Unmanned Vehicles Forecast Sample (1)

22 Commerce Road, Newtown, CT 06470 USA • Phone: 203.426.0800 • Fax: 203.426.0223 Toll-Free 800.451.4975 (U.S. & Canada) • Email: [email protected] • Website: forecastinternational.com

UNMANNED VEHICLES FORECAST

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Unmanned Vehicles Forecast

©2013 February 2013

Table of Contents Product Support Features Customer Service Guide E-Market Alert Newsletter Instructions Query Service Instructions Facts About Your Marketing Service Spreadsheets

Index Cross Reference Index

Programs Tab A - Lead Sheet Airborne Targets, Decoys & Cruise Missiles • AQM-37/AQM-39 • BQM-167 Skeeter • BTT-3 Banshee • Chinese Aerial Targets • EADS Target Systems • GQM-163A SSST • Harpy • HTD-1 Skua • J/AQM-1 (Expendable Target Drone) • Miniature Air Launched Decoy (MALD) • Mirach 100 • MQM/BQM-74 Chukar • Multi-Stage Supersonic Target • Pakistani Target Drones • Pilotless Target Aircraft • QF-4 Phantom/QF-16 • Remotely Piloted Vehicle Target • Russian Target Drones • Russian UAV Programs • Snipe • U.S. Helicopter Target • UCAV Tab B - Lead Sheet Airborne Surveillance/Reconnaissance Systems • A160 Hummingbird • BREVEL • Camcopter • Civilian UAVs • Eagle Eye • Fire Scout VTUAV • HALE UAVs • Hunter • Hypersonic Drones • Indian UAVs • Integrator

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Table of Contents

February 2013

• Israeli VTOL UAVs • J/AQM-6 • KG-135 Sky Robot • Korean UAV Programs • Mirach Series • MQ-1C Gray Eagle/Sky Warrior • Pioneer • Predator/Reaper • Ranger ADS 95 • Raven • RQ-3A Darkstar/RQ-170 Sentinel • RQ-4A Global Hawk • Searcher/Heron • Shadow 200 TUAV • South African UAVs • SPERWER • Supplemental Programs - Unmanned Vehicles: Airborne Surveillance/Reconnaissance Systems • Swedish UAV Programs • Telemos • Watchkeeper Tab C - Lead Sheet Additional Worldwide Unmanned Airborne Vehicle (UAV) Programs • Additional Worldwide Unmanned Airborne Vehicle (UAV) Programs Tab D - Lead Sheet Ground-Based Security and Support Systems • Allen-Vanguard UGVs • Andros Family • MDARS-E • Security Robots • TSR 200 • Wasp/Hornet • Wheelbarrow Series Tab E - Lead Sheet Ground-Based Mine Countermeasures/Reconnaissance Systems • British UGVs • French UGVs • Manportable Robotic System • Mine Guzzler • Tactical Unmanned Ground Vehicle (TUGV) • VTC (Vehicle Teleoperation Capability) Tab F - Lead Sheet Additional Worldwide Unmanned Ground Vehicle (UGV) Programs • Additional Worldwide Unmanned Ground Vehicle (UGV) Programs Tab G - Lead Sheet Sea-Based Search and Surveillance Systems • Archerfish • Double Eagle • EMD • Naval Mine Disposal Charges • PAP 104 • Pluto • REMUS/Minesniper • Seafox/Seawolf • U.S. UUVs

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Unmanned Vehicles Forecast Page 3

Table of Contents

©2013 February 2013

Tab H - Lead Sheet Sea-Based Targets and Torpedoes • A-184/Black Shark • A-244 Series/Flash Black • CALAS • DM2A4 Torpedo • Japanese Torpedoes • Mk 30 ASW Target • Mk 39 ASW Target (EMATT) • Mk 46 NEARTIP/Mk 54 Torpedo • Mk 48 ADCAP Torpedo • MU-90 Impact • Russian Torpedoes • Scutter • SLAT/Torpedo Defense • South Korean Torpedoes • Spearfish • Stingray • SUBTAS • Torpedo 2000 Tab I - Lead Sheet Additional Worldwide Unmanned Sea-Based Vehicle Programs • Additional Worldwide Unmanned Sea-Based Vehicle Programs

Market Analyses Analysis 1 - The Market for UAV Reconnaissance Systems Analysis 2 - The Market for Aerial Targets

Appendices Appendix I - User Inventory Appendix II - Unmanned Air Vehicle Guidance Appendix III - Consolidated Production Statistics Appendix IV - Recommended Web Sites Appendix V - Land and Seaborne Targets Appendix VI - Unmanned Vehicle Archives

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©2013 January 2013

BQM-167 Skeeter

Orientation Description. Subsonic aerial target.

