#AUVSI: Analyzing the UAS analysts

All week at the AUVSI convention we heard the same message: the US Department of Defense (DoD) wants more unmanned aircraft systems (UAS). Budget cuts may be coming, but the demand for the persistence and relative affordability of UAS will only increase.

Or perhaps not.

This blogger moderated an AUVSI super-panel of UAS market experts this morning. It included Phil Finnegan of the Teal Group, Derrick Maple of IHS/Jane’s, Wayne Plucker of Frost & Sullivan and Ron Stearns of G2 Global Solutions. It was like the Traveling Wilbury’s of UAS panels — and, um, that’s a compliment from this blog. After one week of AUVSI enthusiasm, their analyses of DoD and global budget trends was like a dose of cold water.

Their consensus opinion is that DoD spending on UAS may only slightly increase over the next 10 years, or it may just level off. That might be a best-case scenario. The analysts based their conclusions on Fiscal 2012 budget request documents. That’s the latest data available, but it still doesn’t include a roughly $330b, 10-year, defence spending cut approved under the recent deal to lower the debt ceiling. And it also excludes the outcome of the “super committee” in Congress that must find $1.5t in new budget cuts, or, if they fail, trigger mandatory, across-the-board cuts that could siphon another $600b off DoD’s 10-year spending plan.

That is not to suggest that the DoD has lost its appetite for all-things-unmanned. The US Air Force is planning to replace 33 U-2s with 24 RQ-4 Block 30s within five years. The Navy wants to replace the EP-3E Aries with its 22 onboard Mk-1 eyeballs with a family of UAS by the end of the decade. Several AUVSI exhibitors are ramping up to sell potentially hundreds of unmanned, long-endurance helicopters to the army and navy in seven or eight years. Unmanned bombers could be flying off carrier decks in seven years. So the interest is still there. It’s just not reflected in DoD’s budget plans.

Meanwhile, UAS spending in the rest of the world is expected to grow significantly, according to Finnegan and Maple. Maple estimates that UAS spending outside the US could double in the next decade, which is led, of course, by China.

None of this bodes well for the US supply chain. With their home market stagnating on military sales, they must look to a still highly uncertain commercial market or military export customers. The former is still forbidden by the US FAA, and the latter has not been especially kind to US manufacturers, especially when facing competition by Israel. General Atomics Aeronautical Systems, Inc., (GA-ASI) thought they had a great chance to sell the MQ-9 Reaper to France, but the French selected a Dassualt bid offering the Israel Aerospace Industries (IAI) Heron TP, Finnegan said. Israel also has taken a market leadership position in South America, Maple said.

Not surprisingly, US industry wants more freedom to compete in fast-growing, foreign UAS markets. Northrop Grumman CEO Wes Bush made his keynote address on Wednesday a call for export reform. US companies may not enjoy a significant technical advantage over foreign competitors in the UAS market, so there could be more pressure to curb export controls that diminish the technical quality of US bids.  

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