The first submarine (S41) of a batch of four, arrived in Alexandria’s Ras El-Tin naval base on 19 April. The new submarine, manufactured by German company ThyssenKrupp Marine Systems, sailed from the German city of Kiel at the end of March.

Egypt 209-1400

According to the Egyptian press, the Egyptian navy undertook exercises using the submarine on 18 April, ensuring its readiness to join the fleet.

Similar to the South African submarines, these submarines have a dived top speed of 21.5 knots. They are equipped to launch both missiles and torpedoes.

In May 2016, the US State Department agreed to sell to Egypt via a foreign military sales (FMS), twenty Harpoon UGM-84L Block-II encapsulated missiles at a cost of $143 million including services for five years. At the time, the DSCA (Defense Security and Defense Agency) indicated that these weapons were for supporting the Egyptian Navy’s Type 209 submarines.

Even if South African submarines are equipped with SUT 264 torpedoes, we could fairly think Egyptian boats might fire DM2-A3 torpedoes like Colombia, with its German Type 209/1200. Another option is the American Mk-48 torpedoe. Indeed, Egyptian Romero submarines have already Mk-48 Mod4M or Mk-48 Mod 6AT torpedoes in their inventory.

According to the German press, the second submarine (S42) is currently under trials. The agreement between Egyptian authorities and TKMS foresees that the two next units will be delivered from 2018 onwards.

Romero’s replacement program:

For over 15 years, Egypt has looked for replacing its Chinese Romero-class submarines delivered in 1983 and 1984.

Early in the 2000s, Egypt was keen to procure second-hand submarines. In December 2004, preliminary negotiations with Germany for the acquisition of Type 206A submarines Germany took place. Egyptian authorities were already interested to get up to four submarines. Other studied options included Greek Type 209/1100 submarines and even three Heroj-class submarines from Montenegro.

After several years of negotiations, due to the fact Germany already supplies Dolphin-class submarines to Israel, both governments reached an agreement in summer 2011 for 2+2 (2 and 2 in option) Type 209/1400 submarines for €920 million. In February 2014, rumours indicated that Egypt wanted to activate its option from TKMS for a cost of €500 million notwithstanding the alleged opposition of former Federal Minister of Economic Affairs and Energy, Sigmar Gabriel who vowed a much more cautious approach to licensing arms exports. In 2015, the German press unveiled the option was exercised.

Between 2011 and 2015, other rumours indicated Egypt was interested by Russian submarines into a wider package with aircrafts, artillery systems, etc.

Written by Julien Brugnetti for OIDA Strategic Intelligence


Unmanned maritime vehicle developer rides wave of success with defence customers

Contributor:  Andrew Elwell
Posted:  08/22/2012

What if you could put a robot in the middle of the ocean and leave it to remotely scan the seas continuously for a year? What if a Navy could do that and significantly increase the amount of maritime data it collates, while saving money on operational costs?

“Defence, and the U.S. government sector in general, has continued to be a very quick growing sector for us,” said Bill Vass, CEO of Liquid Robotics Inc., a California-based company developing self-propelled and continuous Unmanned Maritime Vehicles (UMVs). “The need for a platform that collects ocean data, whether it’s for persistent surveillance or to act as a communication hub, is getting greater and greater all the time. The cost of doing that [via traditional methods] is going up all the time too, so we’re a game-changer from a cost perspective.”

The company, which develops UMVs that use wave and solar energy to remotely power themselves for up to 12 months at a time, recently created a new subsidiary, Liquid Robotics Federal LLC, to focus on its rapidly growing government and defence business.

“With the new federal subsidiary we’re expecting to do some deals with the large defence contractors, and we’re already talking to quite a number of them. It will accelerate our business in the defence sector,” Vass told Defence IQ in an exclusive interview.

“Establishing a dedicated federal subsidiary and attracting as accomplished a government market executive as Grant Palmer, provides the right infrastructure and the right leader, at the right time to address the growing demands of the U.S. government to monitor and protect America’s maritime security interests and enable advanced scientific missions.”

