Podcast: Aerospace Eyes Trump 2.0

Joe Anselmo:  

Welcome to Aviation Week's Check 6 Podcast, coming to you this week from the Aviation Week Aerospace and Defense M&A Conference in Beverly Hills, California. I'm Joe Anselmo, editorial director, joined today by Michael Bruno, our top business editor. And we have a special guest with us, Dr. Evelyn Farkas, executive director at the McCain Institute at Arizona State University. And Dr. Farkas and I were just on stage here at the event. But it was Chatham House Rules, we couldn't record it, so we got Dr. Farkas on Check 6 to share with our listeners what she told all the attendees here in Beverly Hills. Dr. Farkas, one of the people that was on stage today said, in relation to the recent U.S. presidential elections, “I don't think the country understands what it just did." What did it just do?

Evelyn Farkas:           

Well, first let me say thank you Joe and Michael for having me on the podcast. This is my first time, maybe it won't be my last time. What did the country just do? Well, they elected a president who put forward basically an isolationist and a protectionist foreign policy agenda. What do I mean by that? He said that it's America first. We are not interested in fighting for Ukraine. We want to make peace and we want to make it overnight, the implication being that peace is more important than the type of peace. In addition to that, he talked about tariffs which is protectionist and will have implications for the American people in terms of the economic situation domestically, meaning prices will go up if he does what he has said that he will do.

 So the implications for Americans are that America will not play such a large role on the international stage, that we will cede some power to autocratic states like Russia and China, except in the area of tariffs. So I think that it is a very different kind of foreign policy than the one we see traditionally from Republican and Democratic presidents.

Michael Bruno:   

And to be clear, I know you're giving an observation on what it is that the election will go to as a ramification or the type of foreign policy that we've just elected. At the conference, we started to get down into what does this mean for the aerospace and defense industry in particular, and you had mentioned, I think there was a question there about what kind of prospects does the U.S. defense industry face? And I thought you gave a surprising answer. I'll ask the question again. What do you think is going to happen with the U.S. defense industry under a second term of President Trump?

Evelyn Farkas:    

I think the U.S. defense industry will continue to do well, even if things go south, meaning somehow we're not able to keep Vladimir Putin in the box, politically speaking, meaning he continues to wage war against Ukraine, launches new wars against other countries, potentially even against NATO, if China takes Taiwan. These are really bad scenarios. But even in those really bad scenarios, the defense industry will do well, obviously, because we will need to provide weapons to partners and allies and possibly we'll get involved ourselves.

The other scenario is one where we continue to deter Russia from the worst-case scenario, deter China from the worst-case scenario, but we still need weapons in order to deter. So I think for the defense industry, because of all the global turmoil and uncertainty, because of the standoff between autocracies and democracies, we are in a situation where we need a strong defense in order to frankly back American diplomacy, back our economic commercial interests and hopefully, to bring the weight back to the world order that we established after World War II.

Michael Bruno:  

So a quick follow-up on the commercial side of things. In commercial aerospace, there's this old well-known rule within the industry about how basically you can tie commercial passenger traffic, the number of people who get on an airliner to travel to see their grandparents or something over the holidays, you can directly tie that back to GDP. And obviously, over the past couple of decades, GDP have been rising around the world and thus aircraft passenger traffic was rising. But it sounds like what you're saying, if there are economic ramifications for what's coming, that could possibly affect what happens on the commercial aerospace side. Because if the economies aren't going so well, you're not going to have as many people buying airliner tickets.

Evelyn Farkas:         

Yes, that's true. There's a lot of geostrategic turmoil. So everything from Spirit Airlines being shot by some gang in Haiti to the reality that you can't fly in and out of Ukraine, all of those things have ramifications for commercial flight. And then I would add to it something that we haven't really heard that many people talk about, climate change and the turbulence. Literal turbulence that you experience in an aircraft, now it's become dangerous. We don't right now have a way to predict this new turbulence. So I think that's also a danger, especially as climate change and the impacts of climate change continue to multiply and increase.

