Carbon fiber composites will still find good business with the military

Economic pressures have already killed one US military aircraft program that relied heavily on carbon fiber composites. Will others follow?


Rex Features

WHEN US president Barack Obama signed his $680bn (€449.3bn) military bill in late October, it meant the end of several advanced weapons programs that had been deemed bloated. Among them was the F-22 fighter jet.

The Lockheed Martin/Boeing F-22 Raptor is a fifth-generation stealth jet fighter that costs about $142.6m each, with its program estimated to be worth $65bn.

Composite producer Cytec Engineered Materials, based in the US, declined to comment, but it may be taking a hit with the F-22 shutdown. In 2008, the company was awarded a seven-year, $750m contract to supply composites to Lockheed Martin for the F-22A, as well as the F-35 fighter jet.

Composites are "not a new material to the Defense Department," says Michael Bacal, communications and investor relations manager for US-based producer Hexcel. The military has been at the forefront of carbon fiber composite use, using it for more than 20 years, and the F-22, like nearly all jet fighters nowadays, was a heavy user.

While the president has said he has no intention of reducing military spending while two wars are being fought, Secretary of Defense Robert Gates has made it clear on several occasions that he would like to see monies for expensive and futuristic systems be channeled toward simpler and broader programs, like unmanned aerial vehicles (UAVs), or drones, and helicopters.

"Stimulus spending, war operations, and the focus on health care reform is putting tremendous pressure on some of our major customers - the Defense Department, NASA and Federal Aviation Administration," said Marion Blakey, president and CEO of the US-based Aerospace Industries Association (AIA), during a speech in October.

The Department of Defense (DoD) has largely ignored the industrial base in its past strategy considerations, notes Blakey, adopting what he calls a Walmart strategy - where competition for DoD funds always kept the Pentagon stocked in the past.

"After years of consolidation and focus on providing value to the stockholder, we want to make sure that DoD understands that the next time it has a strategic requirement from industry and goes to Walmart, the shelf may be bare," the AIA CEO cautions.

Although Japan-based composites major Toray Industries won't discuss military topics, company spokesman Yoshitaka Yamagata says that while the economy is expected to recover at a gradual pace, "It is too early to anticipate any self-sustaining recovery led by private sector demand."

The US and Japan are not the only ones feeling the economic crunch. In mid-November, Germany's Luftwaffe canceled an order of 37 Eurofighter Typhoons - like the F-22, "another big user of carbon fiber composites," notes Kevin Michaels, partner in the global aviation consultancy AeroStrategy. In August, the UK stopped an order of 24 more of the Typhoons, for the RAF. "Defense programs are going to be under a lot of pressure as a result of the fiscal situation," says Michaels. In a mid-October conference call, James McNernet, chairman and CEO of US-based aircraft manufacturer Boeing, said the company saw budget pressures continuing "on all defense programs."

Meanwhile, France-based European Aeronautic Defense & Space is nearly four years behind and €5bn ($7.4bn) over budget on its Airbus A400M military transport plane project, and South Africa has canceled its order. The A400M has composite wings and propeller blades, and if it goes forward, Hexcel projects that it will be a growth driver over the medium term.

EVERY CLOUD HAS ONE
Hexcel is not as pessimistic as others. The company's military revenues depend more on the overall procurement budgets of the US and client European countries. One defense program could be down or canceled, but another could be going up, and the net of the two may offset each other.

Drivers in military aerospace, says Bacal, are the performance specifications the customer wants, and these tend to follow the trends of new technologies to offer improved goals. "The overall demand for materials may be close to flat, but you've got changes within that overall procurement budget," explains Bacal. While the F-22 program is capped, the US will increase production on its Bell-Boeing V-22 Osprey. As of 2008, the Pentagon had $27bn earmarked for the V-22 program. Each aircraft costs about $68m.

The V-22 is a vertical take-off and landing program - a combination helicopter and airplane with a tilt-rotor system.

Helicopters do well, notes Michaels. Rotary-wing aircraft are seeing more missions that emphasize unconventional or urban warfare, as well as increased use in areas such as border patrol and disaster relief. "You don't need as many fighter jets, you need more utility and heavy-lift helicopters," he says.

Because they need to be structurally strong but light, helicopters are "tremendous consumers of composites," says Hexcel's Bacal. "Helicopter programs globally are very important to us." Military sales are included in the revenues from Hexcel's Space and Defense (S&D) segment, and helicopter-related sales, including the V-22, represent slightly more than 50% of S&D revenues. Hexcel's materials are also in military aircraft such as the F-22, F-35, the Eurofighter and the F-18. Through the first three quarters of 2009, S&D sales were $226.5m - flat year on year. S&D sales in 2008 were $301.9m, up by 18% over 2007.

Growth in overall US aerospace is expected to slow considerably. The AIA estimates that the roughly $160bn US aerospace market is essentially split equally between government and commercial sales.

AeroStrategy estimates the global fleet of military fixed-wing aircraft to be 22,000, and about 17,000 military rotary wing aircraft, including helicopters. Aerospace as a whole comprised 21%, or 19.95m lb (9m kg), of 2007's carbon fiber consumption. It is the largest consumer of carbon composites, followed by industrial applications (15%) and sporting goods (14%).

Military fixed-wing craft represent 9% of 2008's global aerospace composite demand of 45.9m lbs, while rotary wing craft represented 6% of demand. Carbon fiber reinforced plastic is the most widely used material, about 37% of the demand, and glass fiber reinforced plastic is 35%. The carbon prepreg market was estimated at $1bn in 2008, at $55/lb, with Hexcel and Cytec as the market leaders with 40% each of the segment.

THE NEW STUFF
Drones, like the General Atomics Aeronautical Systems' Predator are heavy composite users, but Bacal points out that they are not produced in such quantities as to have any impact on sales. The total value of UAV sales globally is probably less than $3bn. "In the big scheme of aerospace, drones are an absolute niche," says Michaels.

One aircraft program not given the ax by the new Obama military budget was the F-35 Joint Strike Fighter. With 2,500 to 4,000 estimated orders from 19 countries, including Norway, the Netherlands and Turkey, the F-35 is "the biggest potential program for composites," says Bacal. The F-35 is estimated to cost $83m each.

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