The Future of HdH

The PC-9 Project

HdH’s success in its role as prime contractor on the RAAF PC-9 project will have an important bearing on future directions for the Company. The contract with the Commonwealth to build 67 PC-9s for the RAAF is worth over $A200 million and is understood to be the largest fixed price aircraft contract placed by the Department of Defence with Australian industry. If HdH succeeds in coordinating its own resources and those of the rest of Australian industry and overseas equipment suppliers to deliver high quality aircraft on schedule, it will set an important precedent for future aircraft contracts with the Commonwealth. If HdH can achieve this within the fixed priced contracting arrangements, it will achieve an important objective on behalf of its shareholders.

Because the PC-9 has a much higher performance potential than the original RAAF requirement, there is the possibility of increased numbers of aircraft being acquired to additionally relieve the load on the ageing Macchi 326 advanced trainers.

HdH also has a Joint Marketing Agreement with Pilatus for sale of the PC-9 to various regional nations. Successful international sales would be a boost to Australian production lines and Australia’s defence cooperation activities in the region. HdH is, for instance, taking the marketing lead on possible PC-9 sales to New Zealand, the most immediate possible customer.

Other Defence Workload

Fundamental changes are occurring in the nature and extent of other defence workload undertaken by HdH for the Australian Defence Forces.

Possibly the most spectacular example of this is the rundown of workload in the Gas Turbine Division of HdH Victoria as overhauls of the Atar engine from RAAF Mirage fighters cease. The F404 engine fitted to new RAAF F-18 fighters is many times more reliable, requiring only a fraction of the maintenance and repair manhours resulting in a fall of some 80% in HdHV’s workload from fighter engines support. This change is inevitable; recognition of it is causing HdH to expand its horizons, seeking F404 maintenance from other international operators and proposing to change the scope of the engine support services it offers to the RAAF and other customers, applying new technologies and skills to the reclamation of components which hitherto would be scrapped.

As of the beginning of 1987, contractual arrangements between HdH and the Australian Defence Forces have changed fundamentally. Older cost reimbursement arrangements are being replaced by largely fixed pricing arrangements, with HdH proposing increased emphasis on incentive contracting, linking profitability to efficiency.

Defence Helicopters

After more than 20 years of involvement in maintenance of defence helicopter airframes, engines and systems, HdH is becoming deeply involved in the assembly, systems integration and testing of new RAAF Black Hawk and RAN Seahawk Helicopters which will come off production lines at Bankstown commencing late 1987.

With the prospect of substantial follow-on buys of helicopters for the Australian Defence Forces, HdH is working with Sikorsky and with Sikorsky’s major vendors to expand the scope of Australian participation in the new helicopter programmes and developing new specialised helicopter technologies in Australia.

In addition to improving Australian helicopter manufacturing expertise, HdH is looking towards the possibility of enhancing existing helicopter maintenance capabilities to establish this country as a regional support base for a wide variety of helicopters. Arrangements for Joint Ventures/Licencing Arrangements to facilitate this are well advanced.

To complement improved helicopter manufacturing and maintenance capabilities, HdH and other Australian organisations are examining prospects for collaborative design and development participation as a partner on proposed new light helicopter developments or major modifications. The leverage provided by the Australian Army’s proposed purchase of a new light battlefield helicopter would be an important element in negotiating such partnerships.

Airborne Systems Integration

For a number of years, the engineering organisations of HdH in Sydney and Melbourne have been developing expertise in the integration of new role equipment and airborne systems into defence force aircraft such as RAAF P-3 Orions and RAN HS748 EW aircraft. These capabilities are currently being exercised in conjunction with Sikorsky on RAN Sea Hawk helicopters and increasing potential exists for such skills.

The RAAF’s proposed Airborne Early Warning Control Aircraft will allow HdH and other Australian hardware and software organisations to become involved in a very major new systems integration programme and HdH is looking at regional potential for integration of new or update systems into defence aircraft and helicopters.