Joe Anselmo: 

We are barreling toward the third anniversary of Russia's invasion of Ukraine. February will be the anniversary. And one of the topics here at the event was, what's going to happen to Ukraine now with a change in U.S. administration. What do you see the ramifications are for Ukraine?

Evelyn Farkas:        

Well, first of all, President Trump has said that he wants to bring an end to the war. And everybody wants to bring an end to the war, the question is how, what kind of peace? For the Ukrainians, it's really important that this be a just peace. I think they're willing to make some compromises if they have to on territory if they can get a real security guarantee. That would mean either a bilateral U.S. guarantee, military guarantee, or NATO membership. The other part of this is that the Ukrainians will need to feel like the Russian government is somehow being held accountable for all the human rights abuses that they have experienced at the hands of the Russian military and the Russian government, meaning the torture, the rape, the abduction of children, et cetera. Because if there's no just end to the war, there could be continued turmoil inside Ukraine, and politically, they could end up winning the war, if you will, but losing the peace, meaning losing their democracy. And I think that would be a very sad outcome, one that the United States should not want them to experience.

Michael Bruno:   

And Joe, I would just add that, not to bring it back too harshly to simple business prospects, but the Ukraine War has a direct impact to the bottom line of a lot of large defense primes. RTX, for example, making missiles, munitions, L3Harris Technologies. These companies have been the beneficiaries of supplemental spending and a big increase in the U.S. military budget simply to fund what's happening in the Ukraine War. Obviously, if peace were to break out overnight, no matter whether people liked it or not, or what they thought about that peace, if it actually occurred, it'll be a direct impact to what the industry feels right away.

Evelyn Farkas:   

Maybe, but can I just say something to that? I mean, if peace does break out, you'll still need deterrence and you'll still need to make sure that we have sufficient weapons. First of all, we have to restock here in the United States. We also have the problem in the Middle East. We haven't talked about that yet, although we did on the stage, Joe. And then the Ukrainians themselves, they'll want to make sure they have more munitions, and then there'll be opportunities for joint manufacture in Ukraine. So I think for the defense industry, even if there's a peace overnight, there'll still be, as they say, a tail.

Joe Anselmo:      

So we're about to go into another changeover of presidential administrations. Is the United States safer than it was when President Biden took office or is it more vulnerable?

Evelyn Farkas:       

It's more vulnerable, but it's not necessarily because of anything the president did or didn't do, although I would argue that we could have been firmer with Vladimir Putin many times during President Biden's administration. We could have tried to deter Russia from doing the full-frontal invasion in February 2022. There were a lot of things we could have done. We could have obviously done the Afghan withdrawal in a different form and fashion. So we telegraphed, unfortunately, a lack of political will, and we weren't risk-taking enough, I would say. But that's not why we're in danger, we're in danger because these autocracies were already challenging us before President Biden came into office.

Russia has decided that this international order doesn't suit Russia's interests and Vladimir Putin wants to recreate an empire and go back to the sphere of influence pre-World War II international order, dog-eat-dog. And China frankly wants to emphasize borders and let countries do what they want internally, so ignore human rights. And all of this we were going to have to deal with, whether it was President Biden or if you'd had a second Trump administration. We are just in a very volatile time right now because of these autocrats working together to challenge democracies and frankly also because of technological changes, because of climate change, because of economic turbulence.

Joe Anselmo:            

And you had said the U.S. is under an unprecedented attack from Russia and China in terms of spying and sabotage and that sort of thing. Can you elaborate for our listeners?

Evelyn Farkas:         

I don't think we faced even during the Cold War this level of intrusion. We have international actors, Russians putting bots on our water facilities, on our electrical plants, nuclear plants. We have Chinese cyber attacks and cyber spying. We have the Iranians going in through social media spreading disinformation. And of course, all those countries are doing that in addition to North Korea, North Korea's ransomware attacks. And then Russia has launched these sabotage operations. Now, thus far, not in the United States, but one of them apparently was planned.

