faces Further Delay

HOUSTON – During a NASA Shuttle Program Requirements Control Board meeting on Nov. 24, shuttle program managers decided on another incremental delay in plans for an early December launching of Discovery, giving them more time to assess whether external fuel tank damage found after a Nov. 5 launch scrub has introduced additional risk. The decision dashed plans to make a second round of attempts to begin Discovery’s 11-day assembly mission to the International Space Station between Dec. 3 and Dec. 7. Instead, the space agency will look to a launching no earlier than Dec. 17 at 8:51 p.m., EST, if it can work around Russian plans to launch the Soyuz TMA-20 with U.S., Russian and European crewmembers to the orbiting science laboratory on Dec. 15. The Soyuz crew is scheduled to dock on Dec. 17 just after 3 p.m., EST. However, the space agency will not push to launch Discovery until it understands the underlying cause of four cracks in two adjacent aluminum lithium stringers on the intertank of the 154-ft.-long fuel tank; if a tank flaw escaped detection during the production process; and whether additional undetected damage poses a hazard, said Bill Gerstenmaier, NASA’s Associate Administrator for Space Operations. “We have to understand what our exposure is to that problem recurring somewhere else on this tank,” said NASA Shuttle Program Manager John Shannon, who joined Gerstenmaier for a news briefing. “So we are very carefully, very methodically going through it. We’re passing up some launch opportunities to do that. We want to make sure we fully understand the problem before we commit to go fly.” The next launch period extends to Dec. 20, when shuttle managers would pause to prevent the shuttle’s computer timers from rolling over to the New Year on Jan. 1 at a critical time on orbit. Planners are looking at other opportunities to launch after Dec. 20 as well as in January. On Nov. 18, the control board announced a delay that shifted Discovery’s next launch opportunity from Nov. 30 to Dec. 3, also to permit more time to evaluate the external tank. During Discovery’s fleet-leading 39th and final mission, a crew of six astronauts will equip the space station with a storage compartment as well as an external spare parts platform, and new research gear. One and possibly two missions remain as the shuttle fleet nears retirement. STS 134, aboard Endeavour, is tentatively scheduled to lift off for the station on Feb. 27 with the $2 million Alpha Magnetic Spectrometer. Though snagged in 2011 budget deliberations, Atlantis could lift off on the program’s final flight, STS 135, in mid-2011 with a cargo of station supplies. Since Discovery’s Nov. 5 scrub, Kennedy technicians have replaced the leaky Ground Umbilical Carrier Plate that led to the interruption. A fuel tank fixture, the GUCP vents hydrogen vapors to a launch pad flare stack during the final hours of the countdown. But the damage causing lingering concerns was the stringers cracks found beneath a 20-in. crack in the insulating foam that jackets the 154-ft. tall fuel tank. Technicians replaced 13 in. of the damaged metal on neighboring stringers and installed structural doublers. While similar repairs have been carried out at NASA’s external tank Michoud Assembly Facility, Discovery’s were the first attempted at the launch pad. The cracked foam was replaced, as was a cockpit circuit breaker that was blamed for a voltage irregularity that interrupted a previous launch bid.

