Army Rotorcraft Plans Signal Pain Ahead For Industrial Base

The U.S. rotorcraft industry is highly concentrated, and heavily dependent on military funding.

Although hundreds of contractors supply the sector, for the most part their inputs channel through the finished products of just three manufacturers: Boeing’s BA Vertical Lift unit, Lockheed Martin’s LMT Sikorsky unit, and Textron’s TXT Bell helicopter unit. The parent companies of all three manufacturers contribute to my think tank.

There are additional airframe integrators in the domestic industry, but Boeing and Sikorsky by themselves have produced 90% of the Army’s rotorcraft, and the Marine rotorcraft fleet is dominated by Bell products.

Bell and Sikorsky have significant commercial business, but the pandemic has not been helpful to that segment of the market, and, as in the past, the big money today resides in selling to the military—particularly the Army.

Thus, the fact that the Army is now embarked on developing its first clean-sheet combat rotorcraft in two generations, called the Future Long Range Assault Aircraft, is a big deal for the entire industry.

For Bell/Textron, the winner of a competition announced in December, the program is an opportunity to become the nation’s leading supplier of rotorcraft, reversing years of disappointment just as Bell’s signature V-22 Osprey tiltrotor is approaching the end of a long production run.

For unsuccessful offerors Boeing and Lockheed/Sikorsky, though, it is a huge blow. They teamed to offer an alternative to the Bell offering, which is essentially a refinement of the same tiltrotor technology used on the Osprey.

Sikorsky and Boeing are challenging the Army’s award to Bell, but if their protest does not prevail—and most protests don’t—they face an uncertain future. That is especially true of Sikorsky, because the new Army rotorcraft was conceived to replace its ubiquitous Black Hawk tactical transport—the aircraft that Sikorsky President Paul Lemmo says “forged” the company.

Sikorsky delivered its 5000th Black Hawk earlier this month, underscoring how central it is to the unit’s fortunes. Sikorsky also is building a heavy lifter for the Marine Corps called King Stallion, but that program will only produce a couple hundred airframes—nothing like the scale of the Black Hawk program.

As for Boeing Vertical Lift, it too faces big uncertainties in the near future. The 4,500 employees at its Pennsylvania plant near Philadelphia are, like Bell, facing an end to their share of the V-22 production program while the Army continues to signal ambivalence about upgrades to the plant’s Chinook heavy lifter.

Without the Osprey and Chinook upgrades, the Pennsylvania plant—biggest industrial employer in the lower Delaware Valley—would likely close. Meanwhile, the 4,300 workers at Boeing’s other rotorcraft plant in Mesa, Arizona are facing the end of upgrades to the Army’s Apache WHAT attack helicopter, a program that is scheduled to see its last increment of funding in 2025.

With the Army’s long-term plans for Apache and Chinook unclear, and Bell/Textron poised to displace Sikorsky’s Black Hawk, it is no exaggeration to say that much of the domestic rotorcraft industry is at risk in the aftermath of the Army’s December award.

Of course, new jobs would be created at Bell and Black Hawk will remain in production until its successor is ready for prime time, around 2030. However, Byron Callan of Capital Alpha Partners is probably right when he speculates that Black Hawk will not be replaced on a one-for-one basis. There may be far fewer tactical transports in Army’s future fleet.

Beyond that, overseas allies have shown little enthusiasm for the novel performance features of tiltrotors, so Black Hawk’s successor probably won’t score anywhere near as many overseas sales with allies.

Bottom line: if the Army’s choice of a tiltrotor as its next tactical assault aircraft is sustained, there could be many fewer jobs in the future rotorcraft sector. And if the Army doesn’t achieve greater clarity with regard to what it will do with Apache and Chinook through mid-century, then the job losses will extend beyond system integrators to the shrinking ranks of suppliers too.

Boeing has repeatedly warned that without a robust upgrade program for the Chinook heavy lifter, suppliers providing the transmission, flight controls, cockpit and cabin structure could exit the sector.

The Army is planning to award a second program for a next-generation armed recon helicopter in 2024 to replace the retired Kiowa scout, but that program will be much smaller than the Black Hawk replacement, and Boeing isn’t on either of the teams vying for that award.

The armed recon contest pits Bell against Sikorsky. If Bell wins, then it will dominate the future domestic rotorcraft sector. If Sikorsky wins, that will partially fill the financial abyss created by losing Black Hawk, but not to the extent that the company’s current 13,000 employees can all keep their jobs.

Either way, the outlook for jobs in Sikorsky’s home state of Connecticut would not be good—and that’s before we even get to the company’s 280+ suppliers in the state. Job losses would likely extend to Sikorsky’s other major site in West Palm Beach, Florida.

Whatever the merits of the Sikorsky-Boeing protest may be, it can’t speak to the industrial-base fallout from the December award, because industrial considerations were not part of the selection criteria that resulted in Bell/Textron’s win.

The Army insists that it has thoroughly assessed such impacts down to the second and third tiers of the rotorcraft industrial base, but it does not have a strong track record of thinking through how such outcomes might affect workers.

When tank production waned in the last decade, it proposed mothballing the nation’s only surviving tank production facility in Ohio. Unfortunately, you can’t mothball workers.

Similarly, when it reversed plans to upgrade the Chinook helicopter to a more capable configuration that could serve warfighter needs through 2050, the industrial consequences of delaying upgrades played little part in its plans. The Army hoped overseas sales would keep the workforce intact, but those weren’t likely to generate anywhere near the number of jobs created by building a planned 465 upgraded helicopters for the Army.

It’s a safe bet that Congress is going to have something to say about all this regardless of how the pending protest turns out. Lawmakers may not grasp all the intricacies of Army warfighting plans, but they know what job losses mean to voters.

In Arizona, Connecticut and Pennsylvania, the number of jobs directly or indirectly created by the rotorcraft industry number in the many tens of thousands, and at least two of those states are up for grabs in the 2024 election.

As noted above, all of the companies mentioned in this commentary contribute to my think tank.