The company’s autonomous platform is known as the SHARC (Sensor Hosting Autonomous Remote Craft) to its defence clients – commercially it is called the Wave Glider – with the core platform focused on surveillance and communication. However, as the technology matures the company will look to develop a range of different sub-systems that can be used for a wide variety of applications.

Vass explained that “as more people hear about us and see what we’re doing, the more ideas they have about how they could apply the platform.” But ultimately, Vass said, “our goal is to do any type of data collection, monitoring and surveillance that you would do with a boat.”

Navies are looking at SHARC for applications including long duration surveillance at sea, vessel support, and it can even act as a communication hub, like an ocean-based GPS satellite.

“If you’re planning any type of operation in the ocean, knowing the nowcasting and what’s going on at a specific location is very important. These applications are being used by the U.S. Navy and other navies around the world.”

On the commercial side, where Vass has recently signed a deal with Schlumberger to form the Liquid Robotics Oil & Gas joint venture, the applications are vast. For example, the company was recently the subject of a Discovery Channel feature where its technology was being used to track sharks and view them in real-time via an iPad app.

The vast majority of the company’s federal business is in the defence sector, with the split being around 70% defence, 30% commercial and civilian according to the CEO. This is a trend Vass expects to continue, with defence being the company’s “largest and fastest-growing customer base.”

The role of unmanned aerial systems in the military has increased significantly over the last decade. If the maritime community embraces this technology to anywhere near the same extent over the next few years, Liquid Robotics could be the next big company to emerge from Silicon Valley.

Source: Defence iQ

Pentagon Contract: Lockheed Martin

August 28, 2012

Lockheed Martin Corp., Lockheed Martin Aeronautics Co., Ft. Worth, Texas, is being awarded a $206,821,828 modification to a previously awarded cost-reimbursement contract (N00019-12-C-0070).

This modification provides for the System Development and Demonstration Phase I Increment 1, in support of F-35A Conventional Take Off and Landing (CTOL) Air System for the Government of Israel under the Foreign Military Sales Program.

This modification includes the development of the hardware and software for the Israel F-35A CTOL Air System from the initial requirements development to the Preliminary Design Review (PDR).

In addition, the post PDR of hardware only, will continue through finalized requirements, layouts, and build to prints, including production planning data.

Work will be performed at Fort Worth, Texas (60 percent); Los Angeles, Calif. (20 percent); Nashua, N.H. (15 percent); and San Diego, Calif. (5 percent), and is expected to be completed in May 2016. Contract funds will not expire at the end of the current fiscal year.

The Naval Air Systems Command, Patuxent River, Md., is the contracting activity.

Source: U.S Department of Defense

Newport News Shipbuilding Opens New Submarine Facility

August 24, 2012


Huntington Ingalls Industries (HII) announced today that its Newport News Shipbuilding (NNS) division opened a new, 65,000-square-foot facility, called the Supplemental Module Outfitting Facility (SMOF), to facilitate the Virginia Class Submarine (VCS) Program’s two-submarines-per-year build plan.

« In 2011, Congressional approval to move forward with the two-submarines-per-year build plan was achieved, » said Chris Miner, NNS’ VCS Program director. « This facility is a reflection that we’ve arrived, and we look forward to working with our partner, General Dynamics Electric Boat, to improve upon and increase the pace by which we equip our Navy with Virginia-class submarines. »

The SMOF, which cost about $100 million, will be used to supplement the current Module Outfitting Facility (MOF) in building large modules for Virginia-class submarines. It includes four main bays for construction, as well as 17 specialized work spaces, offices and areas for lunch breaks. Partitioned rooms will supply space for machine tooling and other services within the same building, and flex rooms will offer quiet spaces for crew meetings, safety talks and conferences. Supervisors will also have access to portable offices on the shop floor, providing direct communication to employees.

