JSF Costs Key To 2011 Global Fighter Market

The F-35 Joint Strike Fighter program took up a lot of real estate in the national and international press and trade media in 2010, and the critical attention will continue into 2011. The sheer size of the program to supply the U.S. military and partner nations with a stealthy and relatively affordable strike fighter, coupled with questions about prime contractor Lockheed Martin’s ability to stick to the schedule and meet cost targets, makes it the No. 1 target of industry speculation.

The JSF program, currently in its system development and demonstration (SDD) phase, includes three different variants: the conventional takeoff and landing (CTOL) F-35A to replace U.S. Air Force F-16s and A-10s; the short-takeoff-and-vertical-landing (Stovl) F-35B to replace the U.S. Marine Corps’ AV-8Bs and F/A-18s; and the F-35C carrier variant for the U.S. Navy. The program is in the early stages of flight testing, and, typical of development programs, not everything is going to plan.

Restructuring of the program in February 2010, and again in January 2011 because of final-assembly flight-test delays, has pushed completion of SDD to mid-2016 from late 2013, and added $8.4 billion to the cost of development. The additional $4.6 billion needed in Fiscal 2012-16 to complete development will be found by cutting planned procurement by 124 aircraft, to 325. This will slow the ramp-up of production and make it more difficult to drive down unit costs.

In an effort to restore affordability to the program, the Pentagon struck agreements with Lockheed Martin and engine supplier Pratt & Whitney to buy the fourth low-rate initial production (LRIP) batch of 31 aircraft and 37 engines under fixed-price incentive contracts rather than continue with cost-plus procurement as originally planned. This places the risk of cost overruns largely on the contractors’ shoulders. Lockheed Martin said at the time the transition to fixed-price contracting was made two years ahead of schedule to counter concerns of escalating program costs.

Keeping the F-35 within targets is of critical concern to both the industry team and the Pentagon. The total program requirement across all partner nations currently amounts to 2,443 aircraft. While that figure is almost certain to be reduced in coming years as national deficits curtail defense spending, unit cost has always been a major concern for the Pentagon because of the large fleets of legacy aircraft that must be replaced. Even a small increase in unit cost can have a large impact on procurement budgets, and independent estimates say the price of the F-35 has roughly doubled since 2001.

Estimates for the price of a production aircraft vary widely, ranging from above $100 million on down. Lockheed Martin asserts the unit recurring flyaway cost of the F-35A will eventually drop to around $60 million in 2010 dollars, and argues this would put the cost of acquiring a CTOL F-35 on par with buying a Block 60 F-16 or Block 2 F/A-18E/F. For Lockheed Martin, meeting that cost goal depends heavily on the number of F-35s it will sell to international customers, and the number of F-35s is can sell abroad depends heavily on meeting its price target.

Repeating the success of the F-16 on the international market is part of Lockheed Martin’s vision for the JSF program. The F-35 is viewed as an aircraft that will allow friendly nations to buy a fighter with a high level of stealth, but without the high level of technical secrecy surrounding the U.S. Air Force’s F-22 Raptor. The F-35’s design also emphasizes the air-to-ground mission, an important feature in the modern security environment. For the U.S. military and its allies, it is more likely the highest threat in an air campaign will come from surface-to-air missiles rather than enemy fighters. Also, a fighter is far more likely to spend its time supporting ground forces and acting as a node in the wider command-sensor network.

The eight nations participating in the F-35 SDD phase—the U.K., Italy, Australia, Turkey, the Netherlands, Canada, Denmark and Norway—all typically engage in military operations beyond their borders through collective security arrangements and coalitions. Two of them—the U.K. and Italy—are also Eurofighter Typhoon operators and already possess a fighter designed for the air superiority role. For the remaining partner nations, that any of them will find themselves in a solo campaign against a peer competitor seems fanciful. The argument for purchasing the F-35 to operate within a multinational security framework is underpinned by Lockheed Martin’s strategy of distributing industrial work among the participating nations.

While it is likely the JSF partners will order fewer aircraft than initially planned to save money—the U.K. deciding to jettison its planned purchase of 138 Stovl F-35Bs for a lower number of carrier-capable F-35Cs—they have yet to signal an intent to acquire a different aircraft instead. Denmark and the Netherlands have delayed final decisions, but elsewhere the procurement of F-35s has already received government and/or parliamentary approval, with only the timing and size of initial orders to be determined.