Sponsor. U.S. Air Force Materiel Command, Eglin AFB, Florida.

Status. In production for the United States and for foreign clients.

Total Produced. Approximately 322 BQM-167 Skeeters were in production or had been completed by the end of 2012.

Application. Subsonic, turbojet-powered unmanned air vehicles utilized as aerial targets and for reconnaissance and electronic countermeasures missions.

Price Range. The unit price of the BQM-167A Skeeter is $600,000 to $900,000 depending on the annual quantity.

Contractors Prime Composite Engineering Inc (CEi) http://www.cei.to, 5381 Raley Blvd, Sacramento, CA 95838 United States,

Tel: + 1 (916) 991-1990, Email: [email protected], Prime

Subcontractor Herley Lancaster http://www.herley.com, 3061 Industry Dr, Lancaster, PA 17603 United States,

Tel: + 1 (717) 397-2777, Fax: + 1 (717) 397-7079, Email: [email protected] (Microwave Hardware)

Microturbo Inc http://www.safran-na.com, 2707 Forum Dr, Grand Prairie, TX 75052 United States, Tel: + 1 (972) 606-7611, Fax: + 1 (972) 606-7181 (TRI 60-5 Turbojet)

Outlook Production continuing

CEi providing BQM-167 and BQM-177 aerial targets to the U.S. military

Foreign militaries are ordering CEi's target drones

Sweden is a recent customer for CEi's aerial targets

CEi and ATK working on Multi-Stage Supersonic Target

Kratos has purchased CEi

0

20

40

60

80

100

120

140

160

Un

its

Unit Production Forecast 2013-2022

Units 41 68 70 100 103 117 123 149 151 156

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

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BQM-167 Skeeter

January 2013

Rockwell Collins http://www.rockwellcollins.com, 3721 Macintosh Dr, Vint Hill Tech Park, Warrenton, VA 20187 United States, Tel: + 1 (540) 428-3300, Fax: + 1 (540) 428-3301 (Sensor Suite; Flight Control Unit)

Comprehensive information on Contractors can be found in Forecast International's "International Contractors" series. For a detailed description, go to www.forecastinternational.com (see Products & Samples/Governments & Industries) or call + 1 (203) 426-0800.

Contractors are invited to submit updated information to Editor, International Contractors, Forecast International, 22 Commerce Road, Newtown, CT 06470, USA; [email protected]

Technical Data Metric Metric U.S. U.S. BQM-167A BQM-177A BQM-167A BQM-177A Dimensions Length 6.09 m 5.18 m 20 ft 17 ft Diameter 60.96 cm Not Available 24 in Not Available Wingspan 3.2 m 2.13 m 10.5 ft 7 ft Weight, Dry 295 kg 236 kg 650 lb 520 lb Weight, Maximum 649 kg 635 kg 2,050 lb 1,400 lb

Performance Speed (max) Mach 0.93 Mach 1.1 Mach 0.93 Mach 1.1 Altitude range 15.2-15,240 m 3.4-13,716 m 50-51,000 ft 6.6-45,000 ft Endurance 3 hr 1+ hr 3 hr 1+ hr

Propulsion. A single Microturbo TRI60-5 turbojet powers the Skeeter.

Control & Guidance. The Skeeter can be preprogrammed or operated manually via radio command by a ground controller.

This aerial target can carry a variety of target payloads, including radar enhancers, infrared signature generators,

and countermeasures and scoring devices. The Skeeter can also tow other targets.

Launcher Mode. Skeeter can be air-launched from suitably modified aircraft or ground-launched with the aid of a solid-propellant jet-assisted takeoff booster.

Recovery. The air vehicle is either recovered via a parachute system or retrieved from the sea.

BQM-167 Skeeter

Source: CEi

Variants/Upgrades There is a single version of the Skeeter in production, with another in development. Further additions in the future are likely.

Explanation of Symbols. To aid in identification and comprehension, the following table explains the U.S. Department of Defense's coding system, as established in July 1963.

