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22 January 2014

Market Outlook for Boeing AH-64 Apache 'Thin'

Richard L. Aboulafia, Vice President, Analysis

Market Outlook for Boeing AH-64 Apache 'Thin'

Future prospects for the AH-64 Apache attack helicopter are somewhat thin. India is the best short-term prospect, with a likely order for 22. But on the positive side, the challengers are not looking great. The AH-1Z looks hopeless after South Korea. Eurocopter's Tiger looks rather sickly. In theory, the re-born AW129 (with Turkish help) could play a role, but the odds aren't in its favor. It lacks the heavy attack and sensor capabilities of the Longbow Apache. It also lacks the US stamp of approval. The two designs are effectively in different market niches.

In short, the Apache looks set to keep the high end of the market to itself. Yet this high-end market is not in great shape. Net-centric sensors, missile defense, and lighter multirole systems are very much in vogue. Japan is a good example—canceling its Apache buy and putting the resources into missile defense. There is even a chance that they trade in the aircraft they've taken.

Our forecast includes 72 AH-64Es for undetermined customers. Despite the challenging broader market, this is a conservative figure.

Army Fleet Plans
Thanks to the death of Comanche and its successor, the ARH, and the likely retirement of the OH-58D, the Army's AH-64E upgrade program has a bright future. The current plan is for 48 to be funded annually for all of our forecast period. This good news comes at a price.

The price is that new build aircraft for the Army look less good. The FY 2014 budget defers them altogether. While they could well reappear (especially if that OH-58D retirement produces a serious force shortfall) we are not expecting funding in our forecast period. Of course, those E upgrade machines may as well be new (they have new fuselages and many new systems).

Beyond the E, there's also the Block IV effort. It's far from definitive, but it looks promising, and unless the Army budget is completely raided by the other services, it will be funded. Like Block III, it may salvage some leftover Comanche technology, and perhaps revive the so far unfunded Common Engine Program. Directed energy weapons might even make an appearance. But it is beyond the scope of our forecast.

In all, the current Army plan is a model of force planning through equipment rollover. It calls for 650+ Block III E models to stay in service through 2040. Given the absence of any alternatives, and given the importance of the mission, we think it will happen.

About the Author

Richard L. Aboulafia

Richard L. Aboulafia

Richard is Vice President of Analysis at Teal Group.  He manages consulting projects in the commercial and military aircraft field and analyzes broader defense and aerospace trends.  He has advised numerous aerospace companies, including most prime and many second- and third-tier contractors in the US, Europe and Asia.  He also advises numerous financial institutions on aerospace market conditions.

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