« Employees are excited for the improved quality of life and easy access to services and materials, » explained test electrician Dale Zink, who will move from the MOF to the SMOF. « Productivity is going to go up because there will be access for better communication from supervisor to employee because of the new layout. »

To improve productivity, the facility has two new cranes that can move the entire length of the facility and are capable of lifting up to 20 and 120 metric tons, respectively. Additionally, the SMOF is equipped with new fixed and re-configurable staging that can be easily positioned to the submarine modules.

The U.S Navy’s newest class of attack submarines, Virginia-class submarines use advanced technologies to increase firepower, maneuverability and stealth. The 377-foot-long submarines are capable of submerged speeds of more than 25 knots and can stay submerged for up to three months at a time. Through a partnership between NNS and General Dynamics Electric Boat, this program has been recognized as the best shipbuilding program in the Navy and one of the best acquisition programs in the Department of Defense.

Political games continue to swirl around the F-35

By Lee Berthiaume, Postmedia News

August 26, 2012

More than four months after the auditor general raised concerns about the Harper government’s handling of the $25-billion F-35 program, the political spin continues — with no end in sight.

This week was no exception as the NDP held a day of “hearings” into the program, while Defence Minister Peter MacKay’s parliamentary secretary claimed the government never said it had decided to buy the stealth fighter.

And that was only after a senior Lockheed Martin official said the company is still planning its deliveries of 65 F-35s to Canada — the Harper government’s promise to review the purchase notwithstanding.

Defence analysts say the political games surrounding the F-35 are the exception and not the rule as other countries looking to purchase the stealth fighter are engaging in more serious, open discussion about the aircraft.

They worry Canadian taxpayers are tuning out debate on a matter of serious, long-term national security importance to the country — which might suit the Harper government just fine.

“The government probably calculates that if we started to have a real adult conversation about why we want to spend billions of dollars on a fifth-generation fighter in this particular financial climate, Canadians might not agree,” said Kim Nossal, director of Queen’s University’s Centre for International and Defence Policy.

Many had hoped Auditor General Michael Ferguson’s report on the F-35, which was released at the beginning of April, would present an opportunity to push the reset button after years of defending the increasingly troubled stealth fighter program.

The Harper government committed to conducting a complete review of the stealth fighter program and analyzing other options while pledging full transparency and oversight on things like costs.

It wasn’t long, however, before deadlines started to be missed.

For example, the Harper government had promised to release full cost estimates by the beginning of June, but now that won’t happen until late fall or early winter.

The government insists it is following a seven-step plan that includes freezing funding for the program and conducting a review, but analysts say there has been little evidence alternatives to the F-35 are being considered.

Then this week, Chris Alexander, parliamentary secretary to the defence minister, denied in an interview that the government had ever decided to buy the F-35 — and accused opposition parties of sowing confusion on the issue.

This was despite a long public record showing Prime Minister Stephen Harper and several cabinet ministers repeatedly committing to and defending the stealth fighter since 2010.

“Governments do this all the time, and it’s totally understandable that they would try to change the conversation,” said University of Ottawa defence expert Philippe Lagasse, who participated in the NDP’s hearings on the F-35 on Tuesday.

“The problem is there’s so much public evidence, that really you’re inviting mockery.”

But while analysts agreed Alexander’s comments were bizarre, they said they serve the purpose of muddying the waters and making it difficult for average Canadians to tell who’s telling the truth.

“As a taxpayer, the annoyance is the Conservative government hasn’t been entirely straight,” said Nossal.

“Instead what the government has done is kind of spin this in a way that is actually quite confusing to ordinary Canadians.”

Analysts say other countries considering the F-35, such as Australia, the United Kingdom and even the United States, have had much more open, frank discussions about the pros and cons of the F-35, which is facing cost overruns and production delays.

But there’s also a sense opposition parties have been contributing to the problem as well by trying to score political points out of the issue.

“The opposition is seeking to maximize the government’s political discomfort,” said Nossal.

“The fact is that both sides, in order to achieve their particular political, electoral objectives, are engaging in a certain degree of elasticity with how one interprets things.”

Ironically, analysts say, this may have played into the Harper government’s hands by turning Canadians off the issue.