The result of Lockheed Martin’s global supply-chain approach is a European fighter market in which many of the promising customers have a financial interest in the F-35 via local industry involvement in production. Looking around the rest of the European fighter market, Germany and Spain are partners in the Eurofighter program and France is off the table because of its own domestic fighter program, the Dassault Rafale. Left up for grabs in Europe are primarily the smaller nations with modest requirements for combat aircraft, and it is hard to keep a fighter program alive over the long term by making small sales to nations like Bulgaria, Croatia and Slovakia.

There are still a few countries capable of funding several billion dollars’ worth of fighter orders left in Europe—Belgium, Finland, Greece, Poland and Switzerland among them—but defense funding is under pressure across the continent, and each of these nations is in a position to defer funding for new fighters for an extended period. The reality of the security situation is that, with the fall of the Soviet Union and the continued existence of NATO, there is little urgency in European capitals to replace fighter fleets. In fact, fleet shrinkage remains a popular tactic in Europe for dealing with budget pressures, a situation that will not change any time soon.

With Europe now mostly out of play, there is more pressure to make deals in the Middle East/North Africa region and in Asia. For Boeing, Dassault, Eurofighter and Saab, securing sales in these markets will be key to the continued survival of their fighter production lines into the next decade. Sales in Latin America will not be enough to keep those lines going. While Chile and Venezuela are recent buyers of new F-16s and Sukhoi Su-27s, respectively, and Brazil is conducting a much-talked-about competition for 36-plus new fighters, the Latin American market remains dominated by sales or donations of used aircraft rather than new purchases.

The difficulty for European industry is that the Middle East market is now largely dominated by U.S. manufacturers. Dassault was formerly a big player in the region, but has been attempting to close a deal for Rafales for years without success. British defense contractor BAE Systems sold 72 Eurofighters to Saudi Arabia, but the Saudis turned back to the U.S. in 2010 with an agreement to purchase 84 F-15s and upgrade 70 more. There has been talk of an Omani purchase of used British Typhoons, and the United Arab Emirates has seemed close to ordering Rafales, but closing deals is turning out to be harder than expected for European manufacturers.

The fighter market is growing in Asia, meanwhile, primarily because of rising wealth and concerns over the Chinese military’s modernization efforts. China itself is not yet at the point where it can build fighters that are competitive with the best the West has to offer, with engine development being a major stumbling block. Chengdu has developed the FC-1 lightweight fighter for the export market and the multirole J-10 for China’s own needs. Both are relatively low-cost single-engine modern fighters that are a little behind the latest versions of the F-16 and Gripen. But China is acquiring large numbers of J-10s and has developed the J-11, its own improved version of the Su-27. A large stealthy fighter, the J-20, entered flight test in January, but when it will enter service is not known. Add into the mix an unpredictable North Korea, and Indonesia’s interest in growing its fleet of Su-27/-30s to 180 aircraft, and the result is a number of nations seeing a threat and looking to replace aging models with newer aircraft with the latest in sensors and weapons.

As in the Middle East, the importance of U.S. military power to regional stability gives a major push to offerings by Boeing and Lockheed Martin. South Korea and Singapore are both building fleets of F-15s. Australia has ordered F/A-18F Super Hornets and plans to order a larger number of F-35s. Japan looks likely to select the F-35 to replace its fleet of aging F-4EJs under its F-X program. The Japanese government wanted the F-22 to fill the requirement, but the Raptor cannot be exported without a change in U.S. law. The refusal to sell the Raptor has led the Japanese to flirt with Eurofighter and examine the possibility of developing its own stealthy aircraft, but ultimately the Japanese will stick with tradition and buy American.

With the U.S. dominating sales to big customers in the Middle East and Asia, the Indian air force’s Medium Multi-Role Combat Aircraft (MMRCA) program has become hugely important to the future shape of the fighter market. The contest involves six aircraft: the Boeing F/A-18E/F, Dassault Rafale, Eurofighter Typhoon, Lockheed Martin F-16IN, RAC MiG-35 and Saab Gripen NG. All of these aircraft are at risk of going out of production at some point during the next decade unless a new major order can be secured. What makes the contest interesting is that a good case can be made for betting on any of the horses in the race. The Indian government has tended to buy Russian fighters over the years, but also owns a fleet of French-made Mirage 2000Hs. The rumor mill is working overtime; at one point the Rafale was reported to be out of the running, then the Indian air force was said to be so unhappy with maintenance costs on its MiG-29s that it had no interest in the upgraded MiG-35. A decision is expected in 2011 but may slip.

