Europe's EADS said it is spending around $50 million to $75 million to develop a new armed version of its light utility helicopter for a possible U.S. Army competition and emerging strong interest by a significant number of foreign buyers.
EADS has built three technical demonstrator aircraft to prove different aspects of the expected specifications for the U.S. Army's Armed Aerial Scout program, Lutz Bertling, president of EADS' Eurocopter unit, told reporters ahead of the Farnborough international air show.
Bertling told Reuters that the company was spending its own money to develop the armed variant of its light utility helicopter because it saw strong emerging demand from the United States and other customers in the Middle East.
The new program could involve orders for up to 500 new helicopters and be worth $6 billion to $8 billion in the longer term, according to defense analysts.
Winning the order would give a big boost to EADS' strategy to establish itself as a prime contractor in the U.S. market, which accounts for about half of world defense spending.
The U.S. Army is expected to finish an analysis of alternatives and make a plan for the new program in the second quarter of 2011, with funding to begin flowing in 2012. But it could also delay the program and modernize its existing fleet of aging OH-58 Kiowa helicopters to save money now.
Bertling said EADS had a strong partner in Lockheed Martin Corp , which will provide the weapons, or mission package, for the new helicopter, if the program proceeds.
The EADS-Lockheed team could face competition from rival Boeing Co , Sikorsky Aircraft, a unit of United Technologies Corp , Bell Helicopter, a unit of Textron Inc , and AgustaWestland, a unit of Italy's Finmeccanica .
In 2008, the Army canceled a previous $6.2 billion program run by Bell Helicopter, to replace the existing, aging fleet of OH-58 Kiowa armed helicopters after its cost threatened to increase sharply.
Bertling said EADS was well-placed to bid for the successor program, due to its work on the light utility helicopter it is building for the U.S. Army, one of few Pentagon procurement programs that is meeting cost and schedule targets.
He said EADS had delivered over 120 of the new helicopters to the Army, all on or ahead of schedule, and past performance generally played an important role in Pentagon competitions.
The Army could still decide to modernize the current Kiowa helicopters, which are used to protect military convoys, and keep them flying a while longer, given mounting budget pressures in the United States, Bertling said.
But he said a significant number of foreign countries, especially in the Middle East, had expressed interest in an armed version of the light helicopter, but gave no details.
EADS is also responding to the Army's interest in possibly using a combination of manned and unmanned helicopters to replace the existing fleet, or development of an optionally manned helicopter that could be used with or without a pilot.
He said the U.S. military had seen that using even one smaller helicopter like the Kiowa to escort a military convoy made a huge difference in deterring attacks and responding if they occurred.
(Reporting by Andrea Shalal-Esa)