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:: February 2001 Newsletter ::

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Dear Patient Clients,

Well, let’s face it—the February date above is a barefaced lie. Please excuse the late supplement. What we lack in timeliness, we hope to make up for with…oh, I don’t know what. But at least this supplement does have one somewhat notable report in it—our annual Fighter Overview, which has the temerity to actually contain policy recommendations. Yeah, that’s right. Policy recommendations. Just like a real grown up think tank.

CSIS. Brookings. Rand. Teal Group. Spot the odd guy out. And my own undergraduate and graduate diplomas, from Clown and Barber colleges, respectively, compare poorly with the Ivy parchment collected by the folks who work in the big leagues. Still, Teal has always been remarkable for its extremely high noise-to-talent ratio. We may as well join the debate, with our opinion of US tactical air power options. That’s what this overview aims to do. Have a look. Comments are welcome, and if you want a color copy e-mailed to you, let me know.

Other reports of note this month include the 777, A330, F-16, Special Mission Aircraft overview, B-1, and S-3. Very few forecast changes, however.

Next subject: Tiltrotors. You might have seen them in the news lately. Remember how rosy tiltrotors once looked? The Marines were going to buy 400+ V-22s, with every other service basically good for another 50. The technology would be spun off, with the USMC thinking about a pure tiltrotor force (V-22s and smaller, larger, and attack derivatives) by 2020. And every rich bozo announced they were putting 10 Gs down on a 609. Growth 609 variants would transport airline passengers between congested city centers, and shrunken 609s would replace the family car. Okay, maybe I’m exaggerating, but if you look at my last Rotorcraft overview, you see tiltrotors comprising over one-fifth of the market by 2009.

Well, those ambitious visions are fading faster than a dotcom executive’s hopes of early retirement. Four fatal crashes, some serious cost increases, a few coverup allegations, and a 60 Minutes hatchet job are a powerful recipe for a cancellation cocktail. The zeitgeist is suddenly very negative.

First things first. Teal believes strongly in the technical side of this program. Those crashes, while tragic, are completely normal for a totally new type of flying (compare with the advent of jets, or helicopters). They are also normal for a new type of helicopter, especially a Marine Corps helicopter. The CH-46, which the V-22 will replace, suffered eleven crashes in its first five years. As for the cover-ups, well, they may have happened, and are not excusable. But given the ludicrous budgetary and political pressure placed on the Marines, plus the fact that the Marines have staked their future identity and force structure on the new capability offered by tiltrotors, any cover-ups are understandable.

This is especially true with the return to power of Dick Cheney, the V-22’s nemesis. The on again, off again funding of the early 1990s was a result of his actions, and almost certainly affected the technical maturation of the Osprey. Everyone behind the program has reason to fear him. The line between honest opposition and embittered hatred is not as wide as people think.

Teal’s problem is purely with the market side. It’s not just Cheney. New programs, especially expensive ones, are hard to get through Congress these days. There are few defense spending hawks, and every yobbo Congressman is out to make a name for himself by attacking “wasteful” programs. The congressional Marine lobby ain’t what it used to be. Again, it does not help that Osprey unit costs have suddenly hit fortysomething million; that’s a mighty nice source of cash and political notoriety.

What are the Osprey’s chances? Well, the good old days when I would bravely forecast a program cancellation, with no regard whatsoever for my so-called career, are long past. But seriously, I think it’s 50-50. This thing is hanging by the composite skin of its teeth. When I update the program report in April, I expect we’ll know a bit more.

One option, inevitably, is the silver bullet solution. Build 50 for operational test & evaluation, and to give the special forces folks an important new capability. Then, cancel the program, and go with a new tiltrotor when we have learned more. We don’t like this solution. We have had this technology for over 40 years, and we know what we’re gonna know about tiltrotors. The only problem is finding the procurement cash. But the silver bullet solution might materialize as the only palatable compromise.

What’s the fallout if V-22 goes? First, the Marines take a hit. Their congressionally-mandated force structure has survived the post-Cold War drawdown better than any other service, largely due to the promise of Over-The-Horizon (OTH) assault technology, offered by the tiltrotor. If the V-22 goes, the Marines could find themselves forced to actually cut forces.

As for the 609, it might not die. But it would be seriously at risk. Either way, Bell Helicopter would suddenly be a shadow of its former self. It would still be number two civil player, and the AH-1Z is a promising product, but in terms of revenue Bell would be about the equal of AgustaWestland. Any alliance with them would be on much less favorable terms, and A&W might just throw in their hand with Eurocopter. Also, America’s lead in rotorcraft technology would shrink considerably—this market will become just another story of Europe overtaking the US in aerospace leadership.

But it isn’t just Europe that wins. Sikorsky wins huge. Truncated in size or not, the Marines still need a CH-46 replacement, urgently. Only Sikorsky has suitable machines—H-60s, H-53s, S-92s, or a mix. You can basically add 300-500 helicopters, or about $6-9 billion, to my Sikorsky forecast, to say nothing of aftermarket support. This, plus Boeing’s weakened state, will greatly affect the terms of a Boeing Helicopters acquisition by Sikorsky.

Yours, Until Enough People Pay Attention To My Rantings,

Richard Aboulafia
 

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