“For the government, it’s ideal,” said James Fergusson, director of the University of Manitoba’s Centre for Defence and Security Studies. “It doesn’t allow you to have an open and balanced critical assessment.”

The concern is the politicking has turned average Canadians off at a time when they should be paying more attention than ever.

“Here we have a major procurement, which is a lot of money, which has big implications for the country, for the economy, for the military, which you would think in Canada should be a big issue for us,” Fergusson said. “But it’s not.”

Source: Ottawa Citizen

US moves to arm Indonesia’s growing F-16 fighter fleet

Written by Reuters

Monday, 27 August 2012

President Barack Obama’s administration has proposed to sell air-to-surface guided missiles and related gear to equip Indonesia’s growing fleet of U.S.-built F-16 fighter aircraft.

The sale, valued at $25 million, would be the latest U.S. move to boost security ties with friends and allies in a region stirred by China’s growing military clout and territorial assertiveness.

Indonesia has requested 18 AGM-65K2 « Maverick All-Up-Round » missiles, 36 « captive air training missiles » and three maintenance training missiles, plus spares, test equipment and personnel training, the administration told the U.S. Congress in a notice dated Wednesday, Reuters reports.

The AGM-65 Maverick, built by Raytheon Co, is designed to attack a wide range of tactical targets, including armor, air defenses, ships, ground transportation and fuel storage facilities.

« The Indonesian Air Force needs these missiles to train its F-16 pilots in basic air-to-ground weapons employment, » the Pentagon’s Defense Security Cooperation Agency said in the notice to lawmakers.

The arms sale would contribute to making Indonesia « a more valuable regional partner in an important area of the world, » the security agency added.

Such notices of a proposed sale are required by law and do not mean the sale has been concluded.


The United States is giving, not selling, Jakarta two dozen second-hand F-16C/D fighter planes to strengthen bilateral ties and foster what the Pentagon has called a « much-needed » capability to protect Indonesian air space.

Obama and President Susilo Bambang Yudhoyono of Indonesia announced the F-16 transfer near the end of a nine-day Asia-Pacific tour that Obama used in November to re-emphasize U.S. interests in the region.

The F-16s are decommissioned and no longer part of the U.S. Air Force inventory. Once retooled and upgraded, they will boost Indonesia’s « interoperability » with the United States, the Defense Department said at the time.

Interoperability is the extent to which military forces can work with each other to achieve a common goal. The refurbished aircraft add to Indonesia’s existing fleet of 10 earlier-model F-16s.

The quantities of missiles being sought by Indonesia would support both the existing fleet and the 24 being provided as U.S. surplus, the notice to Congress said.

Jakarta is paying up to $750 million to upgrade the second-hand Lockheed Martin Corp fighters and overhaul their United Technologies Corp’s Pratt & Whitney-built engines.

Indonesia, the largest country in Southeast Asia and the world’s most populous Muslim-majority nation, is only one part of the growing U.S. emphasis on the Asia-Pacific region for national-security planning.

The United States also is building Guam as a strategic hub, deploying up to four shore-hugging littoral combat ships on a rotational basis to Singapore and preparing what is to be a 2,500-strong Marine Corps task force rotation as part of a tightening military partnership with Australia.


Lockheed and Oshkosh win US military’s JLTV EMD contracts

27 August 2012

Lockheed Martin and Oshkosh Defense have each been awarded a 27-month engineering and manufacturing development (EMD) phase contract for the US Army and Marine Corps’ Joint Light Tactical Vehicle (JLTV) programme.

The contract share for Oshkosh and Lockheed amounts to $56.4m and $66.3m respectively, and involves delivery of 22 prototypes by each company within 12 to 14 months from the date of award, plus their support during government testing and evaluation of the prototypes.

First time bidder Oshkosh had proposed a variant of its latest generation Light Combat Tactical All-Terrain Vehicle (L-ATV) for the contract, while Lockheed submitted a substantially lighter and more affordable version of its technology demonstration (TD) model, which already proved its capabilities during government testing.

