Time to support the Australian aerospace industry

US Maritime Corps (USMC) F-35B Short Take-Off Vertical Landing (STOVL) Variant – December 2015

US Air Force (USAF) F-35A Conventional Take-Off and Landing (CTOL) Variant – December 2016

US Navy (USN) F-35C Carrier Variant (CV) – February 2019

In announcing the IOC date, the head of the USMC, Marine Lt Gen Robert Schmidle, stated: “The F-35 is our country’s best hedge against the ever-evolving threat”. These sentiments were echoed by USAF Chief of Staff, Gen Mark Welsh: “The F-35 is a vital capability that the nation needs to stay ahead of adversary technological gains and it provides the multi-role capabilities the anti-access and area denial environment of the future will require”. This increase in confidence is also reflected in the decisions of Israel and Japan to acquire the JSF, with Singapore and South Korea likely to follow.

Increased operator confidence flows on to increased confidence for governments acquiring the aircraft, which in turn flows on to increased confidence for the prime contractor, Lockheed Martin, and its partners BAE Systems, Northrop Grumman and Pratt & Whitney to provide Long Term Agreements (LTA) to their global suppliers, including Australian industry.

However, under US law, Lockheed Martin cannot turn LTAs into multi-year contracts until Low Rate Initial Production (LRIP) is complete, which will take about four years. But even during LRIP, annual aircraft production rates are planned to increase from 36 to 139, which will require translating LTA’s into firm orders. This requires a significant increase in production capacity and generally this means significant financial investment for the companies involved – including Australia’s.

What is not well understood in Australia is that many of the major opportunities available to local industry are so-called “competitive strategic opportunities”. This is work identified early in the program that was well-matched to Australian capabilities (with similar opportunities identified for other partners) and is essentially “theirs to lose” if they cannot remain competitive in both quality and price.

In the case of Australia this includes aircraft vertical tails, composite doors and panels, and decoy flares. Thus, subject to remaining competitive, LTAs on items in this category would turn into firm orders for the remaining LRIP and multi-year contracts. As noted above, however, significant investment is required to meet ramp-up rates otherwise opportunities will be lost.

While positive progress on the JSF program is positive news for Australian industry, *******the 2013 Defence White Paper released in June has provided no prospect of significant support for the Australian aerospace sector.********* As has been the case in the past, this is in stark contrast to the maritime sector where the White Paper states: “Recognising the strategic importance to Australia of maintaining a strong Australian shipbuilding industry, the government is committed to a program of naval shipbuilding that will retain required national skills and capacity to support defence needs over the long-term. Government decisions on specific maritime projects will take full account of this objective.”

The government is so concerned about the so-called “valley of death” in the Australian maritime industry that it is considering bringing forward projects, quite likely with a premium to be paid for an Australian build, to avoid a gap. There is even a specific section in the White Paper titled Building Skills in the Maritime industry.

Why is there no equivalent consideration for the aerospace sector?

In the aerospace sector, where work has been won in a competitive global environment and where multi-year contracts are available as long as companies can make the investment to meet the required ramp-up rate, ********the government remains hands-off and is willing to leave the fate of Australian companies to market forces.******* Even the automotive sector – with arguably much less strategic importance and with a poor record of export success – gets strong government political and financial support.

At a Defence Industry day in July, then-minister for Defence Materiel Dr Mike Kelly stated: “The ability of Australian companies to be world-class and cost competitive in high technology aerospace manufacturing processes requires world-leading innovation and a highly trained and well managed workforce”. It also needs carefully chosen and well-directed government support.

Air power is the centrepiece of the defence of Australia and a vibrant local industry is an essential component of the total force structure. The federal government needs to announce what it is willing to invest to maintain a vibrant and progressive aerospace industry capability in Australia.