Michael Schoellhorn, CEO of Airbus Defense and Space, talks with Aviation Week’s European Defense Editor, Tony Osborne, about the changing face of Europe’s security requirements, the advance of major projects such as the Future Combat Air System (FCAS) and the emergence of European institutions as investors in the security sector.

• Work on FCAS Phase 1B got underway in March
• OEM studying potential future medium airlifter
• A400M building export reputation after Sudan airlift

AW&ST: The conflict in Ukraine has been a turning point for Europe in terms of defense. Has Europe finally emerged from its peace dividend hibernation, and are the defense spending promises turning into contracts? There is recognition that nations need to invest more in defense. The peace and freedom we enjoy cannot be taken for granted. This entails a strong military capability within NATO. That understanding has grown a lot, and I think that’s very positive.

As far as the execution goes, it becomes a bit more complex. Some European countries, such as Germany, for example, have over many years created a procurement process that was not designed for throughput. That is what we are witnessing now. This system needs fixing, and it requires industry’s support as well. It’s not just a matter for the procurement agencies. More needs to be done to really inject speed into the procurement process.

Other countries are more advanced and have a system that by and large works. France is one. Spain’s system also works relatively well in terms of the money that’s available, on the one hand, and moving that to a contract in a reasonable amount of time.

Regarding Germany, have you been encouraged by the statements from Defense Minister Boris Pistorius about speeding up defense procurement? What the German defense minister said about speed being of the essence is definitely right. At the same time, I am happy he also said that despite all the need to focus on short-term priorities, there need to be mechanisms to enable the development of something over a longer period like FCAS. Europe must not forget to look after its own industry.

In the current German defense procurement process, there is a strict separation of industry and the customer, which almost systematically produces overspecified, “gold-rimmed” solutions. One entity writes a big specification document, and [industry] has no chance of bringing their expertise to the table. Consequently, industry can just accept it or leave it. This, in turn, leads to few possibilities [of having] a meaningful assessment of what’s realistic and what is doable. Ultimately, industry finds itself in a situation where if they don’t want to lose the business, they have to say yes. This is a vicious circle we must break through.

How do countries overcome these procurement challenges? One of the lessons learned from the Ukraine war is that we need to go more toward a “minimum viable product”-type approach. That is to say, design something that brings an initial capability in 3-5 years and then take all the user experience back into the next design phase. This way we become more agile and more nimble like other industries. We need to avoid the complexity. Otherwise you end up with something like the [NHIndustries] NH90 with 22 different variants over 600 helicopters. In short, there is a need for more standardization.

Eurodrone is a step in the right direction. It started as a classic program until all the countries came together to build on the lessons from the [Airbus] A400M. Our customers converged on one variant that we are now developing, and bundling the customer side through [European defense procurement agency] OCCAR has been very helpful.

Are Airbus programs still being challenged by export limitations put in place by European countries? Germany is still trying to find a clear direction. On the positive side, the decision to export to Ukraine has developed very fast. Two years ago, it would have been difficult to imagine Germany exporting into a war zone. When it comes to countries like Saudi Arabia, there is still hesitancy, but there is also momentum in the discussion. After all, if you want to be in a European program, we should all have more or less the same standards in terms of exports. There should be no double standard or higher morals.

Would it make more sense if the EU, for example, made decisions on defense exports rather than individual European nations? The EU has too many countries that could have a say in the decision-making process. I think a set of core European countries that have a capable defense industry making these decisions would be a good start. Perhaps creating an export counterpart equivalent to OCCAR could be endorsed by the countries to do an assessment [as well as] manage and make recommendations. Ultimately, countries will not give up their sovereign right to make those decisions, but at least they would have an aligned view of how the decisions are being prepared.