The initial requirement under the MMRCA program is 126 aircraft, with an option for an additional 74. That is a huge contract in today’s market. Unlike other nations that are looking to cut costs by rationalizing fighter fleets around one or two models, India is building a mixed fleet that will eventually include not just Su-30s, MiG-29s and Mirage 2000s, but the indigenously designed Tejas Light Combat Aircraft and a version of ­Sukhoi’s T-50 stealth fighter. Buying so many dissimilar types is not a rational approach from a cost or operational standpoint, but India’s procurement system has often centered more on building technical know-how and creating jobs for its own defense industry than on efficiency or economy in operations.

WTO Subsidy Ruling Sets Stage for U.S. Appeal

The World Trade Organization (WTO) has issued, but not released publicly, the final ruling on the European Union’s claim that Boeing has benefited from illegal state aid for its commercial aircraft, upholding at least some of what Brussels had charged.

The ruling, which remains closely held and will not be made public for several weeks, closely follows the preliminary finding issued in September.

The verdict, emanating today from Geneva, is the latest in a series of milestones in the long-running subsidy dispute between the U.S. and European Union, a dispute that kicked off when Washington challenged aid provided by European states to Airbus.

The WTO now effectively has ruled that both Airbus and Boeing have benefited from subsidies that are not compliant with existing international trade rules. The U.S. case against Europe already is in the appeals stage. Industry officials indicate they expect the U.S. to now also appeal this finding.

Both sides have charged that the other will have to take steps to remedy billions of dollars worth of subsidies, although the WTO so far has not issued any figure on the actual harm done.

But U.S. officials stress that around April, the WTO will issue its verdict on the European appeal. If the European’s lose, then that side would have 90 days to come into compliance with the WTO ruling. If Europe does not do so, the U.S. can seek penalties, although establishing their size would require a renewed appeal to the WTO.

Airbus, in a statement issued after the Jan. 31 final report was issued, says that it expects the public version to state that Boeing “would not have been able to launch the 787 without illegal subsidies” and that funding from both the Pentagon and NASA contravene subsidy rules. Airbus also repeated its call for a negotiated resolution to the dispute.

Boeing, in a statement, says that the reports of the ruling “confirm the interim news from last September that the WTO rejected almost all of Europe’s claims against the United States, including the vast majority of its R&D claims - except for some $2.6 billion. This represents a sweeping rejection of the EU’s claims.”

The company also notes the WTO has found more violations against Europe than the U.S., a claim exactly opposite what Airbus officials argue.

European officials also have argued the subsidy case is increasingly without logic at a time when emergent rivals, such as China, are using massive state support to build rivals to the existing large commercial aircraft makers.

Lockheed, Boeing Duel For GMD Work

Lockheed Martin/Raytheon and Boeing/Northrop Grumman have each submitted proposals to the U.S. Missile Defense Agency (MDA) for the Ground-Based Missile Defense (GMD) development and sustainment contract.

A downselect is expected May 31. The deal could be worth up to $10 billion if all 10 years of options are exercised, and the work will involve sustainment of the GMD system, development of new capabilities, flight testing and disposal of outdated components. The initial contract period is for seven years; annual value is estimated at $600 million.

Boeing is the current prime contractor for GMD and its Ground-Based Interceptor, which are fielded in California and Alaska primarily to guard against a ballistic missile attack from North Korea. However, the company’s record upgrading, testing and sustaining the system has been marred by problems, prompting MDA to shop around for an alternative.

The last two GMD tests in January and December of last year failed to produce intercepts against the most challenging target to date, Lockheed Martin’s LV-2, which can deploy countermeasures. The last successful GMD test took place Dec. 5, 2008. It is unclear whether these failures will factor into Boeing’s past performance rating in the competition.

MDA’s source selection will have a significant effect on the missile defense market landscape. As the Defense Department winds down purchase of the ground-based intercepters and limits the Boeing-led Airborne Laser, Boeing’s role in missile defense stands to shrink substantially if it cannot hold onto the GMD contract.

A Lockheed win would not only edge Boeing out of a substantial part of the business but would also break the trend that the original equipment manufacturer is entitled to decades of sustainment revenue without competition.

