POSITION & HOLD

COTS—our misunderstood friend

By Richard Aboulafia
VP, Teal Group


Eurocopter UH72A Lakota. The Lakota is one of the few successful US military COTS experiences, but it has attracted criticism.

In recent years the concept of commercial off-the-shelf (COTS) aircraft—military and government purchases of civil planes—has taken a severe beating.

Several high-profile failures—most notably the Lockheed Martin/AgustaWestland US101-based VH71 presidential helicopter, Bell Helicopter’s ARH70 armed reconnaissance helicopter (ARH), and Lockheed Martin/Embraer’s ERJ145-based aerial common sensor (ACS) for the US Army and Navy—might give the impression that COTS systems create more problems than they solve.

Yet, behind the headlines, militaries and government agencies throughout the world continue to make excellent use of scores of different COTS aircraft in a wide variety of roles and missions. Given downward pressure on military aircraft design budgets and the upward-spiraling unit cost of mission-specific military equipment, COTS programs will grow increasingly important in the future.

Why COTS?

The primary motive behind COTS aircraft is declining budgets for dedicated military aircraft research and development (R&D). The Pentagon’s budget for creating new airframes—except for the F35 joint strike fighter (JSF)—has been in deep decline for years.

This is true in every other military-aircraft-producing nation as well, which means that militaries throughout the world need to leverage commercial developments to meet numerous requirements.

The US rotorcraft market provides the best illustration of scarce R&D resources. Not only is US rotorcraft development cash flat or declining, but almost 90% of US R&D funds over the past 20 years have gone into either cancelled programs—the VH71 and Boeing/Sikorsky’s RAH66 Comanche attack helicopter—or into the Bell/Boeing V22 tiltrotor.

There has simply been no cash available to create a new, dedicated military light utility or scout design. COTS can also offer cost savings on the operational side. For example, Australia’s Border Protection Com­mand has outsourced maritime patrol duties to Cobham, which operates 10 Bombardier DHC8 turboprops under the Coastwatch program.

These aircraft were modified by Field Aviation using Raytheon SeaVue radars. COTS also offers an agile response to pressing requirements without the need to create a new aircraft. For example, in May 2008 the US Air Force began Project Liberty—a plan to purchase 37 Hawker Beechcraft King Air 350/350ERs (designated MC12W) equipped for surveillance and signals intelligence (sigint) duties.

The aircraft are modified by L3 Communications and the total program is worth nearly $1 billion to the 2 main contractors. But, most importantly, the project rapidly fielded a useful asset for tracking insurgents in Iraq and Afghanistan. In Jun 2009, just over a year after the program began, the first MC12W flew its first combat sortie in Iraq. That kind of fast response is simply not possible unless a COTS airframe is involved.

Anatomy of a fragmented market

Lockheed Martin airborne multi-intelligence laboratory version of the Gulfstream III. Lockheed has indicated that special mission versions of COTS aircraft are a potential new business area.

The first thing apparent from any examination of the world COTS fleet is how diverse it is in terms of types and missions. Regarding the latter, COTS planes can be fixed or rotary-winged aircraft, broken down into the following categories: Transport—ranging from high-end (including head-of-state) to liaison duties, and encompassing utility missions that involve high-priority logistics work.

The final 4 of these categories can be grouped together as special-mission aircraft—aircraft that use dedicated sensors and other avionics to perform more complicated tasks. The chart on this page provides a snapshot of the small and midsize fleet of fixed-wing special-mission aircraft and reveals how many different types have been employed in these roles.

The only single aircraft type with a double-digit share of the market is Hawker Beechcraft’s King Air. King Airs of all types (C90, B200, 350 etc) comprise 26% of the special-mission fleet in this class.

Who benefits?

Worldwide, the small special-mission aircraft fleet is quite fragmented, but Hawker Beechcraft has a very strong position.

COTS aircraft purchases benefit just about every major and minor airframer in the world. While COTS programs seldom represent proverbial manna from heaven for the contractors involved, they can play a role in bolstering new aircraft programs and enhancing manufacturer profitability.

The fragmented fleet illustrated above speaks to the myriad beneficiaries, although there are a few standouts. Foremost among these is Hawker Beechcraft. Between King Airs and Hawker 800 business jets, the company’s products enjoy nearly 1/3 of the small special-mission COTS aircraft market.

But this is just a small part of the company’s COTS market presence. In the 1990s, Hawker Beechcraft (then Raytheon) got to build 180 Beechjets (now Hawker 400s) for the US Air Force’s Tanker Transport Training System (TTTS) program.

Looking strictly at the numbers, this plane, designated T1A in USAF service, was the big winner in the COTS lottery. Civil Beechjet deliveries during the T1A production years came to 166 aircraft, one of the very few examples of COTS sales eclipsing civil sales.

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