You led a transformation program in the commercial business that would change the production processes, so how does the defense and space business require similar transformation? Our production volumes are not going to be matching that of [Airbus] A320-family production, and we are certainly not going to be building 60 Eurofighters a month. However, the transformation we need to go through on the defense side is to become more nimble and more flexible. We need to be able to deliver capabilities in a shorter amount of time. We can no longer afford to have these 10-15-year super-heavy programs that aim sky-high for a set of requirements that will be extremely difficult to fulfill. This adaptability will be a real transformation in terms of mindset but also in terms of processes, procurement and development. Digitalization and uncrewed systems will also have a deep effect on our products. We need modular and scalable architectures, so in principle, flexibility and expandability through software like cars have today. A modern software architecture is crucial, which is a major transformation that the whole industry has to go through.

How is FCAS progressing, and is there a risk that the disagreements that were finally resolved last year could reemerge in future phases? Now the real work has begun, and I am very satisfied about that. The engineers have kicked off all work pillars in the FCAS program. Can we still run into challenges? In a big program like this, new challenges can always emerge along the way. But we’ll tackle those when we get them. So far, so good. What really thrilled me when I was in Madrid in March was the very credible commitment coming from three [French, German and Spanish] defense ministers making rock-solid, very clear statements in favor of FCAS.

On Eurofighter, you have signed Halcon and Quadriga top-up orders from Spain and Germany, respectively, but there appears to still be a lack of clarity on the road map, particularly for the Long-Term Evolution (LTE) program. Is that hindering export opportunities? I think for the timeframe in this decade, there is a lot of clarity in terms of what the product will be. Upgrades are defined up to P6E [Phase 6 Enhancements], and we are currently talking about P4E. The further you look into the future, the more open it is about what precisely LTE will entail. There is growing clarity of what is going to be part of LTE, but there are also still some finalizing discussions that need to be had. Eurofighter is gaining traction with export customers. The question is: Do we have the right political backing to export to all the countries that we talk about?

On the A400M, has the company reached the point of completing full development of capabilities for the platform, or is that going to be enduring work into the future? And what about exports beyond Indonesia and Kazakhstan? Delivery of SOC3 [the full set of capabilities demanded by partner nations] is not yet pinned down to a date. We still must agree to this with the customers, but closing out the first phase of the development process and the certification will happen in the next two years. If you ask me when the end of development is, I don’t think it will ever come. The aircraft has so much potential that it will continue to be developed, and there is already a list of requirements and wishes from customer nations that will likely come to fruition in the second half of the decade. As for export customers, the aircraft has again gained a great reputation from the recent evacuation missions in Sudan, just as it did after Afghanistan. Everybody can see what the A400M is capable of and how reliable its performance has become.

Are initiatives such as the European Defense Fund and the EU’s Permanent Structured Cooperation crucial for the future of European defense projects, or are they doubling up initiatives that NATO, for example, would pursue? European initiatives are helping, and not just doubling up what NATO does. After all, there are projects that NATO would not push for, such as the FMTC, the Future Medium-Size [Tactical] Cargo aircraft [in which] Europe has decided to invest in the early phases of a potential program. It is a good mechanism to find interested countries and converge early in terms of what we should be building and developing.

You mentioned the FMTC. What is the role of Airbus in that? Is there a role developing for industry on this project? We are still in the study phase on this, but countries are coming together. This is something that we look at with a lot of perspective. Only look at the market, and the European market in particular, in terms of [Lockheed Martin] C-130 operators: Many of these aircraft are coming toward the end of their life span, and there is a question of what the 20-ton-class of transport aircraft looks like in the next decade or so. There are different expectations that need to be satisfied in the market in terms of range, size and payload.

Looking ahead, a modular approach would be a smart move in the sense that it is scalable, enabling a family of transport aircraft from [the Airbus] C295 all the way up to A400M.

One of the numerous lessons emerging from Ukraine is that space has emerged as a crucial element in maintaining battlefield communications. Are you seeing that driving a push for greater space capability among customers, particularly the European nations? The U.S. has taken a lead in terms of developing the future architecture of space capabilities in a dedicated program headed and organized by their Space Development Agency. Through our U.S. entity, we are participating in that program. I see the same, albeit with some delay, in Europe. The decision of the EU to establish the IRIS² constellation is also influenced by what we witnessed in Ukraine. It is intended to build a resilient multi-orbit constellation that has a hard government part for extremely high-security applications but also has a softer element or commercial part.