Aircraft Carriers Face Growing Threats

On the American ballistic submarine USS Maine in waters off the Florida coast not too long ago, two submariners eyed a U.S. aircraft carrier through their periscope in the roiling sea. “I think it’s the Washington,” one submariner said. “It doesn’t matter — it doesn’t know we’re here,” the other replied, eyeing the carrier through the scope. “Bang,” he said. “You’re dead.”

In the submarine world, carriers, like other surface ships, represent targets. But lately U.S. aircraft carriers have appeared to be growing more vulnerable to threats deployed from under the sea and in the air.

And those threats have to be taken even more seriously, given recent U.S. government reports about the advancements made in some of those weapons and questioning the carrier fleet’s ability to protect itself.

For example, a report released this month by the Pentagon Director of Operational Test and Evaluation (DOT&E) calls into question development of the self-defense systems for carriers and other surface ships. If a missile or torpedo were to break through a carrier group’s other defenses, the carrier itself could be quite vulnerable (Aerospace DAILY, Jan. 25).

So, what are the chances of getting such a shot on a carrier? One of the biggest threats for carriers — and most other surface ships — is a submarine, and the old maxim says the best way to best a sub is with another sub. But the DOT&E report raises questions about the newest U.S. Virginia-class attack subs when they operate in the same waters as diesel-electric Kilo-class subs, one of the quietest and most popular submarines in the world.

One country that favors Kilos is China. “I have moved from being curious to being genuinely concerned,” Adm. Michael Mullen, chairman of the Joints Chiefs of Staff, said last June about China’s growing military might.

During previous moments of potential conflicts with China, U.S. leaders were quick to send a carrier group to the Taiwan Straits. They might think twice about doing so now.

Not only might there be a Kilo lurking about, but as the Congressional Research Service (CRS) notes in a December report, the Chinese apparently are close to developing anti-ship ballistic missiles (ASBMs), “theater-range ballistic missiles equipped with maneuverable re-entry vehicles (MaRVs) capable of hitting moving ships at sea.”

Observers have expressed strong concern, CRS says, “because such missiles, in combination with broad-area maritime surveillance and targeting systems, would permit China to attack aircraft carriers, other U.S. Navy ships, or ships of allied or partner navies operating in the Western Pacific.”

To put this in perspective, the CRS report says, “The U.S. Navy has not previously faced a threat from highly accurate ballistic missiles capable of hitting moving ships at sea. Due to their ability to change course, the MaRVs on an ASBM would be more difficult to intercept than non-maneuvering ballistic missile re-entry vehicles.”

All of this gives carrier commanders a much bigger “bang” to worry about.

Foreign Investors Shun Garuda IPO

Garuda Indonesia’s initial public offering (IPO) has been scaled back dramatically, after receiving a poor response from foreign investors.

Indonesia’s government has set its price at 750 rupiah (US 8 cents) per share, the bottom of its earlier price range, which went as high 1,100 rupiah per share. The Indonesian government has also decided to only sell 26.7% of its equity. This includes the 7.2% stake held by state-owned Bank Mandiri.

Garuda earlier aimed to sell as much as 36% equity. Under the new arrangement, the share sale will raise 4.77 trillion rupiah ($530 million), of which 3.3 trillion will go to Garuda and 1.45 trillion to Bank Mandiri. This state-owned bank is using the IPO to cash out and recoup money it had earlier lent the carrier. Garuda had persuaded the bank to turn debt into equity on the promise that the bank would get its money back through the IPO.

Garuda in recent months cleared much of its debt and plans to use the money from the IPO for aircraft pre-delivery payments. It has Boeing 737-800s and 777-300ERs on order.

The minister of state-owned enterprises, Mustafa Abubakar, told reporters in Jakarta that as much as 80% of the shares would be sold to domestic investors. “It’s not because there’s a lack of appetite from foreign investors, but we want domestic investors to be a part of our flag carrier,” he says.

Industry sources, however, say foreign investors were reticent about investing in Garuda, particularly at the higher end of the 750-1,100 rupiah price range. A 1,100-rupiah-per-share price would have made Garuda more expensive than Singapore Airlines, as measured by price/earnings and enterprise value/price ratios, say the sources.

Garuda has a strong brand in Indonesia, but it faces increased competition from low-cost carriers, such as Indonesia AirAsia, and at the higher end it faces competition from premium carriers, such as Singapore Airlines.

