There are many new systems either in development or early production — such as Northrop Grumman's new AN/ZPY-1 Starlite on the Army's Gray Eagle UAV. But the big legacy SARs have long been by far the biggest money-earners in continuing budgets. In 2012 and 2013, some of these were threatened with either major cuts to ongoing funding, or outright cancellation, despite continuing heavy use while other SARs are still in testing (such as the USAF/NATO MP-RTIP on Global Hawk UAVs).
The world's biggest SAR program for decades has been the US Air Force's JSTARS (Joint Surveillance Target Attack Radar System), mounting the AN/APY-3 (now re-designated AN/APY-7) multi-mode SAR with ground moving target indication (GMTI.
Return to Dominance
After 30+ years, the AH-64 remains the most important attack helicopter in the world, by a very wide margin. In terms of capabilities, it is unmatched. Longbow Apache, a major improvement over the A model in terms of combat effectiveness, will keep the Apache in this position well past our forecast period.
That doesn't mean the Apache is without its challengers. At home and abroad, there are lighter, newer models vying to carve out a market niche. For the most part, the Apache folks shouldn't be concerned about these rivals. And the broader market remains surprisingly solid.
The Export Market: Still Relevant
After a lengthy order drought things look good again for the Apache on the world market. Over the past few years South Korea, Indonesia, Taiwan and Saudi Arabia have added 60 Es to the order book, although details of the Saudi order remain unclear. The UAE is expected to sign for 30, and even though this deal has been delayed over the past three years, there's a good chance it will eventually happen (it's factored into our Undetermined line).
Strategy: Raytheon Co.'s management has developed a strong reputation. After turning around the world's largest defense-electronics company by resolving problems in troubled programs, the management has made the company into a leading performer.
Company profitability has improved dramatically. Profit margins are now high and continuing to increase. The goal now is to make the company more of a systems integrator in areas such as unmanned aerial vehicles rather than a supplier of individual subsystems. Debt reduction has taken precedence over acquisitions although the company has been very active in making small, niche acquisitions in cyber security.
While the company faces shrinking sales due to US defense budget cuts, it remains the best positioned of the major defense companies to withstand cutbacks due to its growing international sales.
The C-17, once a near-dead program that exemplified cost overruns and bad contracting, turned into a remarkable success story. Not only did costs come down to a level that represents good value even by civil aviation standards, it actually scored the first export sales of any Western strategic transport.
As of September, Boeing had delivered 257 C-17s (223 to the USAF, 34 to international customers. Of the 22 remaining C-17s, seven will go to India (which has already taken three) and two are for an unnamed customer, probably Kuwait.
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