Attack Helicopters and the Three-Way, 20-Year Fighter Pod Battle

Lockheed Martin’s AH-64D/E Apache M-TADS/PNVS (Modernized-Target Acquisition and Data System/Pilot Night Vision System) (was called Arrowhead) will be the most valuable EO/IR targeting system program over the next decade by quite a margin – Teal Group forecasts a total of more than 2,400 M-TADS/PNVS systems will ultimately be produced, with total program funding in our forecast period to be worth more than $6.2 billion (almost $1 billion annually for the next couple of years).

But there is essentially no U.S. competition in the attack helicopter EO/IR market, with the only comparable targeting system being Lockheed’s own AN/AAQ-30 Hawkeye Target Sight System (TSS), initially developed for the US Marine Corps.’s AH-1Z SuperCobra attack helicopter. Following long developmental delays, Lockheed delivered the first production TSS system for the AH-1Z in June 2009. Even though full-rate production for the USMC continued at a moderate rate in 2020, and a few recent, small international AH-1Z sales should now continue both Cobra and TSS production into at least the second half of this decade, this is a much smaller program, to be worth only $680 million over the next decade.

More interesting is the fighter EO/IR targeting pod market – with all of the Big Three defense electronics primes competing: Lockheed, Northrop Grumman, and Raytheon. F-35 Joint Strike Fighter EO/IR systems have stolen some of the glory of the three-way fighter targeting pod battle – which has lasted more than two full decades… and continues today – but (at least?) two competitors are still locked in an intense and very competitive brawl for this big and militarily crucial market.

Lockheed Martin’s Sniper

Lockheed Martin’s Sniper (also designated AN/AAQ-33(V)) navigation and targeting FLIR pod was originally developed for the US Navy’s F/A-18E/F’s ATFLIR (Advanced Targeting Forward-Looking Infrared sensor) requirement. In November 1997 Sniper lost this competition to Hughes/Raytheon’s Terminator pod, but after another long competition, Sniper XR (eXtended Range) won the US Air Force and Air National Guard’s (ANG) Advanced Targeting Pod (ATP) competition in August 2001. This ensured a huge future for Sniper (about 500 pods, worth more than $1 billion).

In September 2010, the USAF awarded a new $2.3 billion Advanced Targeting Pod–Sensor Enhancement (ATP-SE) contract to both Lockheed Martin (Sniper) and Northrop Grumman (Litening). Though this must have come as something of a blow to Lockheed Martin, as the Air Force had been standardizing on Sniper ATP, it was probably worth more than $1 billion for future Sniper ATP-SE buys.

In 2015, Lockheed Martin reported it delivered the 1,000^th Sniper ATP pod. In July 2017, the USAF ATP reached Full Operational Capability (FOC).

By the end of 2017, most US Sniper production had again ended, but production for a growing international market (including Saudi Arabia and now Qatar) will continue at a moderate rate. In July 2016, Lockheed Martin received $99 million in delivery orders for Sniper ATP pods, spares, and upgrades, under an Indefinite Delivery/Indefinite Quantity (ID/IQ) foreign military sales contract, with delivery orders supporting customers in Belgium, Norway, Pakistan, Poland, Romania, Saudi Arabia, Taiwan, Thailand, the Netherlands, and Turkey. The US Air Force awarded Lockheed Martin the ID/IQ contract in 2015, with a ceiling value of $485 million, valid through March 2018.

In April 2020, the first F-15QA “Advanced Eagle” for Qatar made its maiden flight. Although only 40 Sniper pods are now contracted, 80 (for 72 aircraft) are likely.

In addition to new production, upgrades and support should be worth billions of dollars in the future. In December 2017, the USAF awarded Lockheed Martin a $961 million, five-year, indefinite delivery/indefinite quantity (ID/IQ) contract to sustain and upgrade 683 Sniper ATPs employed on multinational F-2, F-15, F-16, F-18, A-10, B-1, B-52, and Typhoon aircraft.

In our forecast period, Lockheed Martin will still rule the fighter targeting pod roost, with Sniper to be worth $2.7 billion – at a pretty consistent rate of about a quarter-billion dollars each year.

Northrop Grumman’s Litening

In September 2010, the US Air Force shook up the largest market in EO/IR: fighter targeting. The Air Force had been buying one targeting pod – Lockheed Martin’s Sniper – but decided to split its future buys, adding Northrop Grumman’s AN/AAQ-28(V) Litening to the $2.3 billion Advanced Targeting Pod–Sensor Enhancement (ATP-SE) contract.