Ryanair Sees Quarterly Loss

Ryanair expects to deliver a full-year profit, at the high-end of its guidance to analysts, despite a third quarter financial performance below expectations.

The airline suffered an after tax loss of €10.3 million ($14 million), despite an expectation it would manage to breakeven. Ryanair CEO Michael O’Leary blames Air traffic controller strikes and walkouts, as well as “a spate of bad weather airport closures in December.” The result was slightly better than last year’s €10.9 million loss for the period.

And although fuel prices are on the rise, O’Leary notes that Europe’s biggest low-fare airline is well hedged both for the rest of its fiscal year and for most of fiscal 2012, albeit at a rate slightly above that secured for the current fiscal year.

The fuel hedges for the rest of the financial year, and slightly improving unit cost performance, lead O’Leary to project a net after tax profit for the full year closer to €400 million than €380 million – the guidance previously given.

In the third quarter, Ryanair saw revenue increase 22% to €746 million year-on-year, with passenger totals of 17 million, up 6%.

O’Leary also expressed frustration that the airline’s outlook is affected by the generally negative view of the Irish economy. He notes that the low-fare carrier now originates less than 10% of traffic from its home market. However, he expressed the hope a new government, to be formed after general elections in February, will roll back costs imposed on air travel, although any incoming government will face severe pressure to rectify the country’s budget deficit.

Owners, Profits Return to NetJets

NetJets added 100 net fractional share owners in 2010, and company CEO David Sokol is optimistic that the demand for fractional operations remains strong, particularly among corporations that want to keep flying privately. In an interview with Aviation Week editors William Garvey and Joseph C. Anselmo, Sokol notes that the fractional ownership provider lost 82 net share owners during the downturn in 2009, but since has made that back “and them some.” He also notes that corporations have been a driver of that growth.

“The late 2008 shock that corporate America took when survival was in question caused boards to look at every line item in their budgets. And that’s been a real positive for us,” he says. “The boards want the CEO to continue flying privately, but they want it done efficiently, and safely. So in 2010 our strongest segment was corporate share sales. I think it’s going to be true going forward.”

Sokol, who took over for fractional pioneer Richard Santulli in August 2009, faced mounting losses, with large orders on the books for numerous aircraft types. He took a number of swift actions to help improve the financial outlook of the company, including laying off 1,000 employees and canceling many of the aircraft orders. The company plans to retire 40 aircraft this year alone.

“Starting in late 2006 and early 2007, you could see that the capital being expended was exceeding the returns coming in,” he notes. “There were commitments to acquire too many airplanes when you’d already seen a leveling off of the industry. We honored every contract and paid damages to cancel those airplanes in significant numbers. But to me, that was an investment in allowing us to go out and get the business stabilized and profitable and then buy aircraft for the future.”

NetJets, however, also has been engaged in negotiations with the manufacturers to discuss the fleet of the future. “The goal is to take the number of different types down and to buy new-generation aircraft that we specify versus just what the manufacturers have,” he says.

NetJets announced an order of 125 Embraer Phenom 300 jets in October, and is currently evaluating possibilities for a large-cabin fleet. A decision on a large-cabin aircraft should be announced in about three months, Sokol says.

He is confident that the moves will pay off and that the result will be a profitable NetJets in the future. He estimates that the after-tax margin will be between 4-5%, or around $200 million pre-tax.

Despite the past performance, NetJets parent Berkshire Hathaway is committed to the business, says Sokol. “I think it’s a business that Warren [Buffett] believes has a real place, particularly for Berkshire. Our 4,000 customers are among the most important, wealthiest, most powerful people in the world,” he says. “And that’s a group of people Berkshire does a lot of work with in different ways. But I think fractional aviation is going to demonstrate itself as a more important product long term than it was even perceived to be before the downturn.”

He acknowledged the difficult decisions and steps that the company has had to take. “When you have a major economic shift such as in the fall of 2008, you have to reinvent yourself,” he says. “Five years from now, I’ll wager all of us will look back at 2008 and say it was the best thing that ever happened to the aviation industry because it’s forcing innovation that wasn’t going to happen.”

And, once NetJets is on solid footing, Sokol predicts his role with the company will change. He notes that he promoted Jordan Hansell to president in November. “Some time in the future the CEO’s title will transfer and I’ll stay chairman. It could be in the first quarter or it could be a year and a half from now,” he says. “I’ve done this enough times now to know when it’s time. You can see it; you can feel it. I won’t keep it [the title] a day longer.”

