First international customer for Osprey is close at hand, but reduced U.S. buy poses pricing challenges
The is finally proving the value of marrying the vertical lift of a helicopter with the speed of a fixed-wing aircraft after a tumultuous and prolonged development phase. But the question now is whether this success is coming at a time when the team is powerless to turn its inherent operational utility into substantially more sales.
Even with a ringing endorsement from its main customer, the U.S., the program has struggled to bring in the international sales needed to dramatically extend the production line. The United Arab Emirates is expected to sign on by year-end as the first international customer, a significant achievement for the program team. And interest from the UAE is said to be prompting some Israeli officials to consider buying the aircraft sooner than planned in 2018. However, the global financial crisis is pinching the budgets of so many potential customers that near-term opportunities are limited.
After decades of turbulent development—including four fatal crashes during flight testing—the tiltrotor is proving its worth in continuous deployments to Iraq and Afghanistan, according to Marine Corps officials. The aircraft is replacing the Marines' CH-46 helicopters and MH-53s now retired by the U.S. Air Force for special operations missions.
But more sales are sorely needed. While continuing to woo more customers, the industry team is now sorting through the thorny problem of a roughly 50% drop in annual production for the Marine Corps as it plans for the second multiyear buy of 98 Ospreys. International sales would help soften the blow to the supply base of the Pentagon's rate reduction.
Bell-is slated to deliver 39 V-22s to the Pentagon this year, bringing the total number to 200. That will be sliced to 21 for the first year based on the forthcoming Multi-Year Plan II. In the fiscal 2013 budget proposal, the Pentagon trimmed the MYP II buy to 98 from 122, shifting 24 aircraft to later in the production plan.
To be certified for a MYP, the program had to demonstrate roughly 10% of savings as compared with year-over-year buys from fiscal 2013-17.
This makes the Marines' longtime goal of achieving a $58 million per-unit price (in fiscal 2010 dollars) unlikely. “We are finally proving the business case certainly with the quantities being in the high 30s per year right now,” says John Rader, Bell-Boeing's V-22 program manager. “Certainly, there is going to be some upward pressure in going from 39 per year to 21, and a lot of that is going to be on our supply base.” Roughly 60% of the price of Boeing's piece of the work comes from its supply base, he says.
The per-unit price of an MV-22 in fiscal 2012 is $67 million, including theengines, says Marine Col. Gregory Masiello, the Pentagon's V-22 program manager. Bell-Boeing has been delivering MV-22s at or ahead of schedule and at or below cost estimates, he adds.
Boeing is benefiting from its experience in cutting theproduction rate by one-third without a price increase. “We specifically have teams going to figure out how you can decrease quantities and hold to that price,” says Rader.
The introduction of robotics into Boeing's factory for assembly and fabrication of composite materials has helped to lower costs, says Rader. Additionally, the quality of work at both Bell's final assembly factory in Amarillo, Texas, and Boeing's Philadelphia facility, where the fuselage and cockpit are assembled, has improved. “What is resonating much more with the customer set is not as much the unit price but the overall business case for [what] the concept of operations will be,” says Rader. “Whether the aircraft is $58 million or in the [$60-69 million range], you can make that business case close very easily because of the efficiencies you get. You recoup that cost when you look at the passenger per pound mile of fuel.”
Meanwhile, the utility of the aircraft since it was declared operational in 2007 is a selling point, according to the Marine Corps. “The operators are learning an awful lot about the V-22 that they did not know before,” says Masiello. “Our readiness and cost are greatly improved.” He cites a 19% improvement in 2011 in the fleet-wide mission-capable rate as well as a 13% reduction in the cost per flight hour for the aircraft.
The program also gained credibility last year after two MV-22s from the USS Kearsarge in the Mediterranean rescued a downed U.S. Air Forcepilot in Libya. The aircraft's speed (up to 282 kt.) and range, key attributes, were central to its ability to execute the mission from a ship roughly 130 nm from the pilot. “Total time from launch to return—90 minutes round trip. That is what the Osprey gets you, that speed,” a Marine Corps official said after the mission. The rescue is said to have been a factor in the UAE's decision to buy the tiltrotor for its special operations forces. The Osprey also debuted at the Dubai air show last year.
As for Israel, its interest is serious, though the timing is uncertain. The country sent pilots to the U.S. last year to be trained in flying the aircraft and conducted an evaluation of its capabilities. “It is an understatement . . . that we have growing interest,” says Masiello. “We believe it is a very earnest interest that will probably turn into customers shortly.” He emphasizes that the industry team is motivated to take up as much as possible of the extra capacity on the Marine Corps line left after the cuts.
The MV-22 will make an appearance this year at the Royal International Air Tattoo near London as well as at the Farnborough air show in order to generate more international interest.
The U.S. Navy is another customer opportunity. The service recently completed an analysis of alternatives for a Grumman C-2 replacement and the “V-22 has competed quite favorably,” says Masiello.
The C-2 is a passenger and cargo transport used for Navy aircraft carriers. Typically, the C-2 delivers cargo and it is distributed in a spoke-and-hub fashion; other rotorcraft are then used to transport supplies to ships in the battle group. The V-22's vertical-lift capabilities, mixed with cargo capacity, eliminate the need for a secondary fleet of rotorcraft to move supplies to smaller ships, says Masiello. “I think from the way we look at the numbers . . . we compete quite competitively.”
The MV-22 recently received clearance to fly onto Navy aircraft carriers and it is now conducting envelope-expansion work on the USS Bush. The aircraft has also been cleared for operations on the French Mistral amphibious assault ship.
The government-industry team is also pushing to reduce the V-22's maintenance costs, which were especially high early in the first deployments to Iraq.
The Pentagon is planning to set up a performance-based logistics (PBL) contract for Bell-Boeing supply-chain management. Masiello expects the contract to reduce the cost of the Bell- and Boeing-manufactured items. And once the PBL is used to establish a baseline, he says he hopes to broaden this strategy to other original equipment manufacturers.
Meanwhile, the Pentagon is also considering a key upgrade for the MV-22 and the CV-22, the Air Force variant procured for infiltration and exfiltration of special operations forces. The modification is designed to improve unrefueled range performance (AW&ST April 16, p. 26). Naval Air Systems Command intends to conduct flight tests of an MV-22 modified with nacelle-mounted “sails,” which are designed to work like winglets on Boeing's commercial aircraft. The upgrade could boost range by as much as 5%. The flight trials are slated for November. Bell-Boeing declined to comment on the plan.
The Marines plan to begin fielding the MV-22C variant this year; it will include upgraded software and improved temperature controls for the cabin. Also this year, the Pentagon plans to begin using the MV-22 for the presidential cargo-support role, taking over for the CH-46.
The Pentagon plans to buy 360 MV-22s for the Marine Corps, 53 CV-22s for the Air Force and a notional 48 Ospreys for the Navy.