Report Due On Qantas A380 Incident

The Australian Transport Safety Bureau (ATSB) this week will issue a preliminary report that is likely to confirm investigators’ suspicions that oil pipe leaks led to the uncontained failure of a Trent 900 engine during a Qantas Airbus A380 flight Nov. 4. Meanwhile, the carrier plans to resume limited operations of some A380s, although the investigation will remain open. Flawed welding led to the oil pipe leaks, which caused a fire and the failure of the turbine disk in the intermediate-pressure turbine, industry officials close to the investigation tell Aviation Week. Rolls-Royce declined to confirm the information, but a new airworthiness directive (AD) issued by the European Aviation Safety Agency (EASA) on Nov. 22 appears to confirm it. The AD calls for more detailed inspections of the Rolls-Royce turbofan. The investigation previously identified an oil fire in the high-pressure/intermediate-pressure structure cavity as a possible cause of the failure. EASA notes that “the incident investigation has progressed, and inspection data from in-service engines have been gathered and analyzed.” The agency adds that “the results of this analysis show the need to amend the inspection procedure, retaining the inspection of the air buffer cavity and focusing on the oil service tubes within the [high-pressure/intermediate pressure] structure.” Such a procedure remains an “interim action,” and further updates are possible as new information is developed, EASA says. In the Nov. 4 inflight emergency on Flight QF32, the No. 2 engine failed about 4 min. after takeoff from Singapore en route to Sydney. The aircraft returned to Singapore after 110 min. in the air, during which the pilots dumped fuel and tried to determine what had happened. The A380 suffered major damage to engines, important aircraft systems and the fuselage skin at Frames 46/47 in Section 15/21, according to an Airbus overview documentation of major damages obtained by Aviation Week. All six Qantas A380s have remained grounded since the incident and are only now being phased back into scheduled services. Lufthansa and Singapore Airlines are continuing to operate their Trent 900-powered A380s but have had to change engines on several aircraft. Following initial findings, EASA ordered frequent checks for the in-service fleet in an AD published Nov. 10. That airworthiness directive is “consistent with the maintenance program we described on Nov. 12,” the engine manufacturer says. “Rolls-Royce has worked closely with Airbus, the airlines and regulators to agree to a regime that will ensure a safe operation.” While the investigation remains open, conflicting information has emerged about whether Rolls-Royce knew before Nov. 4 about mechanical defects that are suspected to have caused the oil fire. Questions have also been raised about the speed of the manufacturer’s response to the problem. An industry executive close to the investigation says Rolls-Royce is adamant in its claim that it had no idea about potential oil leaks, even though it had introduced numerous modifications to the engine in the past. The executive points out that Rolls-Royce would have been required to tell the airworthiness authorities of any safety-related findings. The executive further indicates that Rolls-Royce started developing a fix only after the investigation into the Nov. 4 incident yielded preliminary results. The company has no comment on these points. However, others in the industry say Rolls-Royce was aware of potential problems before Nov. 4, and that it was in the process of implementing a modification to correct the oil leak but had not informed operators. Lufthansa states that 15 of its 16 Trent 900s were delivered with engine upgrades and have not had any oil leak issues. So far, however, it has not been verifiable if the modifications solved the oil leakage issues on the new engines and if they were done specifically because of that problem. Lufthansa’s aircraft have flown many fewer hours and cycles than those of other carriers, though, since they were just delivered in May. Lufthansa also uses them at a 70,000-lb.-thrust rating, while the Qantas engines have been taken up to 72,000 lb. thrust—a difference that has considerable implications for internal temperature levels. Rolls-Royce has also pulled some engines that had been delivered to the Airbus final assembly line to replace older standard motors, particularly on Qantas aircraft. For that reason, Airbus confirmed it will claim damages from the engine maker for any financial impact. Airbus does not rule out that future A380 deliveries this year and in 2011 could be delayed for lack of engines. Rolls-Royce is not commenting on why it pulled these engines. Qantas CEO Alan Joyce reportedly said at a Sydney press conference that Rolls-Royce “has modified certain parts of that engine.” He was quoted by the Associated Press as saying that “if this was significant and was known to be significant, we would have liked to have known about it . . . . [But] we and Airbus were not aware of it.” According to the Associated Press, Joyce also said that “it is a modification that indicates whether or not you are going to have a problem with the engine.” Qantas has a power-by-the-hour arrangement with Rolls-Royce for overhaul and maintenance to be performed by the manufacturer. While much public attention has focused on the engine problems, the Nov. 4 incident also raises some serious questions about the airframe and systems. Among other things, the aircraft lost one of its two hydraulic systems, potentially signaling problems with routing and segregation, since pipes of the two are closely collocated in the wing area. Also, pilots were unable to pump fuel from the aft tanks forward, which could have led to serious center of gravity implications in a longer flight when fuel transfer is required for stability. But redesigns could turn out to be highly expensive or even impossible when it comes to basic changes such as introducing additional back-up hydraulic and electrical systems. Meanwhile, Qantas has decided to resume flying some A380s on its London routes, but it is still not putting the aircraft back on its longer Los Angeles flights due to concerns over operating the Trent 900s at maximum thrust. One of the airline’s A380s was due to begin flying the Sydney-Singapore-London route on Nov. 27, and another was expected to follow soon after on either the Sydney or Melbourne flights to London. There is no timetable yet for the return to service of the other four Qantas A380s. As more aircraft come online, the emphasis will be on increasing A380 frequency on the London routes, a Qantas spokesman says. The airline will not be operating A380s on its Los Angeles routes until it has performed sufficient inflight analysis on the London flights. It stresses that this is an operational decision in line with its conservative approach to safety, not a manufacturer’s directive. Qantas is “being very circumspect about transpacific flying,” says the spokesman. Qantas says it is not yet prepared to put the A380s on the routes to the U.S. West Coast because these flights “regularly require” maximum certified thrust due to factors including higher fuel loads and the shorter runway at Los Angeles International Airport. The airline says the suspension will continue “until further operational experience is gained or possible additional changes are made to engines.” The first aircraft to return to service—VH-OQF—was ferried back to Sydney from Los Angeles after two of its Trent 900 engines were replaced. One is an overhauled engine from Rolls-Royce, and the second is from another of the carrier’s A380s. The second aircraft to return to the air is VH-OQE. Australia’s Civil Aviation Safety Authority (CASA) says it has “given a green light to [the] plan developed by Qantas to return its A380 aircraft to service.” This plan describes how the A380s will be operated, together with “additional safety measures and required inspections.” “Qantas has devoted considerable resources to making sure the return to service of the A380 will meet all relevant safety requirements,” says John McCormick, CASA’s director of aviation safety. The agency will continue to monitor A380 operations, using data supplied by Qantas. The airline has confirmed that it will still take delivery of two new A380s before the end of this year and another two in early 2011. This means that by the end of December, it should have at least four A380s in service.

Bolden Treads Softly On China, Other Issues

The Chinese space officials who NASA Administrator Charles Bolden met in Beijing will not be coming to the U.S. for a reciprocal visit in December, as they had hoped, but there may be a visit in 2011. Nor is Anatoly Permanov, the head of the Russian space agency Roscosmos, likely to get much traction soon with a list of possible cooperative projects he discussed with Bolden in Washington Nov. 18. Like Wang Wenbao, director general of the China Manned Space Engineering Office, Permanov will have to wait until the U.S. political climate becomes more stable. In a rare one-on-one interview with a U.S. reporter Nov. 23, Bolden tiptoed around a range of sensitive issues as he looks for bipartisan support in the 112th Congress for the new U.S. space program that is still evolving at NASA. Deeper engagement with foreign space powers will have to go through the cumbersome interagency review process, he said, while NASA must complete its own assessment of how far over budget the James Webb Space Telescope has become before deciding how to tackle the problem. But one thing he made clear, despite some evidence to the contrary. “I have all the support that I want from my higher command, which is the president of the United States.” After a sometimes-contentious year of wrestling with the White House and his own deputy, Lori Garver, over the direction of space policy (see Aviation Week & Space Technology, Sept. 20, p. 24), Bolden says he has been working Capitol Hill to win support in the next session of Congress for an appropriation to go with the compromise authorization bill President Barack Obama signed in October. “I have reached out to all the people elected, without regard to party,” he says. “I tried to call everybody the day after the election, and I continue to communicate with people that I missed personally, because space has always been a bipartisan effort and I would like to keep it that way.” To that end, he is being particularly careful not to alienate Rep. Frank Wolf (R-Va.), the expected chairman of the appropriations subcommittee that funds NASA in the House. Wolf criticized Bolden sharply for meeting with the China Manned Space Engineering Office (Cmseo) during an October visit to the emerging space power, and the NASA administrator was careful to stress that he made no deals. Chinese officials who were expecting a reciprocal visit to U.S. facilities in December will have to wait, he says. “There is not a delegation coming next month as far as I know,” he says. “A reciprocal visit is something that we continue to work with the interagency organizations, mainly the State Department, trying to figure out the timing for that,” Bolden says. “I wouldn’t even say there is a reciprocal visit planned. I think everyone would like to see one, but everybody’s still in conversations.” Bolden suggested space cooperation has been subsumed in larger financial issues that will be addressed when Chinese President Hu Jintao visits the U.S. in January, with the Executive Office of the President, the White House science office and the National Security Council working to coordinate a bilateral space meeting through the State Department. Similarly, Permanov’s list of possible new space ventures with NASA, including development of a nuclear propulsion system, joint missions to low lunar orbit and asteroids, and a robotic landing on Mercury, is going nowhere fast. The Russian space leader presented the list at a Nov. 18 meeting of the bilateral Space Cooperation Working Group, but Bolden says the most substantive work involved protocols for future meetings. The U.S. hopes to use the list of possible bilateral projects as a way to encourage Russia to take a more active role in the multilateral working group coordinating long-term space exploration plans. “If the international partners think it’s worthwhile, we the United States would be more than happy to do a bilateral effort with the Russians, but we wanted that to be international instead of just the United States and Russia deciding something off on the side.” Republicans will regain control of the House of Representatives through the Nov. 2 elections in part because of fears over government borrowing, which makes domestic discretionary spending for programs like space exploration vulnerable. Bolden told a staff all-hands meeting at the Marshall Space Flight Center Nov. 16 that even if the agency’s spending levels are rolled back to 2008 levels – as some “budget hawks” have suggested, it “would not be devastating.” “We’re going to look at it and we’re going to make determinations as to what we think we can realistically do,” he told the NASA employees. “And what we don’t think we can do is going to come off the table.” One target, however, is the James Webb Space Telescope, recently hit with a finding that it is another year late and $1.5 billion more over budget (AW&ST Nov. 15, p. 50). That report, by an expert panel set up at the direction of Senate appropriations space subcommittee Chair Barbara Mikulski (D-Md.), was only “back-of-the-envelope,” Bolden says, and will get more study by a new management organization before NASA decides how to absorb the blow. The authorization bill gives the agency enough flexibility to adjust to the Webb overrun and other issues that arise, he says, and the agency will use it to its advantage. “[The Webb] management team has been asked to go in and do a bottoms-up review of where we are in terms of cost and schedule so we can go back and present a creditable story to the science community as well as all of our stakeholders,” he says. “I’m hoping we can do that in the new year. So I am cautiously optimistic that the changes I have effected so far will all have a positive effect.”

