Beechcraft reassessing where it goes from here after losing Air Force contract
03/01/2013 6:50 AM
08/08/2014 10:15 AM
The Air Force’s $427.5 million contract for a light air support program would have given a nice boost to Beechcraft Corp., which emerged from Chapter 11 bankruptcy last week.
Now, the question is where does the company turn for additional military sales.
“This contract would have been a big shot in the arm for Beechcraft,” said Loren Thompson, a defense analyst at the Lexington Institute. “They make a good product, but they’ve got a lot of competitors that make good products, and demand is shrinking.”
On Wednesday, the Air Force awarded a much-disputed, high-stakes contract to Sparks, Nev.-based Sierra Nevada, which partnered with Brazil’s Embraer for its Super Tucano aircraft, used by Latin American operators primarily for combat roles.
The contract with Sierra Nevada is for an initial order of 20 planes for use in Afghanistan. The agreement could be worth up to $950 million, however, depending on future orders.
Beechcraft, formerly Hawker Beechcraft, offered the Air Force its turboprop AT-6 attack aircraft, a version of its T-6 trainer used to train U.S. Air Force and Navy pilots under the Joint Primary Aircraft Training System contract. Other countries are also using the T-6 for training, including the Greek, Canadian, Iraqi, Israeli and Royal Moroccan air forces and NATO Flying Training in Canada.
The AT-6 derivative of the T-6 gives the trainer an additional role – combat missions.
It is designed for counterinsurgency use, close air support, armed overwatch, homeland defense, homeland security and other missions, the company has said.
In a statement Wednesday, Beechcraft said the company was disappointed that its proposal to the Air Force wasn’t chosen. It said company officials planned to meet with Air Force representatives for a debriefing on the award.
Beechcraft spokeswoman Nicole Alexander said the company believes there is a good market for the AT-6, which it is actively marketing.
“The company intends to secure a launch customer for the AT-6 this year,” Alexander said.
But Thompson noted that demand for military aircraft is shrinking.
“They occupy a niche in the military marketplace,” he said. “Although their products may be well-suited to certain types of missions, those missions are likely to be hit pretty hard by sequestration and budget cutting.”
A win of the light air support contract would have helped Hawker Beechcraft’s production line for the T-6, as final deliveries to the U.S. Navy under the JPAT contract are scheduled for 2015.
An order for 20 planes would come in handy, said Teal Group analyst Richard Aboulafia.
Winning the light air support contract also would have helped Beechcraft win other contracts, he said.
“Without a home market endorsement for a new attack version, they’re going to have a hard time selling it abroad,” Aboulafia said. “It’s a good product, but they’re going to have a hard time with it.”
Countries with limited financial resources, limited infrastructure and maintenance capabilities – and which are dealing with persistent counterinsurgency forces, such as guerrillas – are the best-suited markets for the AT-6 aircraft, he said.
Competition for the Air Force’s light air support contract has spanned three years and has been plagued with delays and legal challenges.
The Air Force first awarded the contract to Sierra Nevada after eliminating Hawker Beechcraft from the competition.
After objections from Hawker Beechcraft and an investigation that found the bidding process flawed, the Air Force canceled the deal and reopened the bidding in March.
Sierra Nevada sued in June, alleging that the Air Force’s revised bidding process favored Hawker Beechcraft.
Aboulafia said he was not surprised that the Air Force awarded the contract to Sierra Nevada again in the second round.
Objections to the first contract were about procedure, not substance, Aboulafia said.
“That’s not to say the AT-6 couldn’t have done the job,” he said. It’s just the objections were about contracting procedures.
Embraer’s win of the light air support contract could benefit Boeing, reports say, which is competing with France’s Dassault and Sweden’s Saab for a $4 billion contract to sell 36 fighter jets to the Brazilian Air Force.
“This is obviously a very good development for Boeing. It’s the best thing that’s happened to them in months (in the fighter jet race),” said a Brazilian official, according to a report in Seeking Alpha.
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