WASHINGTON — Aviation and defense industry executives will be gathering near London next week for the Farnborough Airshow.

But Tom Arseneault, president and chief executive of BAE Systems’ U.S. business, expects the conversation there to frequently focus on events more than 1,000 miles away, as Ukraine continues its Western-backed fight to repel Russia’s invasion.

While the war has shifted to a largely ground-based battle in Ukraine’s east, with heavy use of artillery, Arseneault told Defense News the leaders of allied air forces and defense industry representatives will likely discuss the medium and longer term implications of the war and what it will mean for the defense of Europe and NATO.

Arseneault said industry leaders also have not taken their eyes off China, which the United States says remains the pacing threat. The discussion at Farnborough will also revolve around the programs and technologies under development to address the potential threat China poses, he said.

Indeed, up until Russia’s invasion of Ukraine in February, Arseneault said, China was the primary “horizon of concern” for the defense industry. Since then, he said, two additional horizons emerged: how the U.S. and its allies can support Ukraine, and what the U.S. can do as part of NATO to defend Europe.

Arseneault spoke with Defense News July 7 about the air show, Ukraine, the COVID-19 pandemic’s effect on the defense industry, and BAE’s work on programs such as teaming autonomous systems with manned aircraft and the EC-37B Compass Call. This interview has been edited for length and clarity.

How has the Ukraine war and the events of the last five months prompted BAE and the industry to change?

I’d characterize the Ukrainian conflict in terms of more of a ground war at this point, and how that translates to the defense of eastern Europe. [That’s] contrasted with the China threat, where you have more of an air and naval profile to that conflict. These horizons all exist at the same time [and] are going to challenge budgets across the countries that have interests in both of those areas, and we’ll see how that plays out.

The M777 [Howitzer] artillery that has been sent over to Ukraine, from both the U.S. stockpiles as well as some of our allies, [is] a BAE system. The resurgence of artillery is an item of interest in the role it plays in battle. Of course, this is the U.S. government and our allies sending systems out of their own stores to make that happen, and maybe with the potential to replenish that over time.

So the role of artillery, the role of combat vehicles, and how that will ultimately translate to the defense of Europe, is a lesson out of that. How it’s affected BAE systems with our combat vehicle and artillery portfolio is something we’ve been watching very closely.

You took the reins at BAE in April 2020, right as the pandemic was heating up. It rocked the defense industry in many ways, with social distancing requirements, supply chains and inflation. How did you try to set BAE on a course to withstand that turmoil?

You have to admit, my timing was impeccable. It all comes down to making sure we’re focusing on our workforce in a way that allows them to be, initially, safe in the way they execute their roles. But then as time has gone on, to move toward more flexibility with the workforce, to understand the impacts of inflation on the workforce, to understand, by the way, the workforces of our collective supply chains.

We are the defense-industrial base writ large, from companies of size, right down through many layers of the supply chain. And that collective workforce is what was really rocked through this period. The concerns about personal safety, ensuring we were going to be able to continue to work right through the pandemic. To do everything we could in order to put the right safety measures in place — understand CDC guidelines, provide all the tools, equipment and personal protective equipment, to make sure our workforce trusted that we and the government were concerned about their health and safety as we worked to build the equipment necessary to keep our armed forces safe.

That has now evolved into a set of workforce challenges across the industry with respect to people’s prioritization of work-life balance, and that’s created challenges of its own. BAE Systems has worked to try to be as flexible as possible in that environment. Let’s face it, there are things you can do in a hybrid way, and there are things where you have to be [there]. You can’t repair a ship from your living room. You can’t build an electronic warfare system from your kitchen table. And you can’t work on highly classified things in a remote setting.

Now, the more recent challenges we face are inflation up and down our supply chain.

Has the supply chain crunch the industry experienced in 2020 and 2021 started to ease?

Things seem to have stabilized on the grand scale; however, there continue to be new challenges mounting. COVID shone a light on how susceptible the industry was to supply chain disruption, because COVID rippled up and down through every layer, and particularly in smaller businesses where you take out five or 10 people and you basically shut their production line down for a period of time.