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BQM-167 Skeeter

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1. Status Prefix J = Special Test, Temporary N = Special Test, Permanent X = Experimental Y = Prototype Z = Planning

2. Launch Environment A = Air B = Multiple C = Coffin F = Individual H = Silo-Stored L = Silo-Launched M = Mobile P = Soft Pad R = Ship U = Underwater

3. Mission D = Decoy E = Special Electronic G = Surface Attack

I = Intercept Aerial Q = Drone T = Training U = Underwater Attack W = Weather

4. Vehicle Type M = Guided Missile N = Probe R = Rocket (no guidance)

5. Numerical (see below)

The status prefix is usually dropped once the system begins operation. The numerical segment of each designation is established by type as it is considered by the U.S. armed services. For example, BQM-167 is the designation for the Skeeter. The letter B means multiple launcher configurations, Q identifies it as a drone, and M indicates that it is a guided missile. It was the 167th such system designated by the military.

Program Review Background. The U.S. military has long met its aerial target requirements from local sources. The U.S. Air Force, Navy, and Army all used the BQM-34 Firebee, although the primary operator of the MQM-107 was the Army. Both are subscale, subsonic aerial targets. These systems long served the U.S. military, but modifications will no longer enable these targets to meet evolving training needs.

New Target for New Threats

AFSAT. In late 2001, the U.S. Air Force announced that it wanted to procure a new subsonic, subscale aerial target. Known as the Air Force Subscale Aerial Target (AFSAT), this system will replace the existing BQM-34 and MQM-107 targets.

The USAF wanted a system with greater endurance than those already in service – about 60 minutes at 15,000 feet. The target's minimum speed would be 250 knots, and its maximum speed would be Mach 0.9. The AFSAT is required to have a 30-minute endurance at 15,000 feet and be able to operate at altitudes between 50 and 50,000 feet. Eventually, the Air Force would like the target to be capable of operating at 60,000 feet.

A 150-pound payload capacity under each wing was required, or 100 pounds internally. The target was to be able to sustain a 6g turn.

A Request for Proposals was issued on February 28, 2002. A single demonstration contract was awarded the following July to Composite Engineering Inc (CEi), Sacramento, California. This contract was worth

$6.6 million and called for the delivery of two preproduction AFSATs, flight demonstration and support, a target test set, and associated data. This contract ran for about 22 months.

Eventually, the U.S. Air Force gave the designation BQM-167A Skeeter to the AFSAT.

CEi Buys Raytheon Plant. In late 2003, CEi announced it had purchased Raytheon's aerial target manufacturing unit. CEi moved the Raytheon production line from Wichita, Kansas, to its 70,000-square-foot plant in Sacramento, but maintained an office with about a dozen engineers in Wichita.

Raytheon officials told the Wichita Eagle that the aerial target business no longer fit its business strategy in the wake of increasing competition from smaller companies. With the acquisition of Raytheon's target drone business, CEi became a subcontractor to Orbital Sciences Corp in an aerial target project for the U.S. Navy.

BQM-74 Follow-On. The Pentagon is procuring a new subsonic aerial target (SSAT) to replace the BQM-34 and BQM-74 drones. Names for this new system include the Target 21 and the BQM-74 Follow-On. This project is not related to the Air Force Subscale Aerial Target (AFSAT) program.

In 1999, the Pentagon approved Target 21 concept exploration. Lockheed Martin and Northrop Grumman received concept contracts worth $1.8 million in March of that year. The new target would be compatible with

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BQM-167 Skeeter

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existing ground control stations and systems used at U.S. Navy ranges.

Two versions of the Target 21 were under examination for possible procurement: Target 2101, which would replace the BQM-74; and Target 2102, which would supersede the BQM-34. Target 2101's primary mission was to support basic test and training needs, particularly in replicating small, subsonic Anti-Ship Cruise Missile (ASCM) threat systems. Target 2102's primary mission was to provide air combat maneuvering and complex ASCM subsonic threat replication.

A program definition and risk reduction phase was planned for FY00, followed by engineering and manufacturing development in FY01. The U.S. Navy wanted to begin Target 21 production in FY04 and achieve Initial Operational Capability in FY06. Plans called for the U.S. to purchase between 80 and 100 Target 21s per year.

Delays soon occurred. The U.S. Navy upgraded its BQM-74s to meet immediate needs. U.S. procurement switched to the E model.