Morgan Stanley: BizJet Recovery Continues

Takeoff and landing data from FAA shows a continued recovery in business jet traffic in October, with the 11th consecutive year-over-year positive month, up 5.7%, says a Morgan Stanley report. Sequentially, October was up 1.3%, it adds. “Moving forward, we expect year-over-year traffic growth to decelerate as compares become tougher,” writes analyst Heidi Wood. “The U.S. business jet traffic recovery appears underway with both Cessna and Bombardier posting 11 consecutive months of positive year-over-year growth versus 12 for Gulfstream, reinforcing our thesis that a recovery in mid-size jet demand would follow the high end.”

Tanker, F-35 and Korea Transfix USAF

Could bad luck be coming in threes for the U.S. Air Force? This month, officials were sacked from the tanker-replacement program, concern grew about another slip in the F-35’s initial operating date, and South Korea is enduring the worst attack by North Korea in more than 50 years. So far, two heads have rolled in the tanker program after two documents involved in the competition were sent to the wrong company. The unidentified employees—who were members of the program office, but not the program manager—have been replaced. An investigation has ensured that the competition is still fair and that no “proposed pricing data” were involved, says the Air Force’s chief of staff, Gen. Norton Schwartz. Each single-sheet report involved an efficiency assessment of either the Boeing or EADS candidate aircraft. The study was conducted to determine how many of each tanker were required to fulfill a series of air-refueling scenarios. “Notwithstanding what was reported [in the press], there was no offer or proposed pricing data on that CD,” Schwartz says. “Both contractors have the same information [about the other].” During the last two weeks, Air Force and independent teams have reviewed what happened in the document mix-up. “Over the last 24 hours or so, we’ve endeavored to [ensure] that we have a level playing field between the two offers [from Boeing and EADS] in respect to the information that was disclosed,” Schwartz says. “Clearly this was a profound disappointment. As a result of the inquiries, those individuals responsible will be held accountable. Two [people] have been removed from the program as a result.” However, the mix-up has had no impact on the delay of a source selection into 2011. “The key thing is to de-couple the notion that the inadvertent disclosure had anything to do with the timing on making source selection,” Schwartz says. The decision has slid out of 2010 and is now slated for the “early part of January,” he adds. “It’s important that this source selection stand on its own and withstand scrutiny. Meanwhile, another new-generation aircraft—the Lockheed Martin F-35 Joint Strike Fighter—is also causing problems. A Defense Acquisition Board (DAB) meeting was held last week and another is due soon. The presentation was the Navy’s preliminary technical baseline review that involved a look at production status and schedules as well as test data and progress on software engineering. Another DAB will finalize inputs for the Fiscal 2012 budget. “With respect to the A-model [USAF] aircraft, my assessment is that it is ahead on test points and flying hours; software stability has been good, and the structure has experienced no failures or surprises,” says Schwartz. However, there was a big caveat to his assessment. “There are some issues with respect to timing on software development,” he says. “We don’t have a complete understanding yet of whether that will affect the new, predicted IOC [initial operating capability] of April 2016. I’m still concerned about the schedule—a little less on technical matters, [but] software appears to be a potential pacing item.” Program delays could ripple throughout the U.S. military according to a new Government Accountability Office report. Researchers contend that currently projected F-35 production will allow the force of 2,000 fighters mandated by the Quadrennial Defense Review to fall to roughly 1,800 over the next 18 years. Schwartz disputes the analysis, arguing that there are options and workaround such as structural and avionics upgrades to extend the operational life of Block 40/50 F-16s and thereby ensure that the U.S. can execute the national military strategy. “A-model F-35 performance has indicated it is the best of the lot,” Schwartz declares. “[But,] if the aircraft aren’t ready to be put on the ramp, we’ll work alternatives. There is a related fighter force structure strategy that will accompany the F-35 production information in the Fiscal 2012 budget plan.” USAF’s third and perhaps thorniest conundrum is the crisis on the Korean Peninsula: South Korean forces, but not those of the U.S., are on higher alert. “Clearly we have substantial USAF assets in a number of locations both on the Korean peninsula as well as Kadena [AB on Okinawa], mainland Japan, Guam and farther east,” Schwartz says. “Those assets are ready . . . to be used if required. The North Koreans have undertaken over time a number of provocations. Combined Forces Command in Korea is monitoring the situation carefully and can be augmented as required. It’s significant that the [South Korean air force] is in the lead as we speak, with as many as eight F-15s flying combat air patrol. The U.S. is on a normal alert posture. That’s not necessarily true for [the South Koreans].”

