The U.S. Army appears poised once again to either delay or outright terminate its latest effort to replace the 1970s-era Bell OH-58D Kiowa Warrior, with budget cuts threatening its long-gestating plans for the Armed Aerial Scout (AAS) program.

If either happens, the effect will be felt by a rotorcraft industry starving for new military programs after a decade of contracts to keep existing platforms flying for the wars in Iraq and Afghanistan. And it could mar the relationship between the Pentagon and industry, which continues to spend company funds on research and development following cues from the Defense Department, but with diminishing hope of seeing a financial return anytime soon.

The uncertainty surrounding AAS ramped up substantially last week at the Association of the U.S. Army convention in Washington, when Army Secretary John McHugh failed to list the program among the service's top priorities as it prepares for life under the constrained funding of a continuing resolution and further deep budget cuts sure to come (see page 31). Acquisition chief Heidi Shyu added to the worry when she said AAS would be nice to have, but acknowledged there are other priorities.

“We wanted an Armed Aerial Scout as a replacement,” Shyu said at the show. “But in this fiscal environment creating a brand-new program is very tough.” When establishing one for a particular mission area, the funding “goes to zero” for sustaining and upgrading the existing system, she notes. This could be justification enough for the Army to continue upgrading the Kiowas piecemeal to avoid a dearth of funding in the near term to keep the scout fleet flying.

Europe's EADS has the most skin in the game. The company has spent more than $100 million developing three AAS-72X demonstrators aimed at the Armed Aerial Scout requirement. But the company is facing a shutdown of its U.S. line assembling the Army's UH-72A Lakota utility helicopter—the basis of its AAS design—without a near-term commitment to continue procurement, starting an AAS competition or finding other customers to continue production.

The company is hoping to entice the U.S. Air Force to buy some UH-72s for its long-desired Bell UH-1N replacement, a long shot given the financial pressure on the Pentagon and the service's decade-plus on-again, off-again approach toward its Common Vertical Lift Support Program. In a Sept. 11 letter to acting Air Force Secretary Eric Fanning, EADS North America CEO Sean O'Keefe argues that the service should opt for the Lakota as a “cost-neutral” alternative to extending the life of its 62 UH-1Ns by only 12 years.

A lull in Lakota procurement could lead to a premature closure of the assembly line in Columbus, Miss., as well as a death knell for the European company's hopes of being a major player in the world's largest defense market. The company lost its bid to sell Airbus A330-based aerial refuelers to the Air Force after a long campaign and its only other major platform that might have potential for the U.S. is the unproven Airbus Military A400M. The four-engine transport faces an uphill battle to garner congressional support as Lockheed Martin's powerful lobbying apparatus is protecting its twin-engine C-130 tactical airlifter.

At the beginning of the AAS voluntary flight demonstration conducted last year, the Army challenged industry to offer a new aircraft with improved high/hot hover performance at the same or less cost than extending the service life of the Kiowa Warrior—no more than roughly $15 million per aircraft. EADS officials believe they invested in the Lakota improvements in good faith and offered at least a 90% solution to the AAS requirements, but may ultimately end up with yet another failed attempt to sell hardware to the Pentagon.

By contrast, a delay of two or three years in starting an AAS program and staging a procurement competition would fit well with Sikorsky's plans. The company and its industry partners are investing around $200 million in building two prototypes of its S-97 Raider coaxial-rotor light tactical helicopter. The first of these is to fly at the end of 2014. A year-long envelope expansion program is scheduled to follow and Steve Engebretson, director of advanced military programs at Sikorsky, says the company will be able to demonstrate the Raider's capabilities to the Army at the end of 2015, and be ready with an off-the-shelf mission equipment package installed on the prototype for the 2016 AAS competition.

Among the other contenders, Boeing with the AH-6i appears to be moving on to different priorities, and AgustaWestland with the AW169AAS was a late entrant that was always considered a long shot. Termination of the AAS program, meanwhile, would leave Bell in a relatively good place, as it is likely to receive continued, incremental funding to upgrade the Kiowa Warrior fleet. The company has backed off on internal funding for its Block II upgrade to the OH-58D, which it has proposed for AAS, electing not to fly an uprated version of the current Rolls-Royce engine after testing the alternative Honeywell HTS900 turboshaft in flight. The company may be hoping the Army will fund those efforts if it, indeed, is looking to fill a gap with today's fleet.

Underscoring the Army's uncertainty on how to move forward with the scout mission, the service has even proposed converting some of its Boeing AH-64 attack helicopters into more lightly armed “Apache Lites” as a gap-filler until it can pursue a proper program. But AAS contenders argue the Apache would be unsuited to some aspects of the scout mission and more costly to operate than the OH-58D or a new aircraft.