Oshkosh Defense Joint and Marine Corps Programs vice president and general manager John Bryant said,  »The Oshkosh JLTV solution was designed with a purpose – to keep soldiers safe on future battlefields with unpredictable terrain, tactics, and threats. »

Lockheed Martin missiles and fire control business ground vehicles vice president said,  »Two JLTVs have been produced on an active manufacturing line, so we are already well prepared for rapid production and testing. »

Prototypes to be delivered by Lockheed include a utility carrier and shelter (JLTV-UTL), a two-seat prime mover with an open bed, and the four-seat general-purpose vehicle (JLTV-GP), while Oshkosh did not provide details about the variants.

Lockheed’s team includes BAE Systems in Sealy, Cummins Engine, Allison Transmission, Bosch, Meritor Defense, Lotus Engineering, L3 Combat Propulsion Systems and Vehma International of America, whereas Oshkosh competed independently for the EMD contract.

A third $64.5m JLTV contract was secured by AM General, which offered its blast resistant vehicle-off-road (BRV-O), by beating Navistar Defense, General Dynamics and Britain’s BAE Systems.

The multi-billion dollar JLTV programme is aimed at replacing the Army and Marine Corps’ fleet of ageing high-mobility multipurpose wheeled vehicles (HMMWVs), which have been in active service for over 25 years.

Around 50,000 vehicles are expected to be acquired by the army with options for additional units, while the USMC has plans to purchase 5,500 vehicles.

Source: Army Technology

Canada – Check out other jets

By Peter E. Greene, The Windsor Star

May 28, 2012

As someone who has worked in production and overhaul of military aircraft, I have been avidly reading the various letters and opinion/guest columns that have appeared in your paper, for and against the Canadian government’s decision to buy the F-35 aircraft for the Royal Canadian Air Force.

The latest salvo condemning the F-35 program comes from retired colonel Paul Maillet, an aerospace engineer and former fleet manager for Canada’s CF18 fleet.

Paul Maillet called the F-35 a « serious strategic mismatch » to Canada’s military needs.

The drawbacks mentioned were the F-35’s single engine, low range, low payload and low manoeuvrability .

The F-35 has been shrouded in controversy, cost overruns and delays, yet the Canadian government and Department of National Defence are adamant to go ahead with this aircraft deal.

Auditor General Michael Ferguson gave a highly critical report of the Defence Department’s handling of the F-35 project. Why doesn’t the Canadian government follow a tendering and evaluation process for new aircraft that it wants to purchase?

No doubt the military industrial complex in North America has a powerful lobby which will bring pressure on our government and DND to buy this aircraft. Canada should be looking at other aircraft that several countries have to offer.

It is interesting to note that rising superpower India, which was looking to buy a medium multi-role combat aircraft for the Indian air force, started a tendering process and evaluated six aircraft from different countries over a period of five years.

They evaluated the U.S.-made F/A-18 Super Hornet and F-16 Super Viper jets, the Rafale made by Dassault Aviation of France, The Eurofighter Typhoon made by a European consortium, the Russian MiG-35 aircraft and the Saab Gripen made by Sweden.

U.S. President Barack Obama made a special visit to India to lobby its government to buy the F/A-18 Super Hornet. It was a hotly contested race of strict technical and commercial evaluation and the two finalists were the Rafale of Dassault Aviation and the Eurofighter Typhoon.

The final clincher was the cost evaluation and the Rafale aircraft was selected. President Obama was disappointed and offered the F-35 aircraft to India.

The Indians rejected the F-35 and went ahead with their deal to buy 126 MMRCA Rafale fighters from France for $20 billion. Dassault will supply the first 18 aircraft by 2015 and the rest will be manufactured under licence by India.

This will be the longest opentender military aviation deal in the world.

Rafale is a twin-jet, semi stealth combat aircraft capable of carrying out a wide range of short-and long-range missions, including ground and sea attacks, reconnaissance, high-accuracy strikes and nuclear strike deterrence. Rafale can carry payloads of more than 9t on 14 hardpoints for the air force version, with 13 for the naval version.

