Europe's shambolic efforts to create an unmanned-aircraft industry to rival the U.S. and Israel continue. But while the defense ministers of several nations have taken steps towards developing a European medium-altitude, long-endurance UAS by 2022, the tricky task of persuading the region's industrial rivals to work together is only beginning. Even China looks as though it could outpace Europe.

The region's stumbling progress is an opportunity for U.S. manufacturers to export their systems and offset the cutbacks in Pentagon UAS procurement, but the potential is limited by the Missile Technology Control Regime (MTCR) treaty, which bars the sale of UAS with payloads of 500 kg. or more without a hard-to-get waiver from the government.

But even as U.S. defense spending slows, the UAS market is expected to grow. The military market for surveillance and strike missions will be worth $67.3 billion from 2013-20, Forecast International projects. Of that total, $35.6 billion will be for production, $28.7 billion for research and development, and $2-3 billion for UAS services contracts. The production value is divided between air vehicles ($14.2 billion), ground control stations ($6.6 billion) and payloads ($14.8 billion).

Despite cuts to the U.S. Air Force's RQ-4B Global Hawk program, Northrop Grumman will be the top player in the UAS market. Even with reductions in the USAF fleet, the Global Hawk program will be worth some $5.8 billion to Northrop through 2022, including the U.S. Navy's 68-aircraft MQ-4C Triton program. Germany canceled plans to buy four Block 20-based EuroHawks in May 2013, citing airspace integration issues, but work to deliver five Block 40s to NATO by 2016 is continuing.

Efforts to export the high-altitude, long-endurance UAS are progressing slowly. South Korea intends to order four RQ-4B Block 30s in 2014. Japan could follow with four in 2015. Canada and Norway are among nations eyeing the Global Hawk, while Australia has declared an interest in the maritime-surveillance Triton.

Northrop will also garner $679.5 million by 2022 from its MQ-8 Fire Scout vertical-takeoff-and-landing (VTOL) UAS program. Flight tests of the 6,000-lb. gross-weight, extended-endurance MQ-8C, based on the Bell 407 helicopter, began in October 2013 and production is switching to the bigger variant.

For now, navies are the main military customer for VTOL systems. Ground forces are showing interest, but programs are moving more slowly. Europe is moving less slowly in small rotary-wing UAS than in fixed-wing. Saab's 520-lb. Skeldar V-200 is operational with the Spanish navy and Scheibel's 440-lb. Camcopter S-100 has been sold to four countries and tested by several navies.

The U.K. awarded AgustaWestland a contract to demonstrate an optionally piloted, 4,000-lb. SW-4 Solo helicopter on a Royal Navy ship in 2014 as a step toward deploying a tactical maritime UAS on warships by 2020. France conducted similar land- and ship-based trials with Boeing's 3,100-lb. H-6U Unmanned Little Bird, which also has been demonstrated to the South Korean army.

General Atomics had been at the top of the military UAS market for years, due to demand for its MQ-1 Predator/MQ-9 Reaper family, and remains the leader in the largest sub-segment of the market: medium-altitude, long-endurance (MALE) systems. The Predator/Reaper family is forecast to generate $5.5 billion in production value through 2022, 40% of the segment total and 16% of the entire market.

The U.S. Army continues to buy MQ-1C Gray Eagles, but the Air Force plans to halve MQ-9 procurement from 2014, and the export market is constrained by MTCR restrictions. In 2017, the Netherlands will become the fourth European nation to operate Reapers after France, Italy and U.K. Australia, Canada and Germany are interested, but would not place orders before 2015-16. The United Arab Emirates has ordered five Predator XP export versions of the MQ-1, and other Persian Gulf states have expressed interest.

In November, the defense ministers of France, Germany, Greece, Italy, Poland, Spain and the Netherlands endorsed development by the European Defense Agency of a common requirement for a MALE UAS to be developed by 2020. An effort by France and the U.K. to have BAE Systems and Dassault co-develop a MALE UAS, dubbed Telemos, has been shelved, but in June 2013 EADS, Dassault and Alenia Aermacchi called for creating a European program and began joint definition of a twinjet MALE UAS.

Italy, meanwhile, will work with Piaggio Aero and Selex ES to certify the P.1HH HammerHead—the first European-developed MALE UAS and a derivative of the P.180 Avanti business turboprop—and consider the system for its long-term needs. A P.1HH demonstrator made its first unmanned flight in November, and the UAS is to be ready to enter service in 2015. Development is being backed by Piaggio's co-owners Mubadala of the UAE and India's Tata.

For now, European companies control less than 3% of the market's value, but this share will grow as countries expand their UAS assets. Meanwhile, UAS orders from Africa, the Middle East, and Latin America could exceed $2 billion during the coming decade, with purchases by the Israeli defense forces accounting for nearly half of this total. The annual production value of UAS in Asia will triple over the next 10 years, reaching $2.9 billion in 2022. Sales in Asia could account for $18 billion of the market's value during this period, with China claiming $13 billion of this total.

In clear signs of China's growing capability in the unmanned sector, in September Japanese fighters intercepted a Harbin BZK-005 Predator A-class MALE UAS exercising with warships, and in November a stealthy unmanned combat air vehicle (UCAV) made its first flight from Chengdu. The Lijian (Sharp Sword) resembles the Boeing Phantom Ray and Dassault Neuron UCAV demonstrators in shape and size.

Demonstration flights of the U.S. Navy's Northrop X-47B carrier-capable unmanned combat aircraft will continue in 2014, as will flight tests of the Neuron and BAE Systems Taranis UCAV demonstrators. The only major new U.S. military UAS competition, for the Navy's Unmanned Carrier-Launched Airborne Surveillance and Strike, is to be decided by early 2015.

In the commercial arena, the FAA estimates 7,500 civil UAS could be operational in the U.S. within five years, provided regulations enabling safe integration into national airspace are in place by the end of 2015 as planned. The majority will be small UAS weighing less than 55 lb., the first category for which airworthiness certification rules will be available. Law enforcement and precision agriculture will be the major initial markets.

Europe is ahead of the U.S. in civil UAS, with almost 1,000 in use, because individual nations can approve operations of systems weighing less than 330 lb. These rules are being harmonized and the European Aviation Safety Agency is developing regulations for UAS above 330 lb., to enable civil airspace integration beginning in 2016.

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