So there was an attack using explosives and aircraft, commercial and/or cargo. It's unclear because the intelligence has not been made public clearly, and I think you guys should call for it as members of the media. But the idea was to use these aircraft flying out of Germany. And that would be a trial run for maybe doing this in the United States. This is incredibly risky behavior. We have not seen such risky behavior since we were actually in a global war, I don't think, coming from Russia. Unfortunately, the Kremlin believes that we're already at war, and so they're taking these actions. They're also testing us. And if we don't stand up to them, if we don't deter them from actually taking the next step, we're going to be in even greater danger.

Michael Bruno:    

t's very interesting to me that it seems over the past 10 years under different administrations, there has been this growing trend of international cooperation amongst obviously not just Allied Western militaries, but more importantly under their industries. And we talked a little bit at this conference here about AUKUS, for example, the United States, United Kingdom, and the Australian deal that's been worked out in recent years. There's certainly a lot of work going on with NATO allies, and we're seeing more companies partnering and doing joint ventures and things like that. What do you think is the trend going forward, maybe five years? Do you see more of that international industrial cooperation, or do you think that trend goes in a different direction or reverses?

Evelyn Farkas:          

I actually see it continuing, especially if Ukraine remains at war but the United States is not supporting Ukraine militarily. Then our allies will want to purchase from the United States, maybe do some co-production. I think you mentioned Rheinmetall working in Ukraine, also in the U.S. Clearly, BAE is in Ukraine and also in the U.S. We have in Texas, now I'm going to forget which company it was, making munitions, but using Turkish workers. So there are really interesting things. The South Koreans, of course, are very actively providing us and the Poles with stocks to backfill as we and the Poles provide to the Ukrainians. So I think there's a lot of opportunity there. At the McCain Institute, we work very closely with the Swedes, and full disclosure Saab. And they are also really interested in working with us and then also supplementing us with, let's say, Gripen fighters, etc., helping Ukraine. And there's a place for these smaller military companies. We shouldn't try to edge out the Europeans as they complain that we have tried to do in the past.

Joe Anselmo:        

 A couple of hours before we were on stage, retired General John Abizaid who used to be the CENTCOM commander from the U.S. We were not allowed to quote him, but he gave me permission to quote him on this. He said, quote, "I think it's inevitable that the space domain becomes militarized in the next several years." That's really scary. Just as we're getting this new space economy dependent on thousands of low Earth orbit satellites, we could have a real scary situation up there.

Evelyn Farkas:             

 Yeah, Joe, I actually think that it's already militarized and we need to just slow it down. We don't even know as civilians without access to the intelligence exactly what's going on there, which is a problem, frankly. I think the defense and aerospace community should be more informed by our government about the dangers, the risks. The Russians apparently are doing something with nuclear capability in space. We know that because Chairman Mike Turner, the chair of the House Intelligence Committee, let the world know. I mean, he didn't reveal information, but he warned us about it. And that is really of great concern.

The Chinese, of course, are trying to keep up in space as well. And most of the analysts that I read, I have to believe them because they're following them more closely than I am, they say that they are almost on par with us in terms of their capabilities. The North Koreans also are getting more technology from the Russians and also trying to improve their own capability. They now have an ability to take a satellite down, an ASAT capability. So, unfortunately, space has become also militarized and more dangerous.

Joe Anselmo:        

And you said today something that was really a bit disconcerting. You're worried about a World War III. What does World War III look like and why are you so worried?

Evelyn Farkas:      

I'm worried about it because we have these countries working together. Call them the Axis of Evil or whatever you want to call them. But Russia, China, North Korea, Iran, they're working together to counter the democracies of the world. And what they want is, again, to go back to a system where the biggest countries could dominate. And they want to be the ones dominating. They want to make the United States weak. In the case of Vladimir Putin, the way it would lead us to World War III would be if he were to take these sabotage trial runs and actually conduct some kind of operation against a NATO ally. Then we have to make a decision as an alliance, are we going to defend that ally or not.

