By Avascent Analytics team
AVASCENT WHITE PAPER
In September 2016, the United States and Israel signed a new Memorandum of Understanding (MOU) that increases the absolute dollar value of security assistance from $31 billion to $38 billion from FY 2019–FY 2028. In this new white paper, Avascent assesses the impact of certain new provisions within the MOU — including the gradual phase-out of Offshore Procurement — on Israel’s growing defense industry: New Deal, New Consequences: US Security Assistance Pact Poses Challenges for Israel’s Defense Sector.
A quick look at the biggest stories of the week.
Turkey’s government has officially committed to buying up to 24 more F-35 Lightning IIs. On October 31, the Turkish Ministry of Defense ordered a second tranche of F-35 aircraft, increasing their eventual fleet size above the existing order of 116 aircraft. The Turkish military hopes to use the F-35 in conjunction with Turkish-built aircraft as part of a future next-generation fighter fleet that would ideally be operational by 2023. The fleet of F-35s and indigenous aircraft are meant to replace Turkey’s aging inventory of F-16s – with the goal of allowing Turkey to more effectively project power into contested areas. According to Avascent Analytics, the Turkish market for fixed-wing fighter/attack/bomber aircraft in Turkey is worth approximately $378.3 million and will grow at a rate of 49% from 2016-2021. However, the market is almost entirely devoid of opportunities, with nearly all funding through 2021 committed to purchases of F-35s, F-16 modifications, and Turkey’s own indigenous fighter aircraft.
Also on October 31, representatives from Pilatus have stated that the company is close to winning a contract to provide 20-25 PC-21 trainer aircraft to the French Air Force. The PC-21s would serve as replacements for the Dassault Alpha Jet trainers which the French military is currently using. An April 2015 request from the French MoD started this process, with deliveries of an eventual platform to begin around 2018. Despite some uncertainty, the market for trainer aircraft represents a largely untapped opportunity space in the near term. According to Avascent Analytics’ data, the market has an average annual size of $224 million, with around 99.5% of that market open to competition.
On November 2, the United Kingdom’s Ministry of Defence has selected two finalists to compete for the British Army’s Challenger 2 Life Extension Program to upgrade the its main battle tank and extend the life out to 2035. BAE Systems, teamed with General Dynamics UK, Qinetiq, Leonardo, Moog and Safran, and Germany’s Rheinmetall Landsysteme in a consortium including BMT, Pearson Engineering and Thales UK will now be asked to build a prototype vehicle as part of the final two-year assessment phase. The contract, worth an estimated £650M, is expected to be awarded in 2019. Should Rheinmetall be selected, it will be another major UK defense project to go abroad following the Apache attack helicopter procurement and P-8 maritime patrol aircraft buy.
The Ukrainian Navy seeks to expand their naval fleet after losing nearly two-thirds of it during the Russian annexation of Crimea in 2014. Vice Admiral Ihor Voronchenko stated in an interview on November 2 that the Ukrainian Navy has begun to repair the frigate Hetman Sahaydachniy, originally procured in 1993, using part of a $500 million aid package from the U.S. Additionally, the Ukrainian Naval Force plans to introduce several new boats by 2020, including a corvette, missile boat, and several gunboats. Ukraine’s naval expansion is critical not only to closing the country’s naval capability gap, but also in countering perceived Russian aggression in the Black Sea. Since the annexation of Crimea, Ukraine has significantly increased their defense budget from $1.02 billion to $2.12 billion in 2016 as a result of the ongoing conflict.
At the start of November 2016, Canada opened its Canadian Surface Combatant (CSC) competition to new ship designs. Prior to this, the competition had been limited to an off-the-shelf buy of a proven ship design. Irving Shipbuilding, the prime contractor for the project, has already pre-qualified 12 firms as ship designers and/or combat systems integrators. Two firms are in the running for both the ship design and combat systems integrator roles. Up to 15 ships are expected to be built for roughly CAD $40 billion, more than 50% greater than the original estimated cost of CAD $26 billion. The vessels will replace Canada’s Iroquois-class destroyers and Halifax-class frigates, which are roughly 40 and 25 years old respectively. The first CSC is expected to be delivered in the mid-2020s.
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