Beechcraft’s reaction to losing the U.S. Air Force’s Light Air Support (LAS) contract for a second time reveals as much about the service’s procurement credibility as it does about Beechcraft’s worries for its own financial future after emerging from bankruptcy.
The company has nothing to lose by once again turning to the(GAO) with another protest and petitioning the U.S. Court of Federal Claims to halt further work by the Sierra Nevada/ team in building the small attack aircraft for delivery to Afghanistan. In February, Beechcraft’s AT-6 again lost the LAS competition to the A-29 Super Tucano. After protesting the same outcome last year, Beechcraft managed to force a recompetition. Though the strategy bought the company time to further improve its AT-6 offering, it was not enough for a win.
The permanent loss of the LAS contract would be a setback for the Wichita-based company, which is attempting to regain its footing after emerging from Chapter 11 bankruptcy protection only days before the Air Force announced the A-29 win. Sierra Nevada/Embraer won $427.5 million worth of work for the first 20 aircraft slated for delivery to Afghanistan starting next year. While that amount is modest in terms of major military awards, the contract allows for orders totaling nearly $1 billion for deliveries to other allies.
Beechcraft CEO Bill Boisture is under hefty pressure from shareholders eager to turn the company around after bankruptcy. So the protest is also a message to investors that the restructured Beechcraft is sound. “The stakes are a lot higher for Beechcraft here” than for, which repeatedly protested its loss of the Air Force’s KC-135 replacement competition and eventually won the work, says Byron Callan of Capital Alpha Partners.
A win would have been a much-needed boost for T-6/AT-6 production, securing a years-long future for the growing defense side of Beechcraft’s work. During the economic downturn, the trainer/attack segment grew from just 17% of revenue in 2009 to 26% in 2011, and accounted for 30% of the backlog.
Meanwhile, Embraer has signed a 10-year lease for an A-29 final assembly facility at the Jacksonville, Fla. International Airport after the Air Force lifted a pro-forma stop-work order issued following Beechcraft’s latest protest. The service cited the importance of quickly delivering the aircraft to Afghanistan as U.S. forces plan to withdraw next year. After the first botched procurement, deliveries are now slated to be about 14 months late.
Securing “the American market opens the door. We cannot even measure how much [business] this will be,” says Luis Aguiar, CEO of Embraer Defense and Security.
Few U.S.-developed aircraft that have lost business at home have succeeded internationally. But Beechcraft CEO Boisture remains optimistic. “The loss of LAS doesn’t preclude us from having a healthy program for years to come,” he says.
With Beechcraft having just emerged from bankruptcy, Boisture is loath to be seen accepting such an important loss without a fight, especially when the Air Force has had major procurement missteps in recent years. In the first LAS competition, the Air Force acknowledged poor documentation, which led to its willingness to solicit new bids.