US rotorcraft manufacturers are feeling the squeeze from growing European competition. Without consolidation or innovation, the only way for the industry will be down

There is no disputing that the latest civil helicopter delivery figures for US manufacturers make for depressing reading. While some of this downturn can be explained away by the post-11 September economic situation, the underlying trend points to a much deeper and longer- running decline for US manufacturers in the face of growing foreign competition. Falling sales are seen by many as symptomatic of the more fundamental issues faced by an industry that has failed to consolidate or invest in new developments.

In a marked contrast to US production figures, Eurocopter over the past nine years has enjoyed a steady increase in civil output to the point where the EADS company delivered almost three times as many civil machines in 2002 as Bell, MD Helicopters and Sikorsky combined. Furthermore, a recent report released by Forecast International shows Eurocopter consolidating its dominant position over the next 10 years in terms of civil turbine helicopter deliveries and share of commercial rotorcraft market revenue.

"Eurocopter decided to go for market share and they came into this country and did exactly that. They have had a very aggressive derivative development strategy starting at the light end. There was controversy in the early days as to whether they were subsidised to any degree. I don't know if that is important now, but what I do know is that they took share," says Sikorsky president Dean Borgman.

There has been a proliferation in Eurocopter products in recent years, starting with the new entry-level EC120 Colibri, the EC135 light twin, the seven-seat EC130 addition to the Ecureuil family, the improved EC145/BK117C2 and medium-sized EC155 development of the Dauphin. In contrast, the only competing new US turbine helicopters certified in the last five years have been the Bell 427 light twin and the Sikorsky S-92. Observes Helicopter Association International (HAI) president Roy Resavage: "US industry has been slow in getting new products out there."

The underpinning of the US helicopter industry has traditionally been the Department of Defense (DoD) and it was the result of such programmes as the army's UH-1 and OH-58 that Bell was successful early on with the civil Model 212/412 and 206 JetRanger series. The more recent Sikorsky UH-60 Black Hawk family has not had the same spin-off success in the commercial sector and while the Bell Boeing V-22 Osprey holds great technological promise, its protracted and problematic development has had a knock-on impact on the Bell/Agusta (BAAC) BA609 civil tiltrotor programme.

While the DoD could be viewed in the past as a preserve for local industry, this can no longer be taken for granted. AgustaWestland and EADS are actively seeking local partners to market the EH Industries EH101 and NH Industries NH90 helicopters, respectively, to the US military. The prospect of the redubbed US101 being recast as a US product, both for domestic military requirements and possibly US foreign military sales, has drawn loud protests from the likes of Sikorsky.

"The US aerospace industry, with helicopters as a subset, is declining and this is vital to the defence and foreign policy objectives of the USA. It is in danger of deteriorating significantly and perhaps even disappearing," warns Borgman.

The recent suggestion that foreign competitors should be barred from the US military market appears to be self-defeating, particularly given the high level of foreign content in the S-92, and Borgman's own admission that, without an export market, "the Black Hawk line wouldn't have kept going".

Furthermore, recent DoD commissioned studies concluded that there is a need for more, not less, competition between helicopter manufacturers to spur on technical innovation and reduce costs. Without an injection of funding for new developments there is little to compete for, however.

Undermining competition

By stretching out the few new programmes that are being funded, and contracting companies to remanufacture older products, the DoD has, by its own admission, effectively undermined competition in the rotorcraft industry.

"Not much happened between 1970 and 2000 in terms of noble work in the helicopter world," contends Gen Mike Hough, US Marine Corps deputy commandant aviation and former head of the Joint Strike Fighter (JSF) programme. "There has been no JSF-style high technology innovation in capability. Helicopters have been built just like they were in the good old days, by hand, and there hasn't been the need to update manufacturing capability for the 21st century. This is a big wake-up call for the helicopter industry, who understand they have to do this to be competitive."

Sikorsky, in response, has challenged Hough to view the lean manufacturing technology being put in place to build the US Army's future RAH-66 Comanche helicopter in partnership with Boeing at its Bridgeport plant, where the S-92 will also be produced. However, the principal concern of the USMC aviation chief is the V-22 and making sure Bell and Boeing can lower the currently projected $70 million unit cost for the tiltrotor. Riding on the fate of the Osprey is BAAC's soon-to-fly BA609 and hopes of developing both a civil and military quad tiltrotor (QTR).

"Bell is still a formidable competitor in the commercial helicopter industry and intends to remain that way," says John Murphey, Bell Helicopter chief executive. "Internally we need to make ourselves more competitive in cost and make investments in the affordability products. We're working hard to do that and have leaned up our organisation and operations over the last year. We're making sure we understand the technological leaps we need to make in order to offer competitive products."

Bell is considering a broad range of options to either replace or upgrade its helicopter portfolio from the six-seat Model 206B up through to the Model 430 intermediate twin-turbine machine, but with the nearer-term focus on certifying the BAAC AB139 medium-sized replacement for the 15-seat Model 412 later this year. The next likely investment will be in a successor to the JetRanger family to take on the EC120. This has been conceptually referred to as the JRX and Murphey promises it will not be another "me too" helicopter.

