The research firm Strategic Defense Intelligence has announced their Global Military Fixed Wing Aircraft Market 2015-2025 report, and it's very interesting reading. The global military aircraft market is expected to be worth US$61.2 billion in 2015 and is expected increase to US$87.5 billion by 2025, representing a combined annual growth rate of 3.64% during the forecast period. The market is anticipated to be dominated by the North America followed by Asia Pacific and Europe. As expected, The US is the largest spender with a cumulative expenditure of US$260.9 billion over the next decade.
Multi-role and transport aircraft are expected to account for 56.4% and 22.4% of the military aircraft market respectively, followed by reconnaissance and surveillance aircraft and bombers. It could be a windfall for aviation OEM and their suppliers, especially in the US.
US spending will dominate over this period, accounting for approximately one third of global spending. That is no surprise, but a major question remains regarding how that money will be spent, and whether that spending will actually but more airframes, or fewer, more capable platforms. Military aviation is at an interesting crossroads, where maturing technology in manned aircraft is up against improving reliability capability in unmanned systems. Current generation drones, basically remote-controlled surveillance/attack aircraft, have proven to be highly effective, although they're used in regions where the air-to-air and surface-to-air threat is minimal.
Northrop Grumman's RQ-4 Global Hawk is typical of the new generation of "smart" drones
Barring a major superpower conflict, that "asymmetric" battlefield environment is likely to persist, calling into question the need for highly complex, manned aircraft. If this leads to significant manpower reductions in major air arms like the USAF, expect considerable resistance from stakeholders ranging from the Pentagon to major military contractors. One possible outcome are fewer, more complex command and control drones, and a constellation of small, cheap special purpose UAV's performing reconnaissance and attack roles. This model would open the door to numerous smaller, non-traditional suppliers in the sector, particularly in the sensor and small actuator segments. De-centralization of roles adds survivability, and by definition spreads the buy over more airframes, favoring the traditional airframe and powerplant community.On the propulsion side, small gas turbine technology isn't dominated by the GE/Pratt & Whitney/Rolls Royce/CFM quartet, suggesting new opportunities for suppliers.
Why so expensive?
Drones, compared to manned military strike aircraft are low performance platforms. They're slow, not maneuverable and not very damaged tolerant. With no risk to onboard crew, it simply pays to devote weight and cost to mission flexibility, at the possible expense of some airframe losses. Like modern manned military aircraft, they're also software-heavy, with a substantial portion of the purchase price of the new UAV's locked in code, rather than the traditional airframe and powerplant.
What's going on? One issue is a lack of real technological advancement in airframes and engines in non-stealth military aircraft. With fuel burn and emissions a secondary consideration in transport airplanes, for example, it's possible for updated versions of Lockheed Martin's C-130 Hercules to stay in production for 60 years. Boeing's B-52 series is another geriatric that's still in service as is the KC-135 tanker that fuels it. The Rockwell B1 is in middle age at 40-something, along with the Fairchild Republic A-10 attack aircraft, the Boeing F-15, Lockheed Martin F-16, as well as may US Navy aircraft. Cost escalation, however, has been consistently above inflation, as a RAND study showed in 2008.
That study revealed that manufacturing costs of fixed wing aircraft has been essentially flat for decades, despite rising wages and benefits; increased aircraft complexity has been the biggest cost driver, meaning fewer units bought for a given budget. This ripples through the programs as fixed price contracts buy fewer aircraft, driving the unit cost of each plane higher. For the supply chain, the complexity problem is twofold: shorter production runs and difficulty in subcontracting work down the supply chain due to security issues with military technology.
The current F-35 multi-role aircraft is a case in point. International participation in the program was designed to minimize risk, bringing high-tech manufacturing to participating nations and lower unit costs for the USAF, the primary buyer. For smaller nations however, the increase in unit costs can quickly become unsustainable, leading to a search for alternatives. The program has as a result become a political football in the UK and Canada, but most telling is the recent embarrassing reversal by the South Korean government, who retracted a fighter aircraft competition win for Boeing's F-15 SE Silent Eagle in favor of the F-35. It is an odd reversal, since the F-35 is years away from operational capability, and many defense analysts (including at least one ex-USAF general) has stated that the Boeing product would be ideal for South Korea's needs. In Canada, in response to the criticism over program cost escalation, the Conservative government has nominally restarted the bidding process, but with the current requirement written around stealth capability only offered by the F 35, it is likely that the status quo will remain.
Is it political? With the need to keep production volumes high enough to allow the Pentagon to buy enough F 35's, the pressure on allies to stick with the program is irresistible. Interestingly, a simplification of F 35 software and avionics systems to reduce unit cost has not surfaced. The current "list" price for an F 35 airframe minus engine is approximately USD 100 million, although final program costs are difficult to determine. "Cost" in advanced military airplane procurement is calculated in multiple ways, including total program cost, lifetime cost and cost including training, spares and support. Much of the approximately 100% cost escalation in the F-35 program since 2001 has been due to software upgrades. The F-35 program is now the most expensive defense procurement program in US history. Is the F-35 program the future of fixed wing military aircraft procurement worldwide? Probably, as the expanded capability allows more missions to be flown by fewer airplanes, which in turn are substantially more complex and expensive to build, buy and maintain. Expect the same complexity/cost equation to transfer to drone programs as they progressively replace piloted airplanes over the next 20 years. For tight margin suppliers to the airframe and powerplant community, winning the order may be just the start of the battle.