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THE MARKET FOR WESTERN-BUILT SPECIAL MISSION MILITARY AIRCRAFT

Manufacturers of special mission aircraft are forecast to deliver 578 new or highly modified special-purpose aircraft during the 2010-2019 forecast period. The projected value of production of these aircraft will top $66 billion in 2009 dollars.

Annual production during the forecast period will range from a low of around 55 aircraft to a high of almost 70 aircraft. The volatility in annual deliveries will be significant, but that is not surprising. There are a limited number of potential customers for such high-cost and specialized aircraft. A single new order or program cancellation can have a substantial effect on annual production totals.

The largest customer for special mission aircraft is the United States government, which currently is, or soon will be, funding programs to produce new U.S. Navy maritime patrol aircraft, airborne early warning (AEW) aircraft, and electronic warfare aircraft, as well as new tankers and special operations transports for the U.S. Air Force.

The Boeing Company is a major presence in the Western special mission military aircraft market. It produces the P-8A Poseidon Multimission Aircraft and the EA-18G Growler electronic warfare variant of its F/A-18E/F fighter for the U.S. Navy. The company is projected to produce a total of 223 new special mission aircraft during the period 2010-2019, about 39 percent of such aircraft expected to be produced overall. The value of this production is forecast to reach $24.4 billion.

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THE MARKET FOR WESTERN-BUILT SPECIAL MISSION MILITARY AC (continued)

Boeing is competing against a team made up of Northrop Grumman and Airbus Military for the U.S. Air Force's KC-X tanker replacement program contract. The Air Force plans to acquire 179 tankers as part of a decades-long effort to replace its fleet of aged KC-135 tankers. Production under the KC-X program is forecast to reach 97 aircraft through 2019, provided a contract is awarded in 2010. The value of this production is forecast to exceed $16 billion.

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THE MARKET FOR AIR-TO-AIR MISSILES

Over the next 10 years, Forecast International projects that over 49,000 air-to-air missiles will be produced by more than 14 manufacturers. The value of this production is expected to total $13.9 billion (in 2009 U.S. dollars), with the manufacturers Raytheon, MBDA, and Vympel taking the lead. The international effect on the market of companies located in China, Japan, Israel, South Africa, Taiwan, and elsewhere will be minimal overall. The primary function of these firms is to fulfill their own national defense needs; as such, they will not seriously challenge the dominant positions of U.S., European, or Russian firms. These firms will have the greatest impact on a smaller scale in the attempt to target certain regions of the world.

The projected air-to-air missile market in terms of units shows a slight drop in annual rates over the next 10 years. Production will peak around 2011 and then decline for three or four years before it begins to rebound. Throughout this period, the value of this production will trend upward.

The dominant systems for the next 10 years will be the short-range AIM-9 Sidewinder and medium-range AIM-120 AMRAAM. Together, these missiles will win the majority of orders in this market through 2019. Europe is attempting to challenge the dominance of these systems, but its effort will not be fully successful.

Meanwhile, MBDA is developing the Meteor, which is earmarked to become the standard medium-range AAM on next-generation European fighter aircraft. The company plans to use the Meteor as its main weapon in a campaign to unseat Raytheon as the world's top provider of air-to-air missiles.

Concerning the short-range AAM market, Europe is making a less concerted effort to challenge U.S. dominance of this segment. European challengers to the U.S.-built AIM-9X Sidewinder include the ASRAAM, MICA-IR, and IRIS-T. The ASRAAM and MICA-IR are among the product lines of MBDA. Development of the IRIS-T is the responsibility of an international group headed by Diehl BGT Defence. EADS is working to convince Diehl BGT Defence to join MBDA. Diehl (80 percent) and EADS (20 percent) own this company. However, Diehl BGT has been reluctant to become part of this European megacorp, fearing its unique corporate identity would vanish within such a large organization.

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THE MARKET FOR MAN-PORTABLE ANTI-ARMOR BUNKER BUSTER WEAPONS

Despite the glut of available weapons systems, the international market for man-portable anti-armor and bunker buster weapons remains a highly competitive and dynamic environment, populated by the established market powerhouses and an influx of energetic new players. The Forecast International Weapons Group expects that the market will produce nearly 1.68 million man-portable anti-armor and bunker buster weapons, worth more than $4.6 billion, through 2019.

The Russian Federation virtually dominates this market. Russian defense contractors, under the auspices of the Rosoboronexport organization, will account for 66.34 percent of man-portable anti-armor and bunker buster weapons production, worth 51.21 percent of the total market value, through 2019.

Of the European programs, the partnership of Saab Bofors Dynamics and Thales for the MBT LAW program will prove the most significant.

Nammo Talley (formerly Talley Defense Systems) remains the sole American player to have an impact on the international market for man-portable anti-armor and bunker buster weapons.

The People's Republic of China has virtually no impact on the international market for man-portable anti-armor and bunker buster weapons. The Chinese State Arsenals system, under the auspices of the China North Industries Corporation (NORINCO), will contribute only 1.12 percent of total production, or 0.70 percent of the total market value, with its Type 69 line.

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TO BE RELEASED IN FEBRUARY 2010

The Market for Submarines