In January 2011, Composite Engineering Inc won the contract to provide the Navy with a new SSAT. Three offers were received: CEi with a modified BQM-167; Northrop Grumman with a version of the BQM-74; and SELEX Galileo, in partnership with DRS Technologies Inc, with a model of its Mirach 100.

The BQM-167X uses the same engine as the A model but moves it to inside the airframe. The target drone also incorporates a redesigned wing. The modifications allow CEi to offer a smaller, lighter, and faster target. The target can fly at an altitude of 6.6 feet while traveling at a speed of Mach 0.9.

The contract with CEi includes the first two production lots. The U.S. Navy plans to begin fielding its new SSAT in 2015. Until this new target is available, the U.S. Navy will continue to rely on the BQM-74E drone built by Northrop Grumman.

This version is designated BQM-177A.

Air Vehicle Models. Only a single version of the Skeeter is in production – the BQM-167A aerial target drone. A multirole UAV version is being proposed.

BQM-167A Skeeter. The BQM-167A's layout is similar to that of the MQM-107. The air vehicle is

made mainly of carbon-fiber composites. The aerial target is powered by a ventrally mounted Microturbo TRI 60 turbojet engine. The BQM-167A can be air- or ground-launched.

Production of the BQM-167A began in 2004. This aerial target is used primarily for test and evaluation of air defense systems, as well as air-to-air missile training. In addition to the U.S. Air Force, the U.S. Army plans to purchase this aerial target.

The export version is the BQM-167i.

BQM-177A. The BQM-177A began as the X model of the BQM-167. The BQM-177A is the U.S. Navy's follow-on to the BQM-74 target drone. The BQM-177A features a new fuselage with reduced drag. This target drone can travel at a speed of Mach 1.1 at a low altitude but can also operate at altitudes above 40,000 feet. The BQM-177A has an endurance of 1+ hours and can perform sustained turns exceeding 6g.

Meeting New SSAT Need

Work on the BQM-177A began in 2007, and its first flight took place in 2008 (12 months after contract award). The BQM-177A uses 60-70 percent of the components from the BQM-167A drone, including its avionics and TRI60-5+ turbojet engine.

The contract for a new SSAT was awarded by the U.S. Navy to CEi in January 2011. The contract includes the first two production lots. The U.S. Navy plans to begin fielding this new target drone in 2015.

The export version is the BQM-177i.

Firejet. The Firejet was not developed under a government contract and is the small target drone offered by CEi.

Technical Data Metric U.S. Length 3.3 m 10.75 ft Wingspan 2 m 6.5 ft Weight, Dry 59 kg 130 lb Weight, Max. 150 kg 330 lb Speed 470 knots 470 knots Altitude, Max. 9,144 m 35,000 ft Endurance 60 min. 60 min.

This is a flexible target system able to fill a variety of mission roles including anti-aircraft artillery and air-to-air missile testing.

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BQM-167 Skeeter

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Related News Kratos Acquiring Composite Engineering – Kratos Defense & Security Solutions Inc has announced a $155 million cash and stock deal to acquire CEi. Kratos will acquire 100 percent of the stock of CEi. Kratos provides electronics and avionics that are used on board CEi air vehicles. Kratos also provides ground flight control stations and electronics for the command and control of CEi aerial systems. CEi's product line includes the BQM-167A/I, the BQM-177A/I, and the Firejet.

In calendar year 2011, CEi generated revenue of $94 million and adjusted EBITDA of approximately $16 million, generating an annual organic growth rate in excess of 25 percent over 2010. The purchase will be paid by Kratos in $135 million in cash and $20 million in Kratos stock. (Sacramento Bee, 7/12)

Market Intelligence Service Subscribers: For additional news, go to the on-line E-Market Alert page located in the Intelligence Center at www.forecastinternational.com and click on the links to the products you subscribe to.

Funding Procurement funding for the BQM-167A Skeeter is part of the USAF's Target Drone funding line. This line includes funding for the QF-4 and QF-16 full-scale aerial targets. Procurement of the older BQM-34 Firebee and MQM-107 aerial target drones has ceased. Drone procurement funding for the U.S. Navy is located under the Aerial Targets line, and for the Army under the Air Defense Targets line.

The U.S. Navy is funding development of a new subsonic aerial target drone. The SSAT will provide a replacement for the BQM-74 aerial target.