Flybe Plans IPO

British regional carrier FlyBe has announced plans for an initial public offering. The airline, which during the summer committed to a major fleet expansion with Embraer, says it is looking to raise about £60 million through the share offering. The airline wants to pull off the IPO next month, although the precise timing could change pending market conditions. The carrier says the money is intended not just to finance fleet plans, but also other expansion, potentially through acquisition. CEO Jim French recently told Aviation Week he planned to buy a continental carrier soon. “We’re looking at a range of acquisition opportunities in Continental Europe, some of which we’d like to conclude by the end of this financial year [March 31],” French notes. “We’re looking to create bridgeheads to help us to develop our growth strategy in Continental Europe.” Rosedale Aviation holds 70% of FlyBe, British Airways 15% and French controls 7%. BA has signalled it will retain its 15% holding by acquiring the required number of shares in the IPO process. FlyBe took over the British Airways Connect business three years ago and now operates a two-type fleet based around the Bombardier Q400 and Embraer E-Jet after an extensive aircraft replacement program. Any future acquisition would undergo a similar fleet-transition. “We have no desire to be anything other than a regional airline,” according to French. He believes that Europe’s future regional airline development will be driven by restructuring among the three principle airline groups Air France-KLM, British Airways/Iberia and Lufthansa.

ATA Names Calio To Succeed May As CEO

The Air Transport Association has hired the former chief liaison to Congress for both Bush administrations to become its new president and CEO as of Jan. 1. Nicholas Calio currently leads Global Government Affairs for Citigroup, both in the U.S. and in more than 100 countries in which the company does business, and has been in that lobbyist position since early 2003. But before joining Citigroup he was assistant to the president of legislative affairs for two years for President George W. Bush—the same position he held for his father, President George H.W. Bush. “I think what I bring to the job is the ability to work with all sorts of different people and different personalities,” having done so with Congress and the Cabinet, Calio says. He notes that he works with Democratic majorities in Congress during the first Bush presidency and has “reached out to people on both sides of the aisle.” That presidential experience also meant learning to deal with crises, think on your feet and think about how what you say affects different constituencies, he added. Having experience in both the public and private sectors also helped hone his skills in identifying issues and identifying policy trends, he says, and his experience with Citigroup has helped him learn more not just about politics in other countries but also their cultures. One thing Calio does not have is an in-depth knowledge of the aviation industry, other than all of the traveling he has done on airlines. In that respect, he is similar to the person he is replacing: James May, who came to ATA from the National Association of Broadcasters, where he served as executive vice president. May says he is advising Calio to “learn to drink from a fire hose” because there will be so much to take in. He will need to “open wide and get ready for a real learning experience,” May says. May says he “started feeling comfortable about six months into the process” after joining ATA in February 2003. Calio will be facing some immediate challenges, such as FAA reauthorization and NextGen funding, as well as trying to make the case for lower—or at least not higher—aviation taxes at a time when Congress is newly focused on cutting the deficit. But May says Calio comes into the job with at least one advantage that May did not get during most of his tenure: the U.S. airline business is making a profit.

France To Transfer Airlifters To EATC

France is due to sign over authority for a large portion of its airlifters to the European Air Transport Command on Nov. 30. The EATC is a partnership of Germany, France, the Netherlands and Belgium to consolidate airlift assets to gain efficiencies. Germany signed over its airlifters and shut down its airlift planning cell in October, and the Netherlands followed on Nov. 26. Belgium, the final partner, plans to do so in January, says air force Col. Mike de Coninck, an EATC official. EATC will oversee 168 aircraft, including 80 from Germany and 61 from France. The European command is expected to declare its initial operational capability soon after the Belgian move, de Coninck tells a military airlifter conference. EATC is still defining what needs to be done to reach full operational capability, which is expected around 2013. De Coninck says planning for EATC expansion is beginning, but that will not happen until after full operational capability is reached. EATC also will be the tactical control organization for the planned European multinational airlift unit of Airbus Military A400M users.

GE Engine Could Help Boost A350-1000

Airbus is coming under pressure from a key A350XWB customer to boost the capability of its largest variant, which could be the opening for GE to return to the program and rival the incumbent Rolls-Royce Trent XWB with a more powerful engine. Emirates, whose orders for 70 A350s include 20 for the 350-seat -1000 variant, wants Airbus to boost the payload/range to enable the aircraft to operate comfortably between Dubai and Los Angeles year-round in its specification. This route is currently served by the ultra-long-range Boeing 777-200LR. The A350-1000’s direct rival is the 777-300ER, of which Emirates has 101 in service or on order. Ultimately the airline needs to order significantly more than 20 aircraft in the A350-1000 category but has been waiting to see what Boeing does to upgrade or replace the 777 and how Airbus evolves the -1000, which will be the last of three A350 family members to be developed. The A350-1000’s design freeze was due to be reached in mid-2010, but this slipped as Airbus threw resources at developing the first variant, the -900. However with service entry with launch customer Qatar Airways set for late 2015, Airbus aims to complete detailed design by the end of 2011 and observers believe that Emirates could yield significant influence with the promise of a major increase in its -1000’s orders. “We’re finding that the smallest aircraft that’s useful to us needs to be 340 seats,” Emirates Airline president Tim Clark told Bloomberg News. “We’re trying to persuade Airbus to realign the A350-1000 more toward the ER, increasing both its capacity and its range.” Clark says that as currently defined, the A350-1000 in Emirates specification is unable to operate the Dubai-Los Angeles route direct. Speaking to Aviation Week, he says: “Dubai-Los Angeles with a payload of 45 tonnes [99,000lb] would be about right.” As currently proposed, the A350-1000 will be powered by a 92,000lb thrust version of the Trent XWB, but Clark believes that to meet the Emirates mission requirements the aircraft will need a minimum of 100,000-105,000lb thrust. Industry sources indicate that with the Trent XWB likely to need a new core to achieve this level of thrust, Airbus could entice GE onto the program to offer a derate of the 777-200LR/300ER’s GE90-115B engine, which has a nominal thrust rating of 110,000-115,000lb. GE was the sole supplier on the original A350, but dropped out when Airbus re-launched the aircraft in 2006 as an all-new design and Rolls joined the program. Although Airbus currently holds orders for almost 600 Trent-powered A350s, only 75 of these are for the -1000 version, and at an investor forum in November chief operating officer Fabrice Bregier indicated that GE could supply an engine for the largest variant: “If GE wanted to be back on board we would be very pleased,” he said. “If they do something interesting for the -1000 later then we can always have a look at it.” GE, which is still working the business case, says it “continues to discuss the A350-1000 with Airbus as the aircraft’s specifications evolve.” Over 85 % of the A350-1000’s order book is held by Middle East carriers including Emirates (20), Etihad Airways (25) and Qatar Airways (20). The other customer is South Korean network carrier Asiana which has 10 on order.