On Space : The Week in Images

Last week was one full of fantastic space images.  

Credit: NASA, ESA, G. Illingworth (University of California, Santa Cruz), R. Bouwens (University of California, Santa Cruz and Leiden University), and the HUDF09 Team

As you must have heard by now, the Hubble Space Telescope has imaged the oldest galaxy known, forming just 480 million years after the start of the universe.  The compact group of stars was one of the first things spotted by Hubble's Wide Field Camera 3, right after its May 2009 installation, though more than a year of additional analysis with the Ultra Deep Field-Infrared camera was conducted before the galaxy was confirmed.  "The new research offers surprising evidence that the rate of star birth in the early universe grew dramatically, increasing by about a factor of 10 from 480 million years to 650 million years after the big bang," writes NASA in its press release.

In celebration of Hubble's discovery, Space.com put together this excellent gallery of images taken since its latest servicing mission.  

Credit: NASA/SDO

The most spectacular image of the week has to be this "Double Play," taken by the Solar Dynamics Observatory.  On the left is a filament that erupted in an M-1 flare, while on the right side is a coronal mass ejection.  If you have some time to kill waiting for things to load, there are some movies of the event, too.  Just to keep the amazing images rolling, here's an image from SDO taken on Saturday of a huge coronal hole.

Credit: NASA/SDO

Some pretty impressive images coming out of Chile, where last week Gemini South Observatory had its first test of the new Gemini Multi-Conjugate Adaptive Optics System -- a stream of five lasers sent into the sky to assist with obesrvations.  The sodium laser is used to measure atmospheric disturbances, allowing the telescope's mirror to correct for them.  

Gemini photo by Manuel Paredes Credit: Gemini Observatory/AURA.

And finally, some images supplied, perhaps, by you.  NASA and SpaceWeather.com are holding a contest to see who can capture the best image of its recently unfurled NanoSail-D.  We wrote in December that NASA was concerned the nanosat had not properly released its 100 square foot solar sail.  Luckily for everyone involved, engineers were able to get the sail deployed on January 20 and confirm it the next day, thanks, in part, to "the amateur ham operator community ... for their help in tracking NanoSail-D," according to Dean Alhorn, NanoSail-D principal investigator and aerospace engineer at the Marshall Center.  The astrophotography contest will remain open while it is in orbit, about 70 to 120 days.  Read more about participating here and follow the project on Twitter where they're posting submitted images.

Thai Airways Aims For The Big Leagues

Thai Airways International’s outspoken president, Piyasvasti Amranand, has set the goal of transforming Thai into one of the world’s top five airlines. This will be tough to achieve, but not impossible.

The national carrier’s board this month approved an investment plan for 2011-17 in which 37 aircraft will be acquired to replace older types and aid expansion.

This is in addition to the seven Airbus A330s, eight Boeing 777-300ERs and six A380s the airline already has on order. It is unclear when the board will decide on aircraft types for the additional order, but the widebodies in contention are thes A330, A350, and A380, and 777, 787 and 747-8. Thai also wants to replace its 737-400 narrowbodies, and is looking at new A320s and 737s. It plans to add 11 narrowbodies in all, but some may be leased.

Thai will be hoping the new aircraft will elevate its standing in the minds of consumers. One event that will definitely grab the attention of the public is when Thai takes delivery in the latter part of 2012 of its first three A380s. The remaining three on order are scheduled to be delivered in early 2013.

The national carrier has always had the potential to be one of the world’s top carriers but, unlike rival ­Singapore Airlines, Thai has failed to offer a consistent level of service. Instead it has stumbled over the years and lost its way. This is evident in the make-up of its current fleet. It is still operating A300s, a type that most passenger airlines discarded long ago. There are also five 737-400s, too small a number to make any operational sense. As for widebodies, Thai has failed to keep to one engine manufacturer for each aircraft type. So, for example, some of its A330s are powered by Rolls-Royce engines, and others by Pratt & Whitney’s.

If you speak to Amranand, he will attribute the carrier’s problems over the years to excessive political oversight. Successive Thai governments have appointed the national carrier’s board and president and interfered in the running of the airline, he says. As a consequence, the national carrier has had myriad presidents and board changes.