U.S. FUNDING

FY13 FY13 FY10 FY10 FY11 FY11 FY12 FY12 (Req) (Req) QTY AMT QTY AMT QTY AMT QTY AMTProc. USAF Target Drones - 74.5 - 85.0 - 59.3 - 129.9 BQM-167 38 36.5 40 39.4 26 28.8 30 31.8RDT&E U.S. Navy Target Systems - 72.1 - 68.3 - 44.7 - 59.2 SSAT - 7.4 - 19.3 - 11.3 - 15.2

All $ are in millions.

SSAT – PE#0604258N Target Systems Development. This is funding development of a BQM-74 replacement.

Contracts/Orders & Options On Sep 6, 2012, Composite Engineering Inc, Sacramento, CA, was awarded a $7,317,122 indefinite delivery/indefinite quantity, firm-fixed-price contract to procure 54 peculiar reparable spares for the Air Force Subscale Aerial Target BQM-167. The location of the performance is Sacramento. Work is to be completed by Nov 9, 2015. The contracting activity is AFLCMC/EBYK, Eglin Air Force Base, FL. Contract Number FA8678-12-D-0239

In Jul 2012, Composite Engineering Inc won a contract to provide aerial target drones to the Swedish military. The contract is worth $11.9 million and is with the Swedish Defense Materiel Administration. Sweden will use the target drones at its Vidsel Test Range. CEi will deliver an undisclosed number of target drones and associated hardware. Deliveries under the initial award are scheduled to be completed in 2013; in addition to the baseline contract, options exercisable for hardware through 2017 are valued at up to an additional $8.3 million.

On Feb 24, 2012, Composite Engineering Inc, Sacramento, received a $32,701,017 firm-fixed-price contract to procure a quantity of 35 BQM-167As, also known as the Air Force Subscale Aerial Target. The location of the

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BQM-167 Skeeter

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performance is Sacramento. Work is expected to be completed by Apr 30, 2014. AAC/EBYK, Eglin Air Force Base, is the contracting activity. Contract Number FA8678-12-C-0202

In Jul 2011, the government of Singapore awarded Composite Engineering Inc a multimillion dollar contract to supply high-speed aerial target drones to Singapore's Ministry of Defense. In addition to delivering the BQM-177i target drones, the contract will encompass all requisite ground support equipment, training, logistics support, and spares. The target system will be provided as the international variant of the next-generation high-subsonic subscale aerial target system recently selected by the U.S. Navy.

On Jan 28, 2011, Composite Engineering Inc, Sacramento, won a $31,461,842 cost-plus-incentive-fee contract for the design, development, integration, and testing of the subsonic aerial target (SSAT). The contracted work includes a three-year engineering and manufacturing development phase, two firm-fixed-price options for production, and options to provide logistics support. The Navy intends to field the SSAT initially in 2015 and to achieve full fielding in 2017. Work will be performed in Roseville, CA (58 percent); Sacramento (20 percent); Wichita, KS (19 percent); and Palmdale, CA (3 percent). Work is expected to be completed in Dec 2013. The Naval Air Systems Command, Patuxent River, MD, is the contracting activity. Contract Number N00019-11-C-0024

On Jan 20, 2011, Composite Engineering Inc received a $34,674,848 contract modification to exercise the Lot 8 option to procure 40 additional BQM-167As. At this time, the entire amount has been obligated. AAC/EBYK, Eglin Air Force Base, FL, is the contracting agency. Contract Number FA8678-10-C-0051 PO0013

On Dec 4, 2009, Composite Engineering Inc was awarded a $29,342,315 contract to exercise the Lot 7 option to procure 36 additional BQM-167As. At this time, the entire amount has been obligated. 691 ARSS/PK, Eglin Air Force Base, is the contracting agency. Contract Number FA8678-10-C-0051

On Nov 25, 2009, Composite Engineering Inc was awarded a $37,551,848 contract to procure additional subscale aerial targets. At this time, the entire amount has been obligated. 691 ARSS/PK, Eglin Air Force Base, is the contracting agency. Contract Number FA8678-10-C0051

