Sunday, June 27, 2010

Boeing’s Asia-Pacific Forecast

Defense News


Boeing’s Asia-Pacific Forecast

Company Predicts Growth in Region, Despite Pentagon Cuts


SINGAPORE — Despite downturns in U.S. and international defense spending, Boeing sees growth in Asia, said Dennis Muilenburg, president and chief executive officer of Boeing Defense, Space and Security.

“Last year, BDS was about a $34 billion business and about 16 percent of that was outside of the United States in international business. And we are projecting that as our business continues to grow that international segment will grow faster, and we expect it to be 25 percent of our business five years from now,” he said.

Muilenburg made the comments during a press conference prior to the opening June 4 of the Shangri-La Dialogue, which is sponsored by the London-based International Institute for Strategic Studies (IISS), known more formally as the 9th Asia Security Summit.

Even as U.S. Defense Secretary Robert Gates announces major cut­backs in programs and spending, Muilenburg expects Boeing’s core business to remain stable.

Boeing has seen some “moderations and flattening” as the U.S. defense budget declines in areas like missile defense, “although we saw most of that impact occur during last year,” he said.

“So we’ve experienced that already. If you look going forward, the support we see for our core product lines continues to be strong and that expands across tactical aircraft.” The company is moving into unmanned systems, cybersecurity and green technologies to help offset this trend in defense budget declines, but core business continues to be lucrative.

New products continue to roll out. In March, Boeing unveiled the F-15 Silent Eagle with reduced radar signature.

Boeing participated in the Green Hornet test in April when a U.S. Navy F/A-18 Super Hornet fueled with a 50/50 blend of conventional and camelina biofuel hit supersonic speeds for the first time.

The Hornets appear to have a bright future in both the U.S. and international market. The U.S. Navy is “pushing a multiyear contract for F/A-18 Super Hornets” and rotor­craft sales and support are very strong for the V-22 Osprey, CH-47 Chinook and AH-64 Apache, he said.

Richard Bitzinger, a former U.S. intelligence analyst, said the declining U.S. budget and the “rising Asian market are really two different things.”

“Actually, because the U.S. defense market is starting to tighten, a lot of U.S. defense firms — along with their European and Russian counterparts — are looking to the Asia-Pacific as a substitute,” said Bitzinger, who works for the Institute of Defence and Strategic Studies, S. Rajaratnam School of International Studies in Singapore.

Asia is very important to most leading arms-manufacturing countries and even critical to some, he said, pointing out that most Russian arms exports go to this region. One reason why Asia has so much promise as a market for U.S. arms suppliers is that the region is one of the few in the world where defense spending has gone up over the past decade and promises to continue to rise, Bitzinger said.

“This is partly due to continually expanding economies, which have permitted rising defense budgets, and in part because there are still so many unresolved territorial disputes in the region — on the Korean Peninsula, in the South China Sea, across the Taiwan Strait,” he said.

Recent Boeing sales and deliveries include the sale of 30 Apache attack helicopters to Taiwan; Australia accepted delivery of the first two Project Wedgetail 737 Airborne Early Warning and Control aircraft, and Japan took delivery of a modified C-130H aerial refueling tanker. The market in India is encouraging. Boeing is active in the fighter competition in India with the Super Hornet and just received a letter of request for 10 C-17s from India.

“We continue to invest in industrial partnerships in India,” Muilenburg said. “India is expected to be a $30 billion market in the next 10 years.”

“The U.S. is fortunate in having many near-captive markets in Asia: Japan, South Korea, Taiwan; countries that almost exclusively buy from the U.S.,” Bitzinger said.

There is also broad interest in Boeing’s Eagle and Super Hornet jets, Muilenburg said. Japan and South Korea are looking closely at both fighters for the next fighter competitions. Singapore has also been a major Boeing customer with procurements of the F-15SG Eagle fighter, AH-64 Apache attack helicopter and CH-47 Chinook cargo and utility helicopter.

“In general, most countries in the region buy their fighter aircraft only from the United States, with Russia as a distant second,” Bitzinger said. “Many products once built for the U.S. military — such as the F-15 and F-16 fighter — are now only built for export, and Asia is extremely important.”