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Airbus Looks To Overseas, Cyber To Grow Business

May. 18, 2014 - 12:33PM   |  
By PAUL McLEARY   |   Comments
Col. Thomas Todd, US Army project manager for utility helicopters, speaks at a ceremony marking the 300th Lakota helicopter at the Airbus facility in Columbus, Mississippi.
Col. Thomas Todd, US Army project manager for utility helicopters, speaks at a ceremony marking the 300th Lakota helicopter at the Airbus facility in Columbus, Mississippi. (Airbus Group, Inc.)
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COLUMBUS, MISS. — The free-spending days of the mid-2000s are all but over for the defense industry. And with few new start programs coming from the Pentagon in favor of more cautious — and less expensive — modernization initiatives, defense executives have become more selective in how they plan to grow their business.

Speaking with reporters here before an event to mark the delivery of the 300th UH-72 Lakota to the US Army, chairman and CEO of Airbus Group, Inc., Allan McArtor outlined where the company sees opportunity.

And it’s not necessarily getting the Pentagon to buy more of its helicopters.

While the Army recently decided to purchase 100 more Lakotas for pilot training as part of its massive aviation restructuring plan, Airbus also sees opportunities overseas in possibly replacing the aging fleets of Bell Helicopter UH-1 Hueys in service with foreign governments.

If only 10 percent of Hueys sold around the globe were replaced with Lakotas in the coming years, McArtor said, that would push about 600 more helicopters through the production facility here, keeping it humming for years to come.

Without offering any further details, the CEO said the 10 percent number “would be a minimum expectation” for what the company may go after.

The company has so far inked only one foreign customer for the Lakota, and is in the process of building out an order of six helicopters for the Royal Thai Army that was signed in March 2013 for $77 million.

Any potential Huey replacement work isn’t something that is going to happen right away, however. But McArtor said the company won’t likely try to grow its business through major mergers and acquisitions in the near-term, either.

The plan for the American branch of the French conglomerate formerly known as EADS North America is to “try and grow our footprint, but do it organically,” he said. Major acquisitions are “not our highest priority” he added, admitting that the company will still likely make some small acquisitions in the cyber field over the next several years.

The company has a role to play in cyber, he insisted. “We have to participate somehow in that business” since it now touches every aspect of the commercial and military aviation markets, he said.

There are plenty of opportunities for the company to become more active in entering the emerging market for micro satellites, however, and the company is working with research laboratories and universities on developing technologies.

While bullish on international sales, McArtor admitted there are some frustrations in working internationally. The European Union in particular “has a long way to go to be efficient [in its organization-wide procurement activities] because each country has its own certification program to go through,” which can complicate requirement development and slow acquisition.

Latin America also offers plenty of opportunity. Airbus has a robust commercial business there, but has yet to make real inroads with its military products. “It’s a matter of transferring confidence in the brand” from commercial aviation over to the military side, he said.

As for the future, while the company has dropped out of the running for the initial development of the US Army’s Joint Multi-Role (JMR) helicopter program, it still has the chance to re-enter the competition after bidding opens following its initial development phase, which wraps up this summer.

McArtor insisted that while the company isn’t participating in the US Army’s only developmental helicopter program, “we’re in the process of defining our next generation of helicopters,” which could lead to involvement in the JMR program in the future.

When asked about the future of unmanned systems, the CEO admitted that “we could have been focusing on that a few years earlier,” adding that the company is conducting an internal look to see what it can do “and choose our strategy.” While there’s nothing in the immediate future there, in the long run Airbus could be more interested in commercial applications for unmanned aerial systems rather than on the military side.

But for now, the Lakota has delivered 300 helicopters, with an order for 100 more, which will keep the line in Mississippi going for another two years without any further orders or foreign military sales.

The extra helicopters come as part of a larger Army program to divest its single-engine trainer platforms and OH-58 Kiowa Warrior aircraft, while transferring the National Guard’s AH-64 Apache helicopters to fill the active force’s scout helicopter mission. The Guard will receive extra Black Hawk helicopters from the active force.

Following the event marking the helicopter’s delivery, Lt. Col. Dave Cheney, product manager for Lakota helicopters, said that while the Army is shipping the twin-engine Lakota to Fort Rucker, Alabama, to replace the single-engine training helicopters the service uses, there are also big changes coming in the logistics support contract for the installation.

“We don’t need the same level of support that we needed when the aircraft was brand new,” he said, adding that “the Army can take a greater role [in logistics support] and we’re going to grow that role inside the Army.” Using more soldiers as opposed to contractors should save the service 5 to 10 percent in logistics costs.

The logistics contract for Fort Rucker expires at the end of 2015, after which a new deal will be awarded that will offer savings by using more Army maintainers.

Col. Thomas Todd, chief of the Army’s utility helicopter program office, added that with the introduction of the Lakota as a trainer, “we will be able to train as we fight,” since the only single-engine helicopter the service uses is the OH-58 Kiowa Warrior, which is being divested as part of the aviation restructure plan.

Todd said all of the Lakotas will be moved to Rucker by 2019. ■


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