Airline Groups See Growth Continue In October

Airline industry groups are reporting further strong gains in demand on international routes, with continuing growth dispelling fears that the recovery has run out of steam. Both the International Air Transport Association and the Association of Asia Pacific Airlines believe that demand is returning to a steady growth curve. The two groups reported another month of solid passenger and freight traffic increases in October, with load factors also rising. IATA says passenger traffic on international routes rose 10.1% year-on-year in October, which is slightly less than the 10.7% increase recorded in September but higher than the August increase. Capacity was up 8.2% in October. Slowing growth in August prompted IATA concerns of a growth slowdown in the fall. Market conditions appear to have brightened since then, however. “The picture is anything but clear, but for the time being, the recovery seems to be strengthening,” says IATA Director General Giovanni Bisignani. “As we approach the end of 2010, growth is returning to a more normal pattern.” On the freight side, traffic rose 14.4% in October on an 11.1% capacity gain. The October traffic growth was about one percentage point less than the increase in September. However, demand was up month-to-month when adjusted for seasonal fluctuations, IATA says. This ended a trend of month-to-month declines since May. “Freight appears to be at a turning point,” Bisignani says. However, “it remains to be seen if this is a stabilization in freight volumes or the start of an upward trend.” North American and Middle Eastern airlines saw the strongest passenger growth on international routes. North American carriers reported a 12.4% traffic gain on a capacity increase of 11.9%. For Middle Eastern airlines, traffic rose 18% on a 13.7% capacity gain. European carriers saw a 9.6% traffic gain and an 8.3% capacity hike. Those based in the Asia-Pacific region reported a 7.3% demand rise on a 5.3% capacity increase. Bisignani says demand improvements “are being met by a cautious approach to capacity expansion.” Over the first 10 months of the year, passenger traffic was up by 8.5%, with capacity rising 4%. Cargo traffic increased 24% on a 9.2% capacity hike. “Forward schedules show a continuation of this trend,” says Bisignani, with passenger capacity expected to rise by 7.5% for the six months from the end of October. Meanwhile, the AAPA says October results from 23 Asia-Pacific carriers “confirm the trend of continuing strong demand” in both traffic and cargo. Passenger traffic on international routes was up 8.2% year-on-year in October, with capacity rising 5.4%. Cargo traffic increased 16.6% on a 14.8% capacity hike. The “return of premium class passengers … is particularly welcome,” AAPA Director General Andrew Herdman notes. “The improving mix of business, coupled with disciplined capacity management, has seen Asian airlines leading the industry in returning to profitability.” For the first 10 months of the year, the 23 carriers have seen international passenger numbers rise 14.2%, with freight traffic up 28.5%. The overall outlook for the region for next year is “very positive,” Herdman says, although the double-digit increases seen in 2010 are expected to “gently ease back towards longer-term trends.”

Harrier GR9's Last Launch

Harriers have now departed HMS Ark Royal for the last time.

The U.K. defense ministry has released these pictures from the last flights from the aircraft carrier, which took place early today around 40 mi. off the coast of Newcastle:

(Pictures: Crown Copyright)

Lt. Cdr. James Blackmore was the last Harrier pilot to launch from HMSArk Royal, noting that "this is truly a memorable day." But as it is never a good idea to tell your bosses they are a bunch of idiots, he also adds that "we accept the decision to decommission both the Harrier and HMS Ark Royal; however, of course the final launch will be emotional."

In a statement, Capt. Jerry Kyd, commanding officer of HMS Ark Royalsays that “as the last Harriers lift off the deck of HMS Ark Royal for the final time it is with a real sense of pride that we remember the fantastic contribution they, and the carriers, have made to U.K. defense around the world.” And, he adds, “we can now look forward to an exciting new chapter of naval aviation as we continue the training for and procurement of the Joint Strike Fighter aircraft.”

The Harriers returned to RAF Cottesmore.

Night Flight

An F/A-18E Super Hornet launches from the aircraft carrier USS Abraham Lincoln during night flight operations in the Gulf of Oman, Nov. 1, 2010. The aircraft is assigned to Strike Fighter Squadron 137, which supports maritime security and theater security cooperation efforts. U.S. Navy photo by Petty Officer 2nd Class Alan Gragg

MRO Market: Growth, Consolidation, New Normal

Commercial, military aftermarkets seek efficiencies and partnerships to offset constraints