Civil Airliner Collaboration

Participation to date in US and European civil airliner projects, primarily as part of the Australian Government’s offset programmes, has been a rewarding experience for HdH and has provided the basis of substantial upgrading in manufacturing technology and systems.

While the Government’s offset policy will remain a critical element in creating opportunities for Australian aerospace participation, negotiating post purchase offsets on mature projects will become increasingly difficult because of the increasing frequency of ab initio work sharing of such projects on an international collaboration basis from their outset Taking advantage of its reputation as a reliable and cost competitive subcontractor, HdH in future will be looking to join new airliner projects from their inception as a preselected participant for the life of the programmes.

This will give HdH the opportunity to exercise design and development skills as well as manufacturing capabilities, enhancing design skills which for too long have lagged behind the manufacturing and maintenance elements of the company’s activities. Recent developments in computer aided design and computer aided manufacturing will be widely applied on these new projects as will international electronic data transfer.

1987 will see HdH and other Australian firms working intensively to negotiate participation opportunities on a number of proposed new airliner projects including the Boeing 7J7, the Airbus A330/340 and the McDonnell Douglas MD-11 and MD-91X.

It is a cause for regret that the Australian aircraft industry will not be able to take advantage of the full extent of the export opportunities offered because of the Australian Government’s decision not to provide launch funding support along the lines of its European, Canadian and Japanese counterparts.

However, using its comparatively new status as a public company listed on the Sydney and Melbourne Stock Exchanges, HdH is seeking alternative funding sources for those projects which are commercially viable. Funding and commercial viability considerations are more complicated on European projects where all existing participants are provided with most of their initial funding requirements by their Governments on an interest free basis, repayable as aircraft sales are made.

Smaller Civil Aircraft

Limits on funding and other resources mean that at present Australia can seek only limited participation in new airliner projects, usually in the range 2-4%. This gives Australia little say in project management, marketing, product support or other non production activities.

To use and extend its skills in these important areas, HdH is actively seeking participation in new smaller aircraft projects as a full partner with shares approaching 50%.

The Pilatus Utility Transport Aircraft project arising out of the Government’s decision to purchase the PC-9 is one interesting small aircraft collaboration opportunity. HdH has developed a considerable respect for Pilatus’s cost effective approach to aircraft design and manufacture and a good working interface has been developed between Australian engineers working on the preliminary design specification and their Swiss counterparts.

There is no doubt that HdH, along with an Australian industry team, would have the facilities and expertise to be a significant contributor to a project such as UTA. Discussions regarding Australian participation are reaching the final stages and are focussing on commercial and financial matters. However, extremely low Swiss interest rates and inflation rates combined with the long-term pay back periods on these international collaboration projects make adequate financial returns a considerable challenge.

Hawker de Havilland is holding other collaboration discussions with smaller fixed wing and helicopter manufacturers in North America and Europe. In all cases, the aim is to achieve significant participation in design, development and production on a shared basis with HdH subsequently being responsible for marketing and product support for a considerable part of the world including the Pacific and Asia.

This emphasis on continuing support is an important one as the value of spares, technical support and maintenance can be up to three times the initial purchase price of aircraft and helicopters.

New HdH Products

While many of HdH’s new aircraft and helicopter initiatives are being studied on an international partnership basis because of the very substantial funding and risks involved, HdH is not ignoring the possibility of development of its own range of specialised aerospace products for Australian and international use.

HdH’s Salisbury Division, working in close cooperation with the Defence Research Centre, is in the process of developing a range of Airborne Delivery Systems including Bomb Racks for the Mirage and F-18 fighters.

The F-18 Bomb Rack is a particularly exciting project, with potential for sales to the US Navy and other F-18 operators as well as the RAAF.

In all these new projects, the emphasis is on versatility and cost effectiveness in order to satisfy the requirements of smaller airforces who cannot afford large numbers of special purpose aircraft. In line with this ‘force multiplier’ concept, HdH is also working on other product developments including new generation airborne refuelling systems particularly suitable for use on smaller aircraft to minimise the need for specialised tankers.

