Forum: Rotary Wing Aircraft

US Air Force rescue helicopter plan faces review
Tue Mar 14, 2006 2:26 PM ET
By Andrea Shalal-Esa

WASHINGTON, March 14 (Reuters) - Top Pentagon officials will review an Air Force program valued at up to $10 billion for new combat search-and-rescue helicopters as part of a broader effort to streamline U.S. military purchasing.

The program is due to include five test aircraft and up to 141 production helicopters.

Analysts and industry executives are watching the process closely since this is the first-ever Pentagon investment review -- and it comes far into a competition that began last year and is due to wrap up in August.

Some say the whole CSAR-X program could be scrapped or revamped, while others say a Pentagon-led drive to reduce the overall number of helicopters operated by the U.S. military could favor Boeing Co.'s (BA.N: Quote, Profile, Research) HH-47 bid with a variant of the Chinook that is widely used by the Army and special forces.

Irwin said the review was meant to review the CSAR-X acquisition strategy in view of the 2007 budget proposal, the results of the Pentagon's quadrennial review and "additional studies of alternative strategies."

She gave no further details, and denied suggestions by industry sources that the review would slip into April.

Following the review, Krieg's office could approve a formal acquisition strategy, which would pave the way for a formal program start in the summer and a contract award, Irwin said.

In addition to Boeing, other bidders include Lockheed Martin Corp. (LMT.N: Quote, Profile, Research) and AgustaWestland Inc., owned by Italy's Finmeccanica SpA (SIFI.MI: Quote, Profile, Research), which are offering the US101, which won a $6 billion contract to build the next presidential helicopter in January 2005.

Sikorsky, part of United Technologies Corp. (UTX.N: Quote, Profile, Research), has teamed with Boeing Co. (BA.N: Quote, Profile, Research) to offer a version of its VH-92, the losing contender for the presidential helicopter.

"The whole idea is to try to rationalize what systems they're buying," said Loren Thompson of the Virginia-based Lexington Institute. "It's all part of a broader effort to run the Pentagon in the simplest, most efficient manner."

He said some advisers to Krieg favored picking the Chinook variant for CSAR-X, because that would trim the number of spare parts needed, as well as training for maintenance crews.

But he said the Air Force appeared to favor the Lockheed helicopter, which is smaller than the Chinook.

Richard Aboulafia with the Virginia-based Teal Group said the Pentagon review could put the whole CSAR-X program in jeopardy, given increasing competition for defense spending.

"There's serious risk here. Everyone is looking for ways to keep the budget profile down," he said.

Industry officials said they did not expect the Pentagon to cancel the program, especially given last month's news that the Air Force was proposing to accelerate the program by two years by adding $849 million to program funding.

Boeing's van Horn, who heads Boeing's Chinook bid, said Krieg wanted to be sure the program was executable, fully funded and that the Air Force would complete the program.

The recent decision to accelerate the program was a sign of the Air Force's commitment, he said, adding, "To me, the money seems to be there. They've actually added money."

Lockheed was looking forward to learning more about the review process and its results, said spokesman Greg Caires.

The Air Force will use the helicopters to rescue wounded soldiers from the battlefield, deliver humanitarian aid and evacuate people caught in disasters like Hurricane Katrina.

The Bush administration budget proposal earmarked $254 million for the helicopter in fiscal year 2007, which begins on Oct. 1. Congress has the final say on defense spending.

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