Printed headline: Maintaining Position

Revenue from the maintenance, repair and overhaul market may be flat for the next year or so as the aerospace and defense industry recovers from the recession, but dynamic supply chain and productivity improvements will reshape the aviation aftermarket. Efficiencies are paramount as aviation maintenance and engineering service providers deal with lower aircraft utilization on the commercial aviation side and decreased budgets, but increased logistics and sustainment needs, on the military side. The civil aviation MRO market is expected to dip 4-6% in 2010 from $45.7 billion in 2009, according to consultancy TeamSAI. “The bleeding will be most noticeable for service related to the oldest fleet types,” says TeamSAI President Chris Doan. However, he still predicts a 4.1% compound annual ground rate through 2019, which would bring it to $53 billion in 2014 and $68.2 billion by 2019 (see graph below). TeamSAI predicts that the MRO market will grow at a compound annual growth rate of 4.1% through 2019. North America is still the largest segment today, with $16.1 billion, or 35% of the market, but in 10 years, Western and Eastern Europe will eclipse it by representing $20.6 billion, compared to $18.9 billion for North America. MRO in the Asia-Pacific region, which TeamSAI says is a $10.1-billion market now, is forecast to match that in North America in a decade at $18.9 billion. Latin America and the Middle East include emerging aftermarket service clusters in Brazil, Mexico and the United Arab Emirates (Dubai and Abu Dhabi, in particular), but those regions still will only represent $3.6 billion and $6.3 billion, respectively, by 2019, according to TeamSAI. Consulting firm AeroStrategy predicts the MRO market will be valued at about $53 billion by 2018, with the highest compound annual growth rate coming from India (8.5%), China (7.6%) and the Middle East (6.5%) (see chart, p. 88). As the MRO market becomes more global, there will be greater transparency in labor rates (see story and chart, p. 90) and service prices, according to Team SAI. Almost every MRO company is working on ways to decrease aircraft, engine and component turnaround times now, which is imperative as operators try to eke out better asset utilization. This has prompted aviation service providers—including original equipment manufacturers (OEMs), operators and MROs—to keep key spare parts in stock or in component pools in the right areas around the world. So far, however, parts pooling is used more frequently in Europe and Asia-Pacific. “Shifting massive amounts of inventory to pool managers—up to $1 million per aircraft or $700 million total for the largest U.S. airlines—should become a higher priority,” states a recent Oliver Wyman study on inventory pooling. AeroStrategy forecasts that the air transport MRO markets will grow at the highest compound annual growth rates in India, China and the Middle East. Cost containment is still a critical focus for most aftermarket service providers, but ensuring that high-quality, safe and reliable services are not jeopardized is crucial. “Although long-term market growth is expected, higher efficiencies in the MRO industry are mandatory,” says August Henningsen, chairman of Lufthansa Technik. TeamSAI’s Doan agrees. “Turn-time and labor efficiency must continue to be a business imperative for the MROs that wish to remain competitive in such a challenging business environment,” he says. One of the challenges for MROs, according to Henningsen, is OEM price escalation, which is not diminishing and affects margins. While the parts manufactuers approval (PMA) versus OEM parts argument is not new, this fiscal environment could lead to increased PMA sales as alternative parts suppliers branch out into selling interior components. Branching out also comes through partnerships and collaboration, which are growing around the world as service providers seek efficiencies and business growth globally. Collaboration, however, is most successful when data can be easily shared and the supply chain can be more transparent. Expect to see investment in information technology rise in this market segment, which still uses many manual processes. “MRO needs to automate end-to-end processes,” says Peter Scott, vice president of supply chain solutions for Exostar. Because there is more partnering and outsourcing, MROs depend on suppliers around the world, so supply chain visibility is increasingly necessary. And lastly, “After a relatively quiet year on the consolidation front, we expect there to be more merger-and-acquistion and joint-venture activity to rationalize the excess capacity in the MRO industry,” says Doan. On the military side of the market, pain points for several Western countries include aging aircraft and constrained sustainment budgets. The aging fleet problems are exacerbated by the delay of new platforms, such as the Airbus A400M and F-35 Joint Strike Fighter. For instance, France, which ordered the A400M, intended to retire its C-160s but is seeking service life extensions from its suppliers instead, according to Mike Howard of AeroStrategy. “A similar situation is ongoing with NH90 customers, many of whom are operating older-generation Sea King aircraft,” Howard says. Operators of mature Lockheed Martin C-130 transports are examining aftermarket, OEM and in-house military service options to upgrade the center wing box, the high-stress area where wings, empennage and landing gear meet. Several operators also are considering communication, navigation and surveillance/air traffic management (CNS/ATM) avionics upgrades, especially for C-130H models. A common problem for out-of-production aircraft is finding parts, which means militaries need to locate new suppliers or launch their own parts production. Then there is the fact that several NATO countries’ fleets are getting beaten up in combat or are flying more frequent humanitarian missions, even while there is less money to maintain them. For instance, the U.S. military is grappling with decreased budgets and a much different operational reality than in the Cold War. Noting that “we’re in an era of persistent conflict,” Lt. Gen. Mitchell Stevenson, U.S. Army deputy chief of staff for logistics, predicts the U.S. is not going to return to a pre-2001 military strategy or posture. “We’re probably going to have a portion of our forces deployed somewhere—always,” he says. The maintenance and logistics effect is that “a portion of our equipment will be in reset at all times,” so the armed services have to position themselves differently to adapt to this new paradigm—and with less money, says Stevenson. John Johns, assistant deputy undersecretary of Defense for maintenance, puts it this way: “What is the new normal? We all need to come to grips with that.” Budgets are shrinking, but AeroStrategy predicts global military MRO spending will be $67.5 billion by 2018, which is $6.4 billion higher than in 2009. “Key growth platforms include the F-35, V-22, UH-72, Tiger and NH90,” while the “declining platforms are led by the F-5,” says Hal Chrisman, an AeroStrategy principal.