The range of weapons includes: Mica, Magic, Sidewinder, ASRAAM and AMRAAM air-to-air missiles; Apache, AS30L, ALARM, HARM, Maverick and PGM100 air-toground missiles and Exocet/ AM39, Penguin 3 and Harpoon anti-ship missiles. The Rafale is a NATO-compatible aircraft and has flown in NATO operations over Tajikstan, Afghanistan and Libya.

Canada should evaluate more aircraft under a tendering process rather than making a hasty and costly mistake by going for the overpriced and untested F-35 aircraft. The Rafale aircraft offers high value for money.

It is high time that our defence department jettisoned the canopy, ejected and bailed out of the F-35 project.

Peter E. Greene lives in Windsor.

Lockheed’s F-35 fighter jet under renewed pressure

By Andrea Shalal-Esa

WASHINGTON | Tue Feb 7, 2012

(Reuters) – Key U.S. senators raised fresh questions about Lockheed Martin Corp’s $382 billion F-35 fighter program on Monday as the Pentagon’s top weapons buyer underscored deep flaws in the way the multinational arms program was set up from the start.

The unusually blunt talk about the most expensive U.S. arms program came a week before the release of a fiscal 2013 budget plan that is expected to postpone funding for 179 warplanes until after 2017, a move that has Australia and other international partners questioning their own procurement plans.

Cuts to the F-35 program are part of the Pentagon’s plan to start implementing $487 billion in defense spending reductions over the next decade.

The leaders of the Senate Armed Services Committee blasted Defense Secretary Leon Panetta’s decision to lift a « probation » imposed on the Marine Corps variant of the F-35 a year ahead of schedule, saying the move appeared premature and was not vetted with Congress.

Senator Carl Levin, the committee’s chairman, and Senator John McCain, its top Republican, cited continuing cost overruns on the F-35 program and said Panetta had wasted a chance to « focus Lockheed Martin’s attention and disrupt ‘business as usual’ in this multibillion-dollar effort. »[ID:nL2E8D6IKK]

They said Lockheed’s fourth production contract for 32 F-35 jets was expected to overrun its target cost of $3.46 billion by $245 million, and that the cost of retrofitting planes already built would add $237 million more to the program’s budget.

Panetta last month threw his support behind the F-35B model, which takes off from shorter runways and lands like a helicopter, during a carefully orchestrated visit to a Maryland military base where the warplanes are being tested.

But a week later, he told reporters the Pentagon would further slow procurement of new F-35s to allow more time for development and testing — news that could prompt the eight international partners to cut or delay their orders as well.

Australia has already said it is rethinking its plans to buy 12 jets, Turkey has put off buying two jets, and Italy may follow suit, according to FlightGlobal. The other partners are Britain, Denmark, Norway, the Netherland, and Canada.


Frank Kendall, the Pentagon’s acting acquisition chief, said the U.S. military was committed to the program, but he told industry executives at a Washington think tank that the United States was clearly « paying the price » for starting production of the new jets years before their first flight test.

« Putting the F-35 into production years before the first test flight was acquisition malpractice. It should not have been done, » Kendall said in remarks after a speech at the Center for Strategic and International Studies.

Initial development work on the fighter began in 1996 under the Clinton administration. Lockheed then beat out Boeing Co to win the program in 2001, early in the administration of former President George W. Bush.

Kendall said the plane’s problems so far were typical of those seen with other fighter jets and there was nothing that would prevent continued production at the current low rates.

The F-35 has completed about 20 percent of its required testing and should accomplish an additional 15 to 20 percent of testing in each of the coming years, Kendall said.

Lockheed, which says the F-35 will account for 20 percent of its revenues once it reaches full production, insisted that the program was continuing to make good progress, citing Panetta’s decision to lifted probation for the Marine Corp variant and better than expected flight test results for 2011.

Lockheed spokesman Michael Rein said the U.S. government’s plan for concurrent production and development would have affected any winning bidder. He noted that most fighter plane programs had some degree of this concurrency.