Apparently, the Air Force Reserve and Air National Guard, along with the U.S. Marines – all of whom have continued to be enthusiastic Litening customers – were impressed with Northrop’s newest Litening G4 pod (Litening, with its more frequent competitions, had been continually upgraded). Interest spread to the USAF as they were brought into flight testing by the U.S. Air Force Reserve Command.

The inclusion in ATP-SE was a major boost for Northrop Grumman, whose Litening had seen the end of nearly all its US production contracts in the late 2000s. In late 2012, the USAF awarded an initial $71.5 million contract to begin full-rate production of the newly re-designated Litening SE for the ATP-SE program, in addition to a $174 million ongoing Litening sustainment contract in March 2013.

However, there then followed little word of Litening production, for the USAF ATP or anyone else, with no reported major sales for the past several years. Even Litening-related press releases from Northrop Grumman slowed or stopped. There were many minor mentions of Litening work in DoD budgets in the 2010s (enough to make a huge classified fighter program unlikely), but no significant procurement or funding lines.

Finally, in January 2019 the USAF awarded Northrop Grumman a $1.3 billion indefinite delivery/indefinite quantity (ID/IQ) award for Litening advanced targeting pod sustainment, production, software and upgrades. And in September 2019, the USAF awarded Northrop a $141 million ID/IQ task order for new Litening advanced targeting pods and upgrades to bring existing pods up to the current configuration.

But few details and no detailed public funding break-outs have been published, and USAF budgets have referred to ATP-SE as an upgrade program as much as a new pod build, so we are not certain how many new pods were to be procured, versus how many upgrade kits. Our forecasts have been speculative, and have included only moderate new pod procurement, along with procurement funding for many upgrade kits.

This year, following the huge (but indeterminate) 2019 USAF contracts, we have increased our speculative funding lines. But we have also removed our totally speculative unit production forecasts – these had become pure guesses. Litening had not seemed to have captured a large share of the USAF ATP-SE market from Lockheed Martin’s Sniper, and reported new international sales have been lacking, but even if $1.3 billion is spread out over several years, that value is substantial. Whatever it goes for. In fact, it could be public funding lines for classified UAV programs….

In any case, Teal Group forecasts Northrop’s Litening will be worth $1.55 billion in our forecast period from FY20-FY29. Not up there with Lockheed Martin for targeting systems, but certainly more successful than Raytheon’s original star system – the lame duck Navy ATFLIR….

Raytheon’s ATFLIR

Raytheon’s AN/ASQ-228 ATFLIR combined targeting and navigation pod was selected in November 1997 to be developed for the US Navy’s F/A-18E/F ATFLIR (Advanced Targeting Forward-Looking Infrared sensor) requirement. It beat out competition from Lockheed Martin, Northrop Grumman, GEC-Marconi, Thomson-CSF, and others.

LRIP was awarded in March 2001, OPEVAL was passed in October 2003, and full rate production began around the end of 2003. With production also contracted for US Navy F/A-18C/Ds, ATFLIR was a billion dollar program in the 2000s.

Unfortunately for Raytheon, ATFLIR has been plagued by extremely high operating costs and other problems, and despite small orders from Malaysia in December 2012 and Australia in early 2013, there have been few signs that ATFLIR production will continue beyond US Navy F/A-18s, though upgrade & support could earn substantial funding for at least a decade.

But suddenly, what future for the US Navy? In August 2019, the U.S. Navy solicited options through an online request for information (RFI), to improve or replace ATFLIR pods on F/A-18E/F Super Hornets and EA-18G Growlers – reportedly due to concerns about ATFLIR’s hardware readiness and sustainment costs. According to the RFI, “The government does not presently intend to award a contract, but wants to obtain technical capabilities, system sustainment and supportability philosophies, pricing, schedule and other market information for planning purposes…. Information provided via this request will be used to evaluate and assess the feasibility, complexity and affordability of a replacement EO/IR targeting pod to support an initial fielding of (calendar year) 2023.”

Was this a warning or an earnest effort to replace ATFLIR? In February 2020, the FY21 U.S. Navy Procurement budget provided substantial funding for an ATFLIR modernization program, to utilize a set of ECPs designed to improve pod reliability and maintainability while mitigating numerous obsolescence issues, and also incorporate tracking/targeting improvements, and modernize the ATFLIR Rover Data Link (ARDL).

So, in early 2020 it seems to still be uncertain whether the Navy will upgrade or replace ATFLIR in the next few years. Our funding forecast assumes they stay with ATFLIR, which would be worth $1.3 billion over the next decade.

If the Navy does not stick with its troublesome (and continuingly expensive) ATFLIR, we can probably double this funding – or add even more – for a competition and production program to replace ATFLIR this decade, almost certainly with either Lockheed Martin’s Sniper or Northrop Grumman’s Litening.