Space Activities

With Australia beginning to develop a comprehensive policy for the participation in various aspects of space research and commercial applications of space, Hawker de Havilland is working to establish the facilities and skills needed to take a leading role in Australia’s future space activities.

This work is already undertaken as scientific space experiments such as Starlab and the Dintenfass experiment (the first Australian payload to fly on the shuttle) and the considerable experience gained on joint international working parties provide a basis for future expansion by HdH.

The recently announced plans for Australian industry participation in Aussat II are a particular focus of HdH’s space activities. HdH is working towards establishing a team of Australian organisations whose complementary skills provide a basis for developing a total Australian space community.

Industry Cooperation

Many of the opportunities available to Hawker de Havilland in the future are likely to be so large that they require resources beyond HdH’s capacity alone, or may require a mix of skills and technologies beyond HdH’s scope. This will provide opportunities for HdH to take the initiative in developing Australian aerospace industry teams.

Already some 30% on average of HdH’s international manufacturing contracts are subcontracted to other Australian organisations. The recent Boeing 747 wing leading edge flap contract is a typical example where thirteen other Australian firms participated.

To assist smaller firms to join in such teaming, HdH has recently established a Small and Specialised Business Office to identify specialist Australian sources, offering them subcontract opportunities and putting them in contact with potential overseas customers.

Australia will only maximise its potential involvement in international aerospace activities if there is active coordination within the local industry and HdH intends to continue promoting such cooperation.

Regional Cooperation

HdH is already one of the most successful international maintenance organisations in the Pacific and Asian areas, with customers in some thirty nations from Japan to the Middle East. Whilst support from HdH’s facilities in Australia will continue, regional nations are increasingly aiming for the establishment of in country aviation maintenance facilities to increase their level of self reliance and to minimise foreign exchange expenditures. Recognising the inevitability of this change, HdH is increasingly involved in discussions with regional nations regarding cooperative programmes and joint ventures to establish and operate such new facilities. In the longer term, the likelihood is that HdH and Australia will become a regional centre for advanced repair and reclamation technologies which require major capital investment and considerable depth of specialised technical expertise while partners in the region concentrate on more labour-intensive maintenance activities. The result should be expansion rather than contraction of HdH’s maintenance operations.

While the regional trend to self-reliance is most evident currently in the maintenance field, a similar move in aerospace manufacturing can be expected to accelerate in the future. HdH is carefully monitoring developments in new manufacturing technologies in order to stay ahead of regional competitors whose labour rates are far below those of Australia.

New Technologies

Over the years, HdH has paid particular attention to monitoring new international developments in manufacturing and maintenance technologies. Company investments over the last decade in facilities for advanced composites and large-scale numerically controlled milling, often made before contracts utilising the facilities had been negotiated, have given HdH a solid technology base for the second half of the 1980s.

However, new investments will have to be made in facilities and systems to remain competitive on major new projects. The development of integrated data bases and planning and management systems covering all aspects of operations through design, planning, procurement and production will be a vital ingredient in achieving improved productivity.

Flexible manufacturing systems allowing efficient production of small batch quantities is another international trend of increasing importance to Australia.

While many of these new technologies and systems will be introduced via international collaboration programmes, once in place they will be directly relevant to HdH’s Australian defence programmes and will result in a reduction of costs on such defence activities.

People

One of HdH’s greatest attributes has always been the skill and motivation of its people at all levels through the company. One of the major revelations of HdH’s international experience has been that Australian workers, whether from the shop floor, planning offices or the engineering organisations, are at least as capable as their international counterparts and often more versatile because the small size of our industry requires them to undertake a greater variety of tasks.

Reliance on individual skills will continue in future. HdH will continue to place emphasis on development of the skills of its people by training, skill upgrading, overseas postings and other interchange arrangements.

Remaining relevant to Australia’s defence needs and competitive in the international marketplace will be a complex challenge for Hawker de Havilland. However, with its current facilities and skills, backed up by the motivation of its workforce, it is a challenge that can be met.