« Lockheed Martin has worked hard during the past decade to cost effectively meet government procurement requirements, » he said, noting that each successive batch of F-35 jets had less « concurrency » costs — the cost of retrofitting already built planes to deal with problems found during testing.

Kendall said the Pentagon had counted on improved design and simulation tools to catch possible problems before jets went into low-rate production, but those design tools failed. He said he hoped no more serious issues came up in coming years, which would allow Lockheed to increase output and cut costs.

« The key to getting the cost down on the F-35 is getting the production rate up and we need to do that as soon as we’re ready to do it, but we’re not ready to do it yet, » he said.


President Barack Obama last month nominated Kendall, who has held a series of jobs at the Pentagon since 1982, to permanently take over as chief arms buyer. The Senate must approve the nomination, but no hearing date has been set.

Kendall, who had been the deputy chief arms buyer for the past two years, said he was already working on various initiatives to rein in chronic cost overruns and schedule delays on other major weapons programs, as well as service contracts that comprise about half of Pentagon procurement spending.

He discussed measures to train acquisition officials, review and analyze requirements to understand the full cost of programs before they are launched, and underscored the Pentagon’s commitment to maintaining the defense industrial base.

Kendall also warned that there were no simple, single-point solutions, including the fixed-price contracts favored by lawmakers and Pentagon officials on the F-35 program and others.

He said the United States was not facing another « procurement holiday » and cuts to weapons programs would not be as steep as after the end of the Cold War.

But he said the cuts would approach those post-Cold War levels if lawmakers did not reverse another $500 billion in spending cuts that are due to take effect in January 2013.

Source: Reuters

(Reporting By Andrea Shalal-Esa; Editing by Tim Dobbyn and Richard Chang)

Aerospace, defense deals reach record totals in 2011

NEW YORK, Feb. 7 (UPI)

Global aerospace and defense business reached record levels in 2011, up from $22 billion in 2010 to $44 billion, despite fears it could turn out to be a bad year overall for the industry, latest data indicated.

Most fears were based on reports of a decline in defense acquisitions, which did happen but was more than offset by an aerospace boom that seems set to continue this year.

U.S.-affiliated transactions dominated activity and cross-border deals showed a significant increase.

Government cutbacks and the allied withdrawal from Iraq and reduction in military commitments in Afghanistan gave rise to warnings last year that the defense industry was headed for a downturn but the high level of aerospace transactions has weighed in to produce upbeat results.

Findings of the industry’s surprise performance came in Mission Control, a quarterly PwC US analysis of mergers and acquisition activities in the aerospace and defense industries worldwide. The report used data from the fourth quarter figures and overall figures for the year.

« We saw a wide-ranging mix of deals in 2011 as global aerospace and defense M&A activity reached record levels, » said Scott Thompson, U.S. aerospace and defense leader at PwC.

« Larger deals became more common, driven by sales of slower-growth defense businesses and private equity exits, while smaller deals drove the bulk of deal volume as major players with ample liquidity focused on acquiring growth, » Thompson said.

The aggregate deal value during the year reached $43.7 billion supported by 341 deals, compared to total deal value of $21.9 billion and 332 deals in 2010.

The 2011 record surpassed the level of transactions reached in 2007 of $42 billion.

It was a year marked by mega deals in excess of $1 billion each, one of those for a total value of $16 billion.

A big increase in aerospace deals contrasted with a decrease in defense contracts.

Both aerospace and defense manufacturers are looking to markets in Asia and Latin America for a continued growth in orders. Asian and Latin American countries, including many in peacetime conditions, are busy modernizing their forces and fleets, activities that are set continue this year.

Government cutbacks in Western countries will continue to take their toll, however.

« The uncertain outlook is causing defense contractors to further globalize in the face of growing competition for a shrinking pool of business. These trends will play a major role in deal activity as the year unfolds, » Thompson said.

However, competition in the industry is growing too, as several countries continue multibillion-dollar investments to modernize their own aviation and defense industries and enter the markets on competitive terms.

Many nations, including China, India and Brazil, are trying to take advantage of the changing conditions and develop their own industries to compete with established rivals.