Every year Singapore's Shangri-La Dialogues bring together the elite of the Asia Pacific defence establishment. It is an opportunity for defence ministers, senior officers, and the defence industry to discuss Asia's strategic challenges and opportunities - and, behind closed doors, hold meetings about weapons.
One attendee this year was Dennis Muilenburg, president and chief executive of Boeing Defense, Space & Security. In a media roundtable he dealt with a range of questions from fifth-generation fighter developments in Asia, India's medium multi-role combat aircraft (MMRCA) competition, and cyber attacks.
This year has seen fifth-generation fighter developments in Asia, most notably the Chengdu J-20. How does this hurt or help sales for the F/A-18 E/F Super Hornet?
It is important to recognise that our customers in the region are interested in being able to field the most advanced technologies and to do this cost effectively. Sometimes the terminology around fourth and fifth generation is confusing. It tries to categorise things by individual platforms instead of the technologies they are fielding.
The Super Hornet deploys the most advanced technologies available today. The US Navy will fly it up to 2035 and it will be operated in tandem with the Lockheed Martin F-35 throughout that timeframe. It is important not to categorise things too tightly by this generational terminology. Instead, it's important to look at the technologies that are actually brought to the market place.
Cost and schedule are also important for our customers. We've delivered roughly 500 Super Hornets, on cost and on schedule. We also know exactly what the Super Hornet costs to support, and it's a lower cost than other systems out there today. The combination of low procurement and low support costs is important to our customers.
What role could Japan have in the Super Hornet international roadmap, and how confident are you that Tokyo will make a decision in the F-X fighter competition this year?
Japanese industry will play an absolute fundamental, foundational role in the programme. We have some very strong industry partners in Japan. We expect to leverage these existing partnerships and capabilities for the F-X programme. Partnership is an absolute fundamental aspect of how we approach the business. Second, in terms of schedule, we are confident things will move forward this year. The key is to provide a low-risk solution with the most advanced technology. We feel the F/A-18 E/F does exactly that.
What is Boeing's revenue in the Asia-Pacific? Who are the biggest customers and what do they buy from you?
Our defence business overall last year was about $32 billion. Roughly 17% of this was sales outside the USA. Half of this 17% was in the Asia-Pacific region. Our large customers in the region include Japan, Australia, Singapore, South Korea and India. The revenue is broad-based across all these customers, and it spans product lines from fighters to C-17 transports and rotorcraft such as the CH-47 Chinook and AH-64 Apache. We expect the overseas portion of defence revenue to be 25% by 2015 or earlier. This growth will be driven primarily by the Asia-Pacific and Middle East, split evenly between the two.
The F/A-18 E/F was one of the aircraft India eliminated from the MMRCA. Is this a closed chapter for you?
It is a closed chapter for us. While we were disappointed with the loss, we understand the situation. We respect the decision, and we've moved our focus to other business in India. Even though we were not selected in the fighter competition, we're making strong progress with our Indian customer. The P-8I Poseidon and C-17 are examples of this, and the Apache and Chinook have undergone successful field trials. Our commercial aircraft business has enjoyed great success in India. We see India as a long-term sustained market and partner for Boeing.
What is the delivery schedule of the C-17 in India?
The aircraft will be delivered in the 2013-14 timeframe. This is the schedule India has asked for and it fits well with our current line production rate. We are ramping down production of C-17s from 15 to 10 a year. We think 10 a year is a sustainable rate, and the Indian procurement schedule fits very nicely with that 10-a-year profile.
Does the elimination of both the F/A-18 E/F and Lockheed Martin F-16IN from the MMRCA suggest the USA needs to relax its export policies for sensitive technologies?
I wouldn't jump to that conclusion. We were disappointed with the results, but the US administration worked very closely with us on technology release. The administration has been very diligent about export reforms, and these have enabled US industry to do business around the globe and build industrial relationships. I don't see (export controls) as a limiting factor in the India campaign, but export reform is something we'll continue to work with the government on. It's a mutual interest area for government and industry, but I don't see it as a pivotal factor in the India fighter campaign.
How to do you deal with safety perceptions surrounding the MV-22 Osprey? How much prospect for sales do you see for the MV-22 in this region?
The MV-22's track record is outstanding. If you look at its track record in Afghanistan and Iraq its safety record is excellent. While there was publicity around issues early in the programme, these issues have been resolved, and the aircraft is proving itself today as a very safe and effective aircraft. In many cases it brings a unique range and payload capability to operations that can't be matched by any other asset.
Second, in terms of international opportunity, because of its unique capabilities in the long run we do see international opportunities for the MV-22. We continue to ramp up our production capacity to satisfy US needs, and as we reduce costs and improve capability, in the long run we will have opportunities around the world.
Has Boeing suffered Cyber attacks recently?
Boeing is a global enterprise and we operate in the cyber world around the clock. As a public enterprise we are under a continuous state of cyber attack and cyber probing. That is the nature of global business today. Over the last decade, knowing that this is a risk to our business, we have built up cyber defence capabilities that our world class.
Can you update us on the F-15 Silent Eagle? Will it benefit from the problems the F-35 is having?
The F-15 Silent Eagle is another excellent offering for international customers who are looking or leading-edge technology at a reliable cost and schedule. We've conducted a series of flights tests with Silent Eagle over the last year, including weapons launch from the internal weapons bay, and we have high confidence in the technology. We see it as another example of the growth capacity that the F-15 platform brings to the market place. We continue to integrate advanced technology into the F-15, keeping it on the leading edge, and the same time being able to deliver it with cost and schedule certainty. This is attractive to international customers, and attractive to customers in the region.
What are the international opportunities for Silent Eagle?
We think the Silent Eagle is an excellent match for the requirement in South Korea. And the development of that aircraft includes industrial participation from our partner Korea Aerospace Industries. We bring technology, industry participation, and cost and schedule certainty to the customer.
The navy has said the F-35 could replace the F-18 rather sooner than expected. Can you address this? Also what is the status on the advanced bomber programme?
Last year we signed a contract with the navy for 124 Super Hornets, and this speaks to the confidence our navy customer has in the Super Hornet. The 2011 defence bill in the USA included nine additional Super Hornets for defence structure needs of the US Navy. We also see continuing strength for Super Hornet buys domestically and in fiscal year in 2012.
Fiscal realities and slips in the F-35 programme have bolstered some of the near-term Super Hornet purchases. The navy's current plan will operate Super Hornets off US carriers through 2035. In fact super Hornets at 2035 will comprise two-thirds of the aircraft on US carriers, running in tandem with the F-35. Nobody should view the F-35 as a replacement for the Super Hornet. It's not, it will replace the classic Hornets. The Super Hornet will continue to bring leading edge capability to our navy customer for decades to come. Earlier this year the US announced the intention to move forward with a long range penetrating bomber. We're encouraged by this and think its an important programme. We'll continue to stay engaged as the requirements firm up.
Can you update us on Boeing defence the middle east?
We see this as a strong growth area. Saudi Arabia is obviously a very important customer. It is interested in F-15s, Apaches, and the AH-6. Across the region there is also interest in fighters and rotorcraft. We are very encouraged by last year's purchase of six C-17s by the UAE. We delivered the first of these six last month. Qatar has a couple of C-17s and they've already been used in humanitarian relief missions around the world.