Textron, Spirit officials hopeful for breakout in defense work

A new administration in Washington with a focus on bolstering the nation’s military has executives of two major Wichita companies optimistic about new work.

It’s an opportunity, perhaps, for sales of the Wichita-built Textron AirLand Scorpion tactical jet and for Spirit AeroSystems to make meaningful gains in growing the part of its business that isn’t commercial airplanes.

The bullishness on defense was a major theme from Textron chief financial officer Frank Connor and Spirit president and CEO Tom Gentile in separate question-and-answer sessions at the Cowen and Co. 38th Annual Aerospace/Defense & Industrials Conference earlier this month in New York.

There are “some encouraging signs what the new administration might mean on aerospace and defense,” Gentile said at the investor conference.

Scorpion’s ‘big year’

It was a little more than four years ago when Textron, the Rhode Island-based parent of Textron Aviation, successfully flew its prototype Textron AirLand Scorpion jet – an aircraft it quietly developed from scratch over 23 months at its East Pawnee facility.

Since then, the prototype has accumulated more than 800 flight hours, flown in 10 countries and participated in military training exercises and operations. The subsonic jet is marketed as a more affordable military jet that can be used for different missions, including maritime and border security, surveillance and reconnaissance and flight training.

Last year, the program reached milestones after the prototype completed a series of weapons tests at White Sands Missile Range in New Mexico and the December first flight of the first production-conforming Scorpion.

That first production-conforming aircraft currently continues its flight testing and will undergo with the Air Force a first-of-its-kind airworthiness assessment of a military aircraft the Defense Department hasn’t ordered.

That assessment could be the key to selling the airplane to foreign military services. The Scorpion is also reported to be under consideration as a close air support aircraft for U.S. military forces, to augment the existing A-10 fleet.

So far, the twin-engine, two-seat jet hasn’t garnered any orders, though Connor said at the Cowen conference that the company continues “to have dialogue with international customers.”

Textron also was emboldened by what seems to be a defense-friendly atmosphere in the nation’s capital following the election of Donald Trump.

“We are encouraged by some of the dialogue in Washington around a potential high-low strategy for this product,” Connor said at the conference. “Sen. (John) McCain (R-Ariz.) has put forward a defense spending blueprint that would include an acquisition line item for this type of product, so all of that continues to be positive.”

Connor admitted that the absence of any orders has led to questions of just how long Textron will stick with the Scorpion.

“Certainly we continue to assess the progress that we are making, the additional investment it will take to move things forward and the opportunity for success,” he said. “We’ve always said we continue to believe that this will be a very significant (and) positive contributor to the value of the company. … And ’17, we think, is a big year for that in terms of continuing to watch the progress.

“But this does not have an infinite life to it.”

Aircraft in the works

Connor also talked about a potential future military program for the company’s Bell Helicopters subsidiary.

Bell is developing what it calls the V-280 Valor, a tilt-rotor aircraft that it is pitching as the Army’s next generation of airborne medium-class troop carriers.

The prototype V-280, whose composite fuselage was manufactured by Spirit, is expected to make its first flight in the latter half of 2017.

The aircraft, Connor said, will “satisfy all the needs for the warfighter (offering) speed, flexibility and affordability.”

“That’ll be a very big thing for us.”

Funding for the aircraft replacement program the Defense Department calls the Future Vertical Lift program has not been appropriated, and Bell and Lockheed Martin would be competing with a team from Boeing and Sikorsky should a contract materialize.

‘Large, significant programs’

The V-280 program is one of several that Spirit’s Gentile ticked off as a possible growth opportunity for Wichita’s largest employer, as is the Sikorsky CH-53K heavy lift helicopter for the Marines.

So is the Air Force’s new long-range strike bomber, the B-21, which, unlike the V-280, is a program that has been funded. Spirit is one of several suppliers for the new bomber that’s led by defense contractor Northrop Grumman.

But Gentile said in his presentation he wants the company to be on even more defense programs, “an area of emerging growth for Spirit.”

“We’re bidding on a lot of other packages in the military,” he said. “And that is on nonrecurring research work and programs.

“And that is including not only fixed-wing and rotorcraft but looking at UAVs and space and even missiles. (Those) are opportunities because all of those use composite structures, and that’s what we do.”

Gentile said military programs represent less than 5 percent of the company’s work, and “a big chunk of that is commercial derivatives” such as the Air Force’s KC-46 tanker (using a Boeing 767 airframe) and the Navy’s P-8 Poseidon (using a 737 airframe). He’s wanting to double defense work, but it may take awhile to achieve that goal.

“The issue with those programs (B-21 and CH-53K), though, is organically all of them are going to be large, significant programs, but they’re going to take many years to develop,” he said. “And so that’s going to take some patience.”

It’s why Spirit is open to acquisitions to more rapidly increase its defense portfolio, but only if those acquisitions meet Spirit’s financial return thresholds and add strategic value to the company, Gentile said.

“We need to get revenue growth,” he said. “We need to get on programs sooner rather than later that we’re not on today, whether that’s in the commercial world or the military world.”

This story was originally published February 22, 2017 at 6:10 PM with the headline "Textron, Spirit officials hopeful for breakout in defense work."