Timetable Month Year Major Development Feb 1958 Firebee research initiated 1959 Initial low-rate production of Firebee 1960 IOC of Firebee Mar 1972 Beech (Raytheon) awarded contract for MQM-107 Dec 1975 MQM-107 production begins 1995 Firebee procurement ceases in U.S., continues in Japan 1999 U.S. places new contract for BQM-34 2000 Target 21 program under way 2001 AFSAT program launched 2003 U.S. concludes Firebee production U.S. concludes MQM-107 production 2004(a) BQM-167A Skeeter (AFSAT) enters LRIP 2008 CEi unveils X model as alternative to BQM-74 target drone CEi involved in Multi-Stage Supersonic Target (MSST) program with ATK Jan 2011 U.S. Navy selects CEi as new SSAT contractor Mar-Apr 2012 Meteor missile engages BQM-167 2013-2014(a) CEi to begin LRIP of new SSAT 2015(a) New SSAT to enter service

(a) Estimate

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BQM-167 Skeeter

©2013 January 2013

Worldwide Distribution/Inventories The BQM-167 and BQM-177 are available for export. The company is seeking additional clients in Europe, Asia, and the Middle East.

India is seeking potential sources for an aerial target drone. No details are available, but Indian officials did mention an interest in a High Speed Expendable Aerial Target. The Indian Air Force would operate this target drone.

User Countries. The United States and Germany were the initial recipients of BQM-167A Skeeter aerial targets produced by CEi. Singapore purchased a version of this aerial target. This purchase was once thought to have occurred in 2006 but actually happened at a later date. Sweden placed an order in 2012. Other reports say Taiwan and South Korea are customers for the BQM-167 target drone, and the Skeeter has taken part in tests of the Meteor beyond-visual-range air-to-air missile.

Forecast Rationale Composite Engineering Inc is taking an ever-increasing share of the aerial target drone market. CEi was already providing its BQM-167A to meet the Air Force Subscale Aerial Target (AFSAT) requirement when it won a U.S. Navy contract for a new subsonic aerial target (SSAT) requirement. This success has not gone unnoticed and now Kratos has acquired CEi.

Winning Bigger Share of Market

Production of the BQM-167A Skeeter for the U.S. Air Force is proceeding. The annual manufacturing rate will probably average 30-40 targets over the next 10 years. From time to time, the yearly figure could spike to 50 or more drones. In addition to the U.S. Air Force, the U.S. Army is interested in this target drone, as are certain foreign militaries.

The U.S. Navy plans to complete work on its version of the BQM-177 in 2013, with production starting soon thereafter. Initial fielding is to take place in 2015. The

new SSAT will be fully operational by 2017. Until this aerial target is available, the Pentagon will continue to rely on the Northrop Grumman BQM-74E.

Previous customers of the MQM-107, BQM-34, and BQM-74 are likely to become customers for the BQM-167 and BQM-177. Fuji Heavy Industries produced the BQM-34AJ in Japan for years, along with the BQM-74 Chukar. Whether Japan will also build the Skeeter under license is unknown. Currently, foreign customers for CEi target drones include South Korea, Taiwan, Singapore, Germany, and Sweden.

The specter of a declining budget does hang over the Pentagon. In tight fiscal times, the training accounts are the first raided for money to fund higher priorities. This is true for many nations, including the United States. How hard these spending reductions will hit aerial target drones is undetermined. Some sources believe the U.S. cannot reduce its procurement of Skeeter-like drones any further.

Ten-Year Outlook

ESTIMATED CALENDAR YEAR UNIT PRODUCTION

Designation or Program High Confidence Good Confidence Speculative

Thru 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total

Composite Engineering Inc (CEi)

BQM-167A <> Skeeter 322 41 38 35 35 36 37 33 39 36 35 365

BQM-177A <> Skeeter 0 0 30 35 65 67 80 90 110 115 121 713

Subtotal 322 41 68 70 100 103 117 123 149 151 156 1,078

Total 322 41 68 70 100 103 117 123 149 151 156 1,078

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©2012 October 2012

Analysis 1 The Market for

UAV Reconnaissance Systems 2012-2021

Table of Contents Executive Summary ................................................................................................................................................. 2

Introduction ................................................................................................................................................................ 4

Trends .......................................................................................................................................................................... 7

Competitive Environment ..................................................................................................................................... 13

Market Statistics ..................................................................................................................................................... 16

Table 1 - The Market for UAV Reconnaissance Systems Unit Production by Headquarters/Company/Program 2012 - 2021 ................................................ 28