Airfreight Industry Impacted By Weak Global Economy

Freighter aircraft buffeted by economic downturn

Printed headline: Turbulence in the Cargo Arena

The global airfreight industry has lost nearly a decade’s worth of growth in the last year and a half, thanks to a period of unprecedented turmoil that began late in 2008 and continued throughout 2009 . Airfreight has historically been a growth industry, yet traffic levels, which had been moderately positive in the first half of 2008, went into free fall in the fourth quarter. And those hoping for a rebound in 2009 were disappointed, as the worldwide recession produced year-over-year traffic declines in excess of 20% for the first six months . Etihad Crystal Cargo, set to be first operator of Airbus A330-200F, has -300F on order, too.Credit: AIRBUS Full-year freight traffic totals for 2008 (measured in freight-tonne-kilometers of service—FTKs) were down about 5%, making 2008 the airfreight industry’s second worst year on record , after 2001’s 7% decline . The year-over-year declines in 2009 gradually grew less severe in the second half , and there are some signs that real recovery may start this year. However, when 12-month results for 2009 are tallied, it is likely air cargo traffic will reflect a decline of at least 15% compared with 2008. Such drops are new to the airfreight industry, and are key to understanding the outlook for the sector . Even if the world economy recovers this year and demand for airfreight returns to historic growth levels, we will have lost nearly a decade of growth. Taking into account the decline in 2009, and the smaller declines experienced in 2001 and 2008, we will begin the year with worldwide FTKs just a bit above 2000 levels. And even if growth in demand returns to its pre-2000 historic level of 6% per year, the impact of the lost growth will be far-reaching; anything resembling “normal” is a long way off for the airfreight and freighter aircraft industries. The root of the problem is a significant imbalance in supply and demand. The supply of capacity in freighter aircraft and in the belly compartments of passenger aircraft has not undergone a contraction as pronounced as that for cargo shipments. As a result, an overhang of capacity must be eliminated before any real growth in demand for freighter s can occur. The Boeing 747-8F is due for its first flight early this year, with deliveries to begin late in the year. Cargolux is the launch customer.Credit: BOEING Of course, capacity can be subtracted by placing aircraft in storage, and we have seen substantial movement toward that end . Even major airlines such as Lufthansa, Air France-KLM and Cathay Pacific have taken modern freighters such as MD-11Fs and 747-400Fs out of service, and several brand-new 777Fs have been placed in temporary storage. These are drastic measures; clearly paying hundreds of thousands of dollars per month for an asset that is sitting idle is far from a perfect solution to the problem of overcapacity. From the end of 2000 to the end of 2008, global demand in FTKs grew by 25%, including the impact of a 7% decline in 2001. This equates to an average increase of just 2.8% per annum over the eight-year period, less than half the historic 6% rate. Freighter fleet totals were nearly the same at the end of 2008 as in 2000, but there had been a pronounced shift to newer, larger wide-body types. As a result, freighter capacity (in available tonne kilometers) was higher in 2008 by more than 35%, and the supply-demand relationship was clearly out of balance. The sharp declines in demand, which first appeared in fourth-quarter 2008, persisted through 2009, causing an even greater supply-demand imbalance. Airlines sidelined 150 freighters during 2009, yet there is still an oversupply of main deck cargo capacity. So, where do we go from here? The simple answer is that we have to dig out of a very deep hole before there can be any net growth. Entering 2010, global air cargo traffic is down roughly 20% from the 2007 level. From that point, let’s further assume growth returns to its historic 6% annual rate this year. If it maintains that average over the next four years, the market in 2013 will have reached roughly the same level that existed in 2007, which represented a peak year for the market. Zero growth in demand from 2007 -13 should be matched by zero growth in freighter capacity if the market is to be in balance. Regarding capacity, Air Cargo Management Group (ACMG) has analyzed several fleet growth scenarios in its most recent “20-Year Freighter Aircraft Forecast.” The most pessimistic assumes zero demand growth through 2013. Even under a zero-growth scenario the freighter fleet will not remain stagnant, although the level of production and conversion activity will be much lower than in a growing market. At the same time , retirements of existing freighters will accelerate. ACMG’s zero-growth scenario fore sees a global freighter fleet of 1,548 units at the end of 2013, roughly equal to the current fleet total as shown in the accompanying table. During the period, approximately 350 freighters will be retired, offset by the production of about 150 factory-built freighters and about 200 freighter conversions (of all aircraft types and sizes). The retirements would include nearly all of the existing first-generation DC-9Fs, 727-100Fs, 707Fs and DC-8Fs, plus about half of the 737-200Fs, 727-200Fs, A300B4Fs and DC-10-10Fs. Furthermore, roughly two-thirds of the 747-200Fs and DC-10-30Fs would be removed. Production of new freighters would continue, but cancellations and deferrals will mean only 150 of the 230 units on firm order today would be produced (a mix of 767-300Fs, 777Fs, 747-8Fs and A330-200Fs). Conversion activity would average about 40 units per year, less than half of the level under a normal-growth scenario. The scenario above assumes a return to 6% growth this year, but there is no certainty this will happen. If the post-2009 growth rate averages only 4% per year, then demand will not get back to the 2007 level until 2015. If, on the other hand, post-2009 growth averages 8% per year, the recovery to 2007 levels will take place in 2012. Predicting demand growth rates is very difficult. Demand for airfreight capacity has grown historically at about twice the rate of worldwide growth of gross domestic product. This is, of course, an unsustainable pattern over the long term. Eventually, airfreight growth must come down relative to GDP growth, but when and by how much cannot be predicted with any certainty. Despite the gloomy picture , there are numerous positive developments to report concerning freighter equipment. The most notable shifts relate to new production freighters, but there are also positive developments in the freighter conversion field. In the aggregate, customers have a wider choice in the freighter market today than ever before. In reviewing freighter developments, it is important to recognize that they traditionally have carried about 50% of global airfreight tonnage, while the remaining air cargo has been carried in the lower-deck compartments of passenger aircraft. The fact that cargo traffic dropped more than passenger volume did during the 2008-09 recession caused a temporary shift toward a higher percentage of cargo moving in passenger aircraft bellies. On the other hand, tighter security requirements that in the U.S. will mandate 100% screening of cargo carried on passenger flights by August 2010, may lead to a greater reliance on freighters . As for new production types, Boeing stopped building the 747-400 and 747-400ER freighter models in mid-2009, but customers interested in large-capacity factory-built freighters have two new Boeing models to choose from. The first to enter service was the 777F, with initial delivery to launch customer Air France in February 2009. The 777F has about the same cargo capacity as the 747-200F, but consumes about one-third less fuel and has a range approaching 5,000 nm. Boeing’s second new large freighter is the 747-8F. Certification flight testing is expected to begin early this year, following a program delay announced last October. Initial deliveries are planned for the fourth quarter of this year. The -8F features a stretched fuselage (220 in. longer), higher gross weights (maximum takeoff weight approaching one million lb.), new composite wing and new 787-type engines, giving it enhanced capability and about 15% lower unit costs than the current 747-400F. The predicted efficiency of the 777F and 747-8F has proven attractive to customers, as evidenced by about 75 firm orders for each type. Airbus also has a new freighter moving closer to certification. The A330-200F