But Amranand asserts that the status quo is about to change because he is working toward ensuring Thai is no longer a state enterprise. “If we lose the state enterprise status it will make a difference. The prime minister and the finance minister understand this well,” he says, referring to two Democrat Party politicians who also are his political backers.

The plan is for the finance ministry to reduce its Thai stake to 49% from 51% so it will no longer be classified as a state enterprise. Thai was unable to achieve this goal in the past because some of its loans have covenants requiring the finance ministry to be a 51% shareholder, says Amranand. But in recent months Thai has renegotiated many of the loans to have this provision taken out and—now that the airline is recapitalized—Amranand says he is hopeful the others will agree to do likewise.

The airline’s board, meanwhile, has undergone a major shift in how it ­operates. “There was a long history of intervention by the board and the board was doing everything,” says Amranand. “The board members were dividing up various jobs of the airline among themselves. You had one member negotiating with the banks, another doing fleet plans and yet another looking at seats. They were taking over the job of management and management stopped thinking and followed orders. I didn’t join Thai Airways to be chief operating officer but CEO,” he adds.

Amranand is also championing ­better corporate governance, a not-so-subtle reference to his clampdown on corporate corruption. Senior ­executives at the airline say he ­recently put the management team through a corporate governance course that was held over successive weekends. Amranand made a point of attending each class to see who showed up, add the executives.

“Corporate governance is crucial,” says Amranand, adding that bad corporate governance “is a problem in Thai Airways but the situation is improving.” He says management now knows that “no matter how high you are in the company, if you misbehave you cannot stay on with the airline. “This is the most important change I can make. If I don’t change the corporate culture, then when I go the carrier will just revert back to its old ways.”

Europe OKs Data Relay Sat System Development

PARIS — The European Space Agency (ESA) has approved the launch and contracting of the European Data Relay Satellite (EDRS) network, filling a long-standing gap in Europe’s space capability.

The U.S. and Russia have had extensive data relay systems in place for some time, and Japan and China have begun developing similar networks.

Magali Vaissiere, ESA’s communications director, said Jan. 28 that a program board had gathered sufficient financing commitments to cover the agency’s share of the €370-million ($504-million) project, which will be run by a private operator and financed through a public/private partnership. This permitted the agency’s industry board to authorize the award of a phase C/D full-scale development contract.

The European Union’s (EU) Global Monitoring for Environment and Security (GMES) Earth observation program will be the anchor tenant. The operator will be able to market unneeded capacity to third-party customers in return for its investment.

EADS Astrium was downselected in December to negotiate development and operations contracts for EDRS. ESA expects to conclude the development award in the next few weeks, but the operations agreement may take months or even years to negotiate, Vaissiere says. The EU has yet to agree to permanent funding and governance structures for operating, maintaining and replenishing GMES.

A total of €280 million was committed for system development, almost half by Germany, which will have a lead role in the undertaking. German aerospace center DLR said it would invest €120 million in EDRS and the state of Bavaria and the city of Cologne, another €7 million. The Netherlands and Norway also agreed to support the program, joining eight other nations who had previously committed to development (Aerospace DAILY, Jan. 18).

EDRS will consist of two geostationary payloads—a small dedicated satellite, based on the Small Geo satellite bus developed by Germany’s OHB System, and a hosted payload to be piggybacked on a commercial communications satellite. Each payload will include a laser-optical terminal supplied by Tesat Spacecom, a German unit of EADS.

A series of secondary payloads, intended to test new technologies or communications services, also will be carried on the dedicated spacecraft, ESA member states agreed on Jan. 25.

The EDRS-hosted payload will enter service on an unnamed commercial spacecraft in 2013, when ESA’s existing experimental relay on the Artemis technology satellite is due to reach the end of its operations and the first two GMES spacecraft, Sentinel 1A and 2A, are due to enter service. The dedicated relay satellite will be put into service in late 2014 or early 2015.

The laser relay terminals will have a capacity of 1.8 Gbps., sufficient to permit near-real-time transmission of remote-sensing data, something existing data relay satellite systems such as the U.S. Tracking and Data Relay Satellite system cannot do.

EDRS also will be the first data relay satellite network funded with private as well as public funds. It will be ESA’s fourth public/private partnership, after Avanti Communications’ Hylas-1 broadband satellite, launched in November; Alphasat/Inmarsat I-XL, to be orbited in 2012, and Small Geo/Hispasat AG1, also set for launch in 2012.