Table 2 - The Market for UAV Reconnaissance Systems Value Statistics by Headquarters/Company/Program 2012 - 2021 ................................................. 42

Figure 1 - The Market for UAV Reconnaissance Systems Unit Production 2012 - 2021 (Bar Graph) ............................................................................... 56

Figure 2 - The Market for UAV Reconnaissance Systems Value of Production 2012 - 2021 (Bar Graph) ......................................................................... 56

Table 3 - The Market for UAV Reconnaissance Systems Unit Production % Market Share by Headquarters/Company 2012 - 2021 .................................... 57

Table 4 - The Market for UAV Reconnaissance Systems Value Statistics % Market Share by Headquarters/Company 2012 - 2021 ..................................... 59

Figure 3 - The Market for UAV Reconnaissance Systems Unit Production % Market Share 2012 - 2021 (Pie Chart) ...................................................... 61

Figure 4 - The Market for UAV Reconnaissance Systems Value Statistics % Market Share 2012 - 2021 (Pie Chart) ....................................................... 61

Conclusion ............................................................................................................................................................... 62

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Analysis 1

October 2012

The Market for UAV Reconnaissance Systems

Executive Summary The unmanned aircraft system (UAS) market has seen a remarkable transformation over the last 11 years. More change has occurred in this market in that time than in all the previous decades.

Such a radical change can only occur in the wake of some equally climactic event in a much larger world environment. That event was the 9/11 terrorist attacks and the subsequent Global War on Terror launched by the United States and its allies. Prior to these events, the size of the unmanned vehicle market had been growing, but at an almost glacial pace.

For decades, many years before 2001, unmanned air vehicles were steadily building their reputation within the U.S. military. Operations in the Middle East (Iraq – 1991) and the Balkans (Bosnia-Herzegovina – 1995) helped to enhance this reputation, but it was during the post-9/11 fighting in Afghanistan and Iraq that UAVs came into their own.

Game of Drones

Besides taking thousands of innocent lives, destroying buildings in New York City, damaging the Pentagon, and ushering in the U.S.-led war on terror, the 9/11 attacks resulted in massive increases in the operational use of, and funding for, unmanned air vehicles.

The U.S. reacted quickly to the 9/11 terrorist attacks, launching Operation Enduring Freedom (OEF) on October 7, 2001. This operation's aim was to topple the Taliban regime in Afghanistan and break up the terrorist training network located in that country.

Even before the first U.S. soldier set foot in the country in 2001, UAVs were in operation over Afghanistan. According to some reports, the U.S. had been using UAVs to monitor Afghanistan for an indeterminate time before this date.

Long viewed as useful assets for collecting intelligence, UAVs quickly became an indispensable element of U.S. military operations. In some cases, UAVs became combatants, firing air-to-surface missiles at targets of opportunity. The Predator has even worked in conjunction with AC-130 gunships, providing streaming video directly to these aircraft while involved in missions. In addition, the new AH-64 Apache Block III attack helicopter is able to control a UAV while airborne.

The fighting in Iraq also brought the first wide-scale use of man-portable unmanned air vehicles. Platoon and

company-level commanders use these systems to provide soldiers with better situational awareness.

The U.S.-led invasion of Iraq, as well as military operations in Afghanistan, has helped to raise the profile of UAVs to heights undreamed of just a few years ago. Program managers in the United States have said that for the first time, they are actually getting more money than requested. Around the world, planned funding for UAVs has skyrocketed since 2001. Production is higher than ever in the history of this market.

The Pentagon plans to spend billions on UAV research and procurement over the next 10 years. Although Europe cannot hope to match this figure, the continent could spend nearly $6 billion on procurement and a similar amount on research and development.

For the immediate future, U.S. companies will be the leading providers of UAVs to the world. U.S. firms will control more than 40 percent of this market's total value and produce far more air vehicles than any of their competitors. The leading firms are Northrop Grumman (maker of the Global Hawk) and General Atomics (which provides the Predator).

Company % Market Share Main System General Atomics 20.38 Predator Northrop Grum. 18.18 Global Hawk IAI 2.15 Heron Boeing 1.53 ScanEagle AAI 1.12 Shadow All Others 56.64

U.S. companies can attribute their dominance to the Pentagon's high demand for UAVs and to the availability of financial resources to pursue multiple programs. The U.S. military is procuring an array of UAVs ranging from man-portable to high-altitude, long-endurance (HALE) systems.