competes in the medium-capacity freighter market, where it offers a significant increase in payload-range performance compared to Boeing’s production 767-300F, which until now has been the largest and most capable freighter in this segment. Boeing has a backlog for about 25 767-300ERFs , with deliveries stretching into 2012. The A330-200F, for which Airbus has approximately 65 firm orders, is scheduled for certification in March , with deliveries beginning in August. The A330‑200F will be the only production freighter from Airbus for several years; freighter versions of the A380 and A350 models are expected, but not until after 2015. The use of factory-built freighters has been common in the wide-body market segment, especially for high-capacity models flown in high -use operations. However, in the global fleet of freighters of all sizes, aircraft converted from passenger to freighter configuration outnumber factory freighters by roughly three-to-one , a ratio that is expected to continue . Such conversion involves removing passenger-related equipment, installing a large main deck cargo door and reinforcing the floor to carry heavier loads. At the top end of the market, Boeing and the Bedek Aviation Group of Israel Aerospace Industries each offer passenger-to-freighter (P-F) conversions of 747-400Fs. Together Boeing and Bedek/IAI delivered approximately 60 converted 747-400s through the end of 2009, although sales dried up that year due to the economic downturn . Boeing also offers a P-F program for the MD-11 , but those conversions will soon end due to a lack of passenger MD-11s to serve as “feedstock.” Next in line to become a large-capacity freighter conversion candidate is the 777, for which Boeing has begun product development studies. P-F programs are being considered for both the 777-200 and -200ER , with a decision to launch possibly coming in the first quarter of this year followed by certification and initial deliveries of converted freighters in 2013-14. Both of the models noted above have significantly lower takeoff weights than the production 777F (which is based on the high-weight 777-200LR ), so the payload-range performance of converted 777s will be significantly lower than for the production freighter. T he medium wide-body freighter range represents a market segment that grew tenfold from 1995-2005, due to the growing popularity of A300, A310 and 767 freighters. The medium wide-body segment is where Airbus entered the freighter market in the early 1990s, and where it retains a leading position . The manufacturer built more than 100 A300-600s in freighter configuration, mainly for use by express carriers, before the production line closed in mid-2007. The A330-200 F will ensure Airbus a continuing presence at the upper end of this size category. Airbus remains active in the P-F market through EADS Elbe Flugzeugwerke of Dresden, which has had a successful conversion program for the A300‑600 and A310-200/-300 for several years. A competing P-F program for the A300-600 was certified in December 2008 by U.S.-based Flight Structures Inc. In addition, Airbus executives have disclosed that they are studying the development of a P-F program for the A330-300 model. This aircraft, with a fuselage that is about 17 ft. longer than that on the A330-200F, would appeal to express carriers moving low-density, high-volume shipments. Initial deliveries of the converted A330-300F could take place as early as 2012. Although Airbus types have been the most popular medium wide-body freighters, the Boeing 767 is gaining ground . The 767-300F remains in production, and conversion activity has picked up on both the 767-200 and -300 . Boeing certified a conversion program for the 767-300ER in mid-2008, and delivered the first modified unit to All Nippon Airways ( three more by the end of 2009). Boeing’s partner in this 767-300BCF program is Singapore Technologies Aerospace, which provides touch labor . With a fleet of more than 500 passenger 767-300ERs in service, this conversion program has a great future. Elsewhere, Israel Aerospace Industries continues its successful program for the freighter conversion of the somewhat smaller and less capable 767-200 series. Furthermore, Bedek/IAI has teamed with Mitsui & Co. under the M&B Conversions brand, to develop a similar program for the 767-300. Certification testing of the first M&B 767-300 conversion began last fall, and delivery of the first unit to launch customer EuroAtlantic Airways was scheduled to take place in the fourth quarter . In contrast to high daily utilization rates common for large freighters, narrow-body models typically fly many fewer hours. This factor places a premium in this segment on low acquisition cost, which explains the airfreight industry’s extensive use of aircraft converted after first operating for 15-20 years in a passenger role. It is interesting to note that there are no narrow-body freighters in production today, although Boeing does offer the 737-700C (convertible) model that includes a large main deck cargo door. Fortunately, there are numerous P-F conversion programs for narrowbodies available from a variety of sources. Three companies—Pemco World Air Services, Aeronautical Engineers Inc. and IAI—offer conversions for the 737-300 and -400 . Three other companies—Precision Conversions, Alcoa-SIE and ST Aero—offer P-F programs for the 757-200 . These types are designed to serve as replacements for the 727-200 F, which is facing retirement after many years as the world’s most popular jet freighter. To date, Boeing and Douglas-built aircraft types have dominated the small-capacity freighter market, but that is about to change. Airbus Freighter Conversion GmbH. (AFC), a joint venture formed in 2007 among Airbus, EADS-EFW and Russia-based UAC and Irkut, is moving forward with development of an A320/A321 P-F program. AFC secured a launch order for 30 conversions from Netherlands-based leasing company Aercap in July 2008, and the initial converted A320 is expected to enter service in the first quarter of 2012, followed about a year later by the A321. These converted Airbus freighters will feature large main deck cargo doors aft of the wing, contrary to the more common forward location. Conversions will be performed both in Dresden and Russia, with total capacity building to 30 per year. The A320 and A321 will offer 10- and 13-pallet capability, respectively, placing them between the 737-300F and 757-200F in size, which could work to the advantage of the Airbus models. The various narrow-body models are expected to be popular among express companies in their well-developed freighter aircraft networks, and they will find extensive application in newly developing markets such as China and India. FedEx, for example, is acquiring 87 converted 757-200Fs to replace the 727-200Fs in its U.S. domestic fleet. Finally, in the narrow-body segment a new development in 2008 was the certification of a conversion program for BAe 146 s. The new program was developed by BAE Systems Regional Aircraft with the touch labor performed by Romania-based Aerostar. This program is the re-launch of one that saw about 30 new BAe 146s converted off the production line in the late 1980s, mostly for use by TNT in its European express network. In addition to the mainstream commercial freighters , a number of Russian-built models are in use . The Antonov An-124 and Ilyushin Il-76 were originally developed for the Soviet military, and they continue to play a role in the niche market carrying outsized shipments. Finally, a few Tupelov Tu-204 freighters are in operation, and the first Il-96-400T entered service late in 2009. However, Russian aircraft will continue to play a secondary role in the freighter fleet for the foreseeable future. Robert V. Dahl is managing director of Air Cargo Management Group, a Seattle-based aviation consulting firm. He also serves as associate editor of the CARGO FACTS Newsletter, an ACMG-affiliated publication. For more information, see www.cargofacts.com

Commercial Jet Freighter Fleet Summary 1,550 Total Units* Small Narrowbody Medium Narrowbody Medium Widebody Large Widebody Payload Capacity Payload Capacity Payload Capacity Payload Capacity Less than 60,000 lbs 60,000 to 120,000 lbs 70,000 to 140,000 lbs Over 140,000 lbs 408 Total Units 218 Total Units 440 Total Units 484 Total Units 26 BAe 146 QTs 14 B707-320s 69 A310-200s/-300s 6 B747-100s 33 B737-200s 144 B757-200s 49 A300B4s 85 B747-200s 94 B737-300s/-400s 32 DC-8-50s/-60s 149 A300-600s 5 B747-300s 32 B727-100s 28 DC-8-70s 52 B767-200s 194 B747-400s 209 B727-200s 57 B767-300s 35 DC-10-30s 14 DC-9s 62 DC-10-10s 4 DC-10-40s 2 L1011s 155 MD-11s 9 777s