The future light single-turbine helicopter will feature a new more open cabin, improved speed and range and, more importantly for an entry-level machine, a design that is affordable to both produce and operate. "US industry as a whole needs to focus on the products they put out and the people who will potentially purchase them. They have to see value, as the replacement cost will be a good deal higher than what the machine originally went for," advises Resavage.

A major breakthrough in operating economics hinges on making significant improvements in powerplant specific fuel consumption and component reliability, which in turn requires sustained investment in research and development. This is something that has been noticeably lacking from recent budgets, with NASA completely cutting funding for rotorcraft research and development in fiscal year 2002. The American Helicopter Society (AHS), together with Bell, Boeing and Sikorsky, managed to get $12.5 million reinstated last year, but is again facing zero funding in the fiscal year 2003 budget.

R&D budget needed

"US companies are putting less and less into R&D as a result," says AHS executive director Rhett Flater. "Companies are not willing to make the investment without comparable investment in partnership with the US government. When the government ratches down, so does industry. We've got to get the government back in the picture." The AHS and industry are lobbying Congress to get $50 million put into the fiscal year 2004 budget to support rotorcraft R&D initiatives, and continue funding the long-running NASA/army research partnership.

A lot of the technology first pursued in the 1970s and 1980s and now coming to the fore was a direct result of this funding, which in 2001 totalled no more than $35 million compared to the $13 billion pumped into space. "The V-22 would never have come into existence had it not been for the [Bell] XV-15. This was a direct product of the NASA/army partnership, established in 1965 and which has produced such great technology. Funding has now gone and NASA has essentially abandoned rotorcraft research and development entirely," says Borgman.

AHS and industry, if successful in obtaining funding in 2004, have targeted five technology efforts for investment. This includes achieving an 80% reduction in rotorcraft noise over the next 10 years; 10 times lower vibration levels to cut operating and support costs, a 30% lighter rotorcraft empty weight; bringing rotary-wing accident rates down to that of fixed-wing aviation; and giving operators the capability to operate in zero ceiling, zero visibility conditions to open up airspace access.

This picks up on the NASA-funded Runway Independent Aircraft study work done by industry in 2001 to explore vertical take-off landing concepts for alleviating congested airports. Rotorcraft proponents contend that helicopters like the 19-seat S-92, new civil tiltrotors and, later, even larger QTR type developments, could replace fixed-wing aircraft on shorter-haul routes and free up increasingly scarce runway slots for larger, longer-range passenger jets.

"This is the Holy Grail of the helicopter industry - the ability of rotorcraft to supplement scheduled fixed-wing aircraft. It can't be done today because of the high operating and support costs, noise, vibration, an unsuitable infrastructure and a lack of day/night capability. If industry could address these issues, rotorcraft could successfully supplement aircraft on routes up to 555km [300nm]," says Flater.

Current airport approaches and airway routings are designed around fixed-wing aircraft and do not lend themselves to the efficient and cost-effective use of helicopters. Until this changes, carriers see no benefit in flying helicopters in an airline role if they are forced to operate them as they would a Beech 1900 and are unable to take advantage of a rotorcraft's VTOL capabilities. Ultimately, change will hinge on decision-makers being convinced that rotorcraft are not the problem, but the solution.

Nearer-term and more non-partisan efforts at bolstering the helicopter industry have focused on alleviating 11 September fall-out, notably easing access to restricted airspace over urban areas and combating skyrocketing insurance costs. Hopes for lower rates and an insurance industry recovery last year were dashed due to the poor state of the stock market. HAI, in the meantime, estimates that insurance rates have risen by as much as 150% and are increasingly being cited by a number of local manufacturers as a factor in falling sales.

HAI is pushing a number of initiatives to reduce insurance costs such as safe operator programmes and tort reform. "We want liability reform across a number of areas, including the general liability of operators. There needs to be some reasonable cap. Runaway jury awards have been pushing insurance charges higher without the same degree of coverage. A lot of the tort problem is not federal, but state and therefore reform is going to take time," says Resavage.

Consolidation is key

The future competitiveness of the US rotorcraft industry ultimately hinges on consolidation. While Europe has managed to merge its various national helicopter houses into two main companies - AgustaWestland and Eurocopter - US helicopter manufacturers have failed to consolidate in the same manner as the country's airframe, avionics and missiles businesses. There are still three main helicopter companies as well as several smaller piston manufacturers.

"We're at three majors today, though not much has changed from when there were four, as Boeing has not really consolidated its act. It would be healthier for industry if there were just two manufacturers," says Borgman. While US industry has been happy to form product-oriented partnerships, such as BAAC and the Bell BoeingV-22 and Boeing Sikorsky Comanche joint ventures, the respective Textron, Boeing and United Technologies parent corporations have been unwilling to relinquish their interests. "You need a seller as well a buyer to do that and no-one is interested in taking on this role," notes Murphey.

Source: Flight International