If we don't, we're still going to have to deal with Vladimir Putin. Because let's say he takes over that NATO country because it's a former Soviet country, a Baltic state, or Poland. He somehow threatens Poland and gets involved there militarily, although the Poles are getting pretty strong now, and they're very much aware of this danger. But if NATO as an alliance doesn't react then, I think we'll have to... And that would mean World War III because of all these other countries. If we don't respond right away, I'm afraid we'll have to respond at some point because Vladimir Putin, as I said, views us as the only country that can stop him. And he'll continue weakening us domestically through social media, through corruption campaigns, through all these bots and spying and all these things that he's been doing, including maybe sabotage. So it's really dangerous if we don't stop Vladimir Putin frankly now. And it's cheapest and easiest to stop him in Ukraine.

And one other thing, Xi is watching that. And President Xi, if Vladimir Putin gets away with what he wants in Ukraine, he will be emboldened to try to seize Taiwan. And if he, again, seizes Taiwan, then China is a big bully in Asia, and our Asian allies are in danger, and we also have military commitments to them to defend them. And if we don't defend them, again, China then will come after us. So the allies, on the one hand, they could be the reason why we would go to war, but on the other hand, they're also a strength. They are a reason why we're stronger because they help us fight against the bad guys and hold the line.

Joe Anselmo:           

I'm going to try to end this on a positive note. Donald Trump's rhetoric often worries people, but you're at least cautiously optimistic on a couple of his early picks for his administration. Tell us why.

Evelyn Farkas:

Yes, I am. So he picked Senator Marco Rubio. Senator Rubio is an internationalist. He's somebody who believes in standing up for democrats. He's actually advocated quite strongly over the years for Venezuela's people and their democratic opposition. He's been engaged in foreign policy now for over a decade. He's a professional.

Joe Anselmo: 

For Secretary of State.

Evelyn Farkas:  

He would be the candidate for Secretary of State, that's right. And then Michael Waltz, who's a congressman, has a former special operator, knows the military, knows how the world works, has been quite strong on China. He's also a solid professional. So clearly President Trump views them as loyal to him, that's fine. What in my mind is important is that they're experts and they know what they're getting into and they understand the world.

Joe Anselmo:      

At the very end of our conference today, the room was set abuzz by the news that President-Elect Trump said he intends to nominate Pete Hegseth, who is a Fox News host and former Army National Guard officer to be his defense secretary. Boy, that's interesting.

Evelyn Farkas:      

Yeah. I think most people said, "Who is that?" And then Fox News host doesn't sound like a qualification to be Secretary of Defense. And having served as a reservist or a national... Maybe he was a reservist. But anyway, a National Guard member deployed to Iraq and Afghanistan is good experience. But really, running the Pentagon, being Secretary of Defense, first of all, you have in the building alone thousands of people, and it's a very complex operation. You have to know how it operates. There's a secret code. In order to get your way, in order to assert your power, you have to know what that code is, if you will. It's just really understanding the procedures and how the bureaucracy works, the relationship between the uniforms, the armed services personnel, and the civilians in the building. And then, of course, he would be in charge of thousands of Americans deployed all over the world, civilians and military. So it's a complex undertaking and requires someone with a lot of experience and frankly, some bureaucratic and management experience and policy experience. So it's an interesting choice, to say the least.

Joe Anselmo:       

Dr. Farkas, thank you for sharing your views with us twice today. Michael Bruno, thanks for joining us as well. Unfortunately, we're out of time. That is a wrap for this week's Check 6 Podcast. A special thank you to our podcast editor in London, Guy Ferneyhough. To our listeners, thank you for your time, and join us again next week for another Check 6.