Yet this market contains a substantial number of anticipated UAV contracts. Some $3.9 billion worth of contracts (or 10.08 percent of the entire market value) is up for grabs, and companies from around the world are vying to get a piece of this action.

Europe is just as determined as the United States to expand its UAV fleet, although the continent's financial resources are more limited. European companies currently account for just under 4 percent of this market's value, but their share will grow in the future.

France has plans to create one of Europe's largest UAV fleets. These plans include the procurement of interim

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Analysis 1

©2012 October 2012

systems to meet immediate needs and others to fulfill long-term requirements. The French military will receive new man-portable, tactical, and long-endurance systems, followed by a mini-UAV for use at the battalion level, a vertical takeoff and landing (VTOL) UAV for naval surface combatants, and a MALE system.

The United Kingdom is looking to expand its UAV fleet. London is moving ahead with its Watchkeeper UAV program and plans to cooperate with France on the development of a new MALE system.

BAE Systems and Dassault Aviation plan to develop the Telemos MALE UAV. The team wants to bring other European companies and countries into this program in the future.

Germany, Spain, the Netherlands, Italy, and Greece all plan to place new UAV production orders over the next 10 years. Some of these UAVs will deploy from naval surface combatants.

Percentage Market Share by Nationality U.S. Firms 41.67 European Firms 3.88 Israeli Firms 3.68 All Others 40.69 Pending Contracts 10.08

Israel Aerospace Industries (IAI) and Elbit Systems Ltd are also looking to benefit from growing worldwide interest in UAVs. Israel was at the forefront in deploying UAV systems and is much more dependent on foreign orders to keep its production line profitable. Israeli firms are aggressively marketing their UAVs around the world. Both IAI and Elbit are forming alliances with large foreign firms to assist their efforts in winning a greater share of the UAV market.

Interest in UAVs is growing outside the U.S. and Europe. Japan is introducing new systems and plans to acquire a Global Hawk-like HALE UAV. South Korea, India, Malaysia, Pakistan, Singapore, Taiwan, and Indonesia, to name a few, are also looking to expand their UAV fleets.

The number of countries involved in UAV research and acquisition programs will continue to grow throughout the decade and beyond. More and more nations are realizing that UAVs can save lives and make a military force more efficient by performing certain dull, dirty, and dangerous missions.

In addition to the military market, the market for civilian and commercial unmanned air vehicles is growing. The civilian UAV market segment refers to systems operated by non-military government organizations, such as border patrols, police, etc. The commercial UAV market segment describes purchases by non-government organizations (private companies, etc.).

Flying UAVs outside tightly controlled military airspace is a hindrance to the growth of these segments. Both the U.S. and Europe are working on ways to integrate UAVs into their respective national airspace. For the immediate future, these market segments will remain far smaller than their military counterparts in both value and production volume.

Conclusion. The market for unmanned air vehicles is worth an estimated $39.2 billion over the next 10 years. This figure includes production of all air vehicles, ground control equipment, and payloads through 2021. Research and development will account for a further $28.7 billion in spending, and perhaps another $2 billion to $3 billion will go toward UAV services contracts. This means a total market value of $70.9 billion.

The most significant providers of these systems will be located in the United States: Northrop Grumman, General Atomics, and AAI. The U.S. military has a large requirement for UAVs, and it keeps growing each year.

Europe has lagged behind the United States in terms of funding and production volumes for unmanned air vehicles. Still, European governments are investing more money in UAVs. Among the beneficiaries of this increased funding will be BAE Systems, EADS, and Dassault. The United Kingdom and France are the continent's largest operators of UAVs, followed by Germany and Italy.

Despite more funding, the share of this market held by European firms will remain much smaller than that held by their U.S. counterparts for some years to come. However, Israel's share of the market, 3.68 percent, is misleading since Israeli companies are involved in numerous joint ventures that do not place them as prime contractor. This additional revenue could mean Israel's true share of this market is higher.

During this period, the UAV market will experience a slow but steady rise in value annually. The number of air vehicles built will decline over the next 10 years.

SAMPLE


Analysis 1

October 2012

This market may be finally exiting its infancy. In the near term, the U.S. market will experience some cooling

and eventually settle at a lower level of activity – but one that is still much higher than it was prior to 2001.

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