And now as we’ve come to grips with that, then Ukraine hits and that creates new set of challenges with respect to raw materials and access to some of the supply chains outside our country and in areas that are affected by the conflict. So it just seems like one domino after another. And COVID’s impact had a ripple effect through to the ultimate production of microelectronics.

Now you have an industry that’s trying to catch back up as demand is starting to climb significantly. And so we’re still feeling some of that. I think many of us in industry have found ways to work around it to the best of our ability, but we’re nowhere near where we were pre-COVID. [Microelectronics is now] where we’re having the most [supply chain] trouble.

The Air Force is increasingly focusing on the potential for teaming autonomous aircraft with manned fighters or bombers. Has this prompted BAE to focus more resources on its autonomous sector?

We’ve been involved in autonomy, in one form or another, for a couple of decades. We are on a series of programs, some of them we can talk about, some of them we can’t, with respect to manned-unmanned teaming. We have a business that has been doing flight controls for aircraft, both commercial and military, for decades. So that has positioned us well for this kind of manned-unmanned teaming future.

We’ve been tracking [Air Force] Secretary [Frank Kendall’s] interest in this and briefed him on some of the initiatives and technologies that we’ve been working on. We think there’s some real potential there. The warfare of the future will increasingly depend on those kinds of scenarios, where you’re able to mix manned assets with unmanned to increase firepower and reduce the risk to human life.

BAE is handling the electronic warfare components of the Air Force’s Compass Call recap. How is EC-37B going?

Really well. Compass Call’s mission has been a bit below the radar, but it has been used in every major conflict of the last 40 years. And it is a critical mission. It performs a series of electronic warfare missions from jamming to suppression of enemy air defense, etc. The EC-37B will be able to fly higher and faster [than the old Compass Call EC-130s]. The EC-130, from a maintenance standpoint, was pretty costly with some of these aging aircraft. And so it’s time to change the packaging for Compass Call.

We’ve been introducing a series of new technologies we call SABER, which is the backbone of Compass Call. It stands for [Small] Adaptive Bank of Electronic Resources. That’s the core of this standoff jamming capability that gives Compass Call its edge. One of the things we’ll feature at Farnborough is an exportable version of that. I think standoff jamming as a mission, has quite a bit of relevance in some of these future fight scenarios. And so we’ll be able to bring our standoff jamming capability into the international arena.

The new Compass Call will have a mix of new electronic warfare systems combined with legacy systems transplanted from the old EC-130s. Have there been any issues integrating the old systems with the new?

Surprisingly few. This plan to repackage Compass Call into a new platform had been under way for some time, and so they anticipated a lot of the challenges.

For 40 years, this has been a critical system. Over that time, we’ve been working as the mission systems integrator to continue to evolve that system. One of the things about electronic warfare is, the minute we think we’ve got it bulletproof from an electromagnetic standpoint, our adversaries come up with something new. So there’s this continual path of understanding and evaluating and assessing our ability to counter these evolving threats.

Are there any areas of concern you see in the debate over the 2023 budget?

Congress is recognizing a couple of things. One, the effects of inflation on the buying power of the services, as well as the need, on the basis of the National Defense Strategy priorities, to make sure we are creating the opportunity to modernize for the new and sustain the legacy [systems] in the process. You’re seeing upward pressure on the budgets pretty much across the board as it’s moving its way through the committees. Much to be seen yet, but it feels like it’s moving in the right direction.

Do you expect the inflationary pressures on the Defense Department to result in slightly lowered procurement amounts for key weapons systems in 2023?

It’s going to depend. Inflation will have a variety of impacts across the broader portfolio, and it’s all going to be about trying to find the right balance. In some instances, that will mean recognizing that inflation will have an upward trajectory on prices that will be paid for the same number of aircraft or systems.

In other instances, there will be a balancing act around how far can that money go? What can we afford? Each of the services are working through their sense of that, but I think Congress recognizes that the budget needs to account for the inflation that we’re experiencing, which we haven’t seen in the better part of 40 years. There’s a number of factors at play working its way into the decision, much as you and I and everyone who is paying for gasoline and groceries these days is experiencing.

Stephen Losey is the air warfare reporter at Defense News. He previously reported for Military.com, covering the Pentagon, special operations and air warfare. Before that, he covered U.S. Air Force leadership, personnel and operations for Air Force Times.

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