Honeywell’s Defense and Space business area enjoyed good growth in the Asia Pacific region in 2015, demonstrating an 8.5 percent increase in year-on-year revenue. The signs throughout the region are good for a sustained upward trend over the coming years, largely as a result of increased defense spending.
Mark Burgess, v-p for Asia Pacific, Honeywell Defense and Space, told AIN that Honeywell has seen “strong growth in Korea, and a phenomenal growth in Japan”, the latter driven by major equipment acquisitions and a weak yen. Both Japan and Korea have adopted a twin-track approach to defense procurement, combining the acquisition of state-of-the-art equipment from the U.S. and elsewhere with the indigenous development of high-technology platforms using the best available technology from around the world.
Kawasaki’s P-1 maritime patroller is a prime example of the globalization of a national product, an indigenous design that draws in best-in-class components and systems from international sources. Honeywell is the largest foreign supplier to this program, and it is similarly a major supplier to the related C-2 airlifter program.
Both Japan and Korea are to receive the F-35 Joint Strike Fighter, providing Honeywell with increased business in the future, while both nations are also developing advanced fighter aircraft. The KF-X fighter, being developed by Korea and Indonesia in an 80:20 split, represents a major chance to increase business further, as it evolves. Honeywell works closely with industry in both countries, but Burgess noted that business in Indonesia can be “challenging, due to governance and compliance issues.” Honeywell has, however, forged an excellent relationship with aircraft-builder PTDI through the supply and support of engines and avionics.
Taiwan is another important market for Honeywell, notably concerning aero engines, as is Australasia, where the company has grown its business four-fold in as many years, with that level of growth set to continue. Among the new contracts is a five-year deal to support the French navy operating in Tahiti.
Southeast Asia
While Malaysia represents a strong commercial helicopter marketplace for Honeywell, and Thailand a small but growing defense business, in Southeast Asia it is Singapore that dominates revenue, generating 75 percent of the business. This is due primarily to the large amount of U.S. equipment in use with the Singaporean defense forces. ST Aerospace is a strong partner, and the companies have worked together on a number of RMU (repair, maintenance and upgrade) contracts, notably for the F-15 Eagle.
RMU work is a growth area for Honeywell as the useful lives of platforms extends ever longer. Many of the upgrades being applied to varied fleets focus on greater economy and reliability of operation, and also on enhancing safety through improved avionics and the implementation of systems such as HUMS (health and usage monitoring system).
For Honeywell, an exciting area is the increasing adoption by defense forces of wideband satellite communications systems, such as the JetWave system developed in partnership with Inmarsat. “Military operators are beginning to see the transformational effects of having fully connected aircraft,” remarked Burgess. “Special forces are leading the way in many nations, and now it is being rolled out into airlift, maritime patrol and VIP transport fleets.”
Following a re-opened competition, Honeywell has recently been selected to provide the satcoms for the Kawasaki C-2 transport with its HSD-440 system. This is also used in the Royal Australian Air Force’s Viper satcoms for the C-130, for which Honeywell has devised a “roll-on, roll-off” solution. All RAAF C-130s have the necessary racks to accommodate the equipment, which uses a hatch-mounted antenna, and can be rapidly fitted with one of six HSD-440 terminals, if required, for long-distance deployments.
Local activity
One driver of Honeywell’s growth in the Asia Pacific region is a focus on the localization of sustainment activities. While deep-level servicing and repair is still undertaken by the company as the OEM, Honeywell is promoting front-line and depot-level work in-country, and is working with a number of channel partners in several nations.
Local sustainment offers a number of attractive benefits: for Honeywell it increases business without the need for major investment, while for the customer nation it provides local employment and increases the nation’s base of technological capabilities. For the end-user a local sustainment activity means a faster turnaround for repaired or overhauled components, and at a lower cost.
Having established an engine maintenance operation for the M1 Abrams tank in Australia–the first of its kind outside U.S. Foreign Military Sales arrangements–Honeywell is working with several local partners to offer similar capabilities in other fields. For instance, Honeywell and ST Aerospace are proposing a local sustainment model for Singapore’s F-15 fleet.
Although the headline news is good for Honeywell Defense and Space, there has been one setback in the Asia Pacific region, where the commercial helicopters business (which falls under the Defense and Space umbrella) has been hit by the global slump in commodities prices, notably during the second half of 2015. Much of Honeywell’s business in this sector is connected with the onshore mining/offshore oil industry, and many of the company’s customers are contracted to include a Honeywell Avionics Plan, which provides sustainment for fleets on a per-flying hour basis. The slump in prices has led to fewer hours being flown on operations, and therefore less revenue for Honeywell.
Even here, though, there are signs of new business opportunities: faced with reduced funds for capital investment, operators are increasingly looking at upgrades to existing helicopters instead of making new acquisitions.