State Capitalism in the Drone Industry

nEUROn-Dassault Aviation company 2013

Though they make smaller drones, European suppliers have flown only experimental big machines and haven’t manufactured any large drones to offer for sale. That is because governments have been unwilling to earmark funding for development programs, and even five years ago military-procurement agencies weren’t pushing hard to get homegrown products into the air.  France has decided to quadruple its fleet of four aging surveillance drones—one of which is out of order—with the purchase of 12 brand-new Reapers from General Atomics Inc. of the U.S. The U.K.’s Royal Air Force operates a squadron of five Reapers remotely from a U.S. base in Nevada.

European Union politicians and industrialists are increasingly concerned that in failing to launch an ambitious large-drone program, the bloc is both abandoning sovereignty and missing out on one of the most dynamic segments of the military aerospace market. “We’ve lost at least 10 years in Europe, and the longer it takes, the more the Americans and Israelis will dominate the large UAV [unmanned aerial vehicle] market,” EADS Chief Executive Tom Enders told reporters in June (2013).

Annual global spending on all types of drones, including research and development, could double from today’s level to $11.6 billion by 2023 and will be an important engine of growth for the aerospace industry, according to Teal Group, a consultancy based in Reston, Va.  European governments have collaborated on military-aircraft programs such as the A400M transport plane, made by EADS unit Airbus, and the NH90 heavy helicopter, made by the NHIndustries consortium, composed of three European aviation companies: Eurocopter, Finmeccanica SpA’s AgustaWestland and Fokker Aerostructures.

But, like many military procurement projects on both sides of the Atlantic, execution of these contracts was late and over budget. Part of the problem is that governments have differing requirements and won’t settle for a “standard” version.  The NH90, for example, has more variants than the number of governments that ordered it because their militaries insisted on receiving aircraft that met specific requirements, thereby limiting the potential for economies of scale.

In recent years, EADS, BAE Systems PLC of the U.K. and Dassault Aviation SA of France have been chasing seed money from their respective governments to develop separate, large-drone prototypes, without much coordination.

In France, Dassault was tapped in 2003 to lead the “nEUROn” project to experiment with technologies for a stealthy combat drone. Dassault paired up with companies from Italy, Sweden, Spain, Greece and Switzerland and tested a prototype in France in December last year (2012).

In the U.K., BAE worked on its own plan but has had to cope with an unexpected hurdle. Since British civil-aviation rules forbid flights of drones in civil airspace, BAE couldn’t test its stealthy attack-drone demonstrator, called Taranis, in U.K. airspace. The company instead had to dispatch the aircraft and engineers nearly to the other side of the globe for a test in Australia.

Germany had opted for a middle-ground route: develop a drone on the basis of a U.S. aircraft, the Global Hawk made by Northrop Grumman Corp. But the €1 billion ($1.36 billion) project turned into a debacle when the German government realized the plane couldn’t be certified to fly at home or elsewhere in Europe, and later scrapped it.

The French and U.K. governments are discussing ways to synchronize and possibly combine their attack-drone programs, with Dassault and BAE leading the way, but no formal decision has been made…

European governments are still dragging their heels to come up with a strategy for homegrown surveillance drones, while the industry seems much more gung-ho.  Last June, EADS, Dassault and Finmeccanica issued a joint statement urging European governments to launch a surveillance-drone program, saying they are prepared to work together if the governments can agree to begin a program.

In May, the French government said it would spend €670 million to buy the U.S.-made Reapers because European companies had no product available to meet urgent needs, notably in Mali, where the French military is currently reducing its presence after a campaign that started in January against Islamic militants.

The absence of a pan-European, cooperative approach—no single country has a budget to create its own program—raises the risk that emerging competition from countries like China, South Africa and Turkey will move into the empty space, analysts and aerospace executives said.“Clearly, drones are the future for dull or dangerous missions,” said Dan Jangblad, chief strategy officer for Sweden’s aerospace company Saab AB.

By David Pearson,European Defense Firms’ Drone Push Remains Elusive, Wall Street Journal, Oct. 8, 2013

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