After losing several big defence contracts over the past decade – resulting in consistently falling revenues – Boeing Defense, Space & Security (BDS) has finally notched a big win.
On 31 August, the US Navy awarded the Arlington, Virginia-based division an $805.3 million contract to develop four MQ-25A Stingray carrier-based unmanned refuelling aircraft.
The fixed-price, incentive-firm target contract provides for the design, development, fabrication, test, delivery and support of the MQ-25A unmanned air vehicles, including integration into the carrier air wing for an initial operational capability by 2024. The USN could ultimately buy as many as 72 of UAVs for a total spend of as much as $13 billion.
By winning the UAV tanker contract, Boeing beat proposals from Lockheed Martin and General Atomics Aeronautical Systems. Both of those companies chose to not build a prototype before the award was announced, while Boeing manufactured a full-scale and functional aircraft, which demonstrated carrier deck taxiing, but has not yet made its initial flight.
Boeing also hedged its bets by joining General Atomics' bid as a subcontractor in an undeclared capacity, a sign of how hungry the manufacturer was to win this latest defence contract.
Boeing has been shut out of several big deals in recent years, including losing the contract to build the US Air Force’s Long Range Strike Bomber in 2015 to Northrop Grumman, and the Joint Strike Fighter to Lockheed Martin in 2001. As a result, defence revenues at the company have fallen bymore than a third, from $32.1 billion in 2007 to $21.1 billion in 2017.
“It was a high-priority win for Boeing,” says Phil Finnegan, director of corporate analysis at Teal Group. “It positions them in medium-altitude, long-endurance [unmanned aerial systems]. That’s an important market segment.”
Medium-altitude, long-endurance UAVs are projected to be the second-largest segment of the unmanned aircraft market, worth $22.2 billion between 2017 and 2026, according to the Teal Group's analysis. The largest segment will be unmanned combat aerial vehicles, worth $27.1 billion over the same period, it says.
The addition of the MQ-25 contract to BDS’s books, spread over the next five years, will not contribute much to the division’s top line on its own, says Finnegan. However, the win is part of a small yet growing rebound in its revenue performance. Boeing gave guidance in the second quarter that defence turnover would be $22-$23 billion in fiscal year 2018, a 4.3% increase over the previous year.
The recent bounce in revenue is due to a production contract for 28 F/A-18 Super Hornets for Kuwait, contracts for 18 additional F/A-18 Super Hornets and three P-8 Poseidon aircraft for the USN, and a multi-year contract for 58 of the V-22 Osprey tiltrotors it builds jointly with Bell.
Boeing plans to perform the MQ-25 work in St. Louis, Missouri where it manufactures the F/A-18, EA-18G and F-15. The UAV is being prepared for its first flight, although the company has not announced when that will take place.
The USN is interested in a carrier-based UAV tanker to extend the range of its manned aircraft, including the F-35C Lightning II, F/A-18 Super Hornet and EA-18G Growler. The service has become anxious about the range of its fighters because adversaries such as China and Russia have developed anti-ship cruise and ballistic missiles that could force carriers to keep their distance from the battlespace.
Ultimately, it is not clear if the USN will fully embrace the MQ-25 concept and order a full complement of 72 aircraft, given its conservative reputation and the meandering legacy of the programme, which started in 2010 as the Unmanned Carrier-Launched Airborne Surveillance and Strike programme before evolving into an aerial refuelling mission.
“The navy has changed the concept multiple times, changed the focus of the program, and so there is a lot of scepticism about ultimately how much commitment there is and how many systems they will buy,” says Finnegan, noting, nonetheless: “It’s clearly important [to Boeing] even if the navy doesn’t buy a large number of systems.”