This 30-page research note presents combat aircraft and selected avionics market analysis from 2008 to 2019.

World Air Forces are at various combat aircraft replacement and
upgrade cycles. Most NATO countries are in an active replacement phase
for their 1970s designed aircraft while emerging nations such as India
will evaluate entirely new aircraft sources in the near future. More
than 5,000 combat aircraft will be entering service globally over the
next decade, with a peak of 524 deliveries in 2014.

Programs such the Lockheed Martin F-35 are set to dominate the
marketplace through 2029 while G2 Solutions expects aircraft such as
the Dassault Rafale to gain more traction on the export market through
2014. “Rafale has had issues with some export tenders this decade, due
to a mix of unfavorable political considerations and system overall
technical maturity,” said Michel Merluzeau, G2 Solutions’ Managing
Partner. “However, the outlook has improved, with market potential for
Rafale around 300 aircraft to 2019, more if it wins the Indian MMRCA
competition.”

Airframes of concern this decade include the Saab Gripen and
Boeing F-15 Silent Eagle (SE). Gripen has been relatively successful,
but now competes for tenders in Brazil and India where the aircraft is
clearly at a disadvantage against the Boeing F-18E or Dassault Rafale.
Failure to gain additional orders might see the program come to a
standstill by 2015, however there are smaller opportunities such as
Argentina that are possibly ideally suited for Gripen. “The upgraded
F-15SE is an interesting niche option for existing F-15 operators, but
the market opportunity window is tight and the addressable market is
probably fewer than 100 aircraft,” stated Merluzeau.

The study also highlights the remarkable longevity of the
Lockheed Martin F-16 series, soon to be supplanted by the F-35. Thirty
years since its entry in service, G2 Solutions analysis predicts that
more than 200 F-16s have/will be delivered between 2008 and 2019.
Lockheed Martin will maintain a commanding lead with a market share
greater than 43%, ahead of Boeing, AVIC1, Eurofighter-EADS and Dassault
Aviation.

Market Findings

• Business aviation avionics markets remain very dynamic. Although a
  significant slow down of US and European market demand will affect
  sales over the next three years.
• The sector remains the most innovative in terms of new technology adoption and experimentation.
• Rockwell Collins, Honeywell and Universal Avionics continue
  to dominate the medium to higher market segments with Garmin
  establishing a solid foothold at the lower end of the market segment
  with emerging light jet programs.
• The dominance of integrated systems will not lead to a
  similar dominance from one or two players alone. Aircraft OEMs are
  likely to mitigate risk with the transition to multiple subs working
  for a lead integrator on future key programs.

• The 65-page research note AB080, defines, quantifies and
  forecasts unmanned persistent ISR, with a production forecast running
  from 2009- 2019. G2 Solutions examined hundreds of unmanned aerial
  systems (UAS) that are military in nature, in service or expected to
  enter service during the forecast period.
• In total, 34 UAS and/or future programs are summed to arrive at the $44.4 billion total market acquisition figure.
• Many high-profile UAS-inclusive programs will be awarded and move to production/delivery in the 2009-2019 timeframe.
• These include, but are not limited to: Broad Area Maritime
  Surveillance (BAMS), Future Combat Systems (FCS), Watchkeeper,
  SkyWarrior, STUAS/Tier II and the United States Air Force Next
  Generation UAS.
• A number of international sales and service-specific UAS purchases also contribute to this forecast.
• Not surprisingly, the integration of a strike capability is
  both a major program and cost driver, and militaries will increasingly
  be tasked with balancing these two capabilities.

• RDT&E budgets have increased in the recent past due to
  delays in moving major programs into production; this trend will
  continue but associated funding growth will slow considerably in the
  near-term
• Congress has commenced efforts to gain more oversight into RDT&E program schedule and cost over-runs
• Programs that show excessive cost growth or fail to meet technical milestones will be increasingly threatened by cancellation
• Army and Navy RDT&E funding will decrease significantly
  over near and long-term, as large platform programs transition to
  procurement and funds are sent to that account to complete the
  acquisition
• Early stage development for programs will face increasing
  funding pressure in the long-term, as final development of large
  platforms consumes a greater share of the RDT&E budget,
  particularly in the Army and Navy
• Supplemental and baseline spending have grown extremely
  large and become intermixed during the last 4 years. Separating what
  will continue as baseline will require some fiscal control by the DoD

• Demand throughout the forecast period will remain strong despite temporary decline in the short term.
• New levels of avionics performance have dramatically increased pilot situational awareness.
• The retrofit market will witness significant technology
  insertion through 2012 and will be the most dynamic in terms of
  competitive positioning and new technology introduction.
• Consolidation will continue. With fewer OEM programs
  available, companies will continue to shop for technology acquisitions
  in order to bring themselves closer to integrated avionics offerings.
  Timing of consolidation is critical as few companies remain that can
  enhance significantly potential buyers competitive positions.
• From a competitive standpoint, Garmin’s ultra dominance of
  the aircraft OEM segment clearly indicates that the company’s market
  expansion strategy proved correct.

• This report examines six years of U.S. DoD spending in Federal Supply Code (FSC) 1560 Equipment Aircraft Structural
• Companies are grouped into three tiers based upon FSC 1560 revenues over time
• Revenues rose sharply from 2001-2002, and have leveled off at close to $2 billion annually from 2003 to 2006
• The number of reporting locations has skyrocketed, rising from 484 in 2001 to 1,184 in 2006
• DoD has spent a total of $12.3 billion in FSC 1560 from 2001-2006
• It also provides a spending forecast from 2007-2011
• G2 Solutions worked from contract action data beginning in
  1999 as well as another set of information characterizing DoD FSC 1560
  spending from 2001- 2006.
• In its simplest form, airframe structural components markets
  are similar to commodity trading; through this report G2 looks at macro
  political, policy and force structure issues to justify a 5-year
  forecast

• Demand throughout the forecast period will be robust with a temporary decline
  towards the later part
• There will be strong avionics upgrade opportunities in established markets such
  as the US and Europe until new narrowbody aircraft are introduced sometime
  next decade
• Near Term Outlook: average growth rate 2007-2010: 5.6%, Compound Annual
  Growth Rate 2006-2010: 4.6%
• Top three avionics OEM competitors control approximately 85% of the forward
  fit market, an increase over previous years
• Consolidation likely will continue with Tier 1 & 2 companies looking to augment
  their market role in the retrofit segment and make other acquisitions based on
  program or avionics technology-based opportunities. For example, General
  Electric’s 2007 acquisition of Smith Industries has augmented GE’s avionics
  footprint and aircraft shipset value significantly
• Market vulnerable to a downturn in aircraft orders, however replacement cycles
  and need for more efficient aircraft will moderate such an impact

• This report examines six years of U.S. DoD spending within the
  maintenance and repair of structural aircraft assemblies across all
  service branches
• It provides a six-year baseline of spending, market share analysis as well as major contracting office locations
• Research will also point to ongoing and anticipated DoD spending and contracting behavior
• Global deployments and overall DoD budget scenario are examined as contributing factors
• Where possible, major contracts are described, with an eye
  toward sunset and recompete provisions – Not all contracts mentioned
  will be solely applicable to JO15, as MRO contracts encompass avionics,
  weapons systems, engines as well as structural maintenance,
  modification and repair

• Garmin maintains a dominant GPS retrofit market share position, with estimated 2007 market share between 75 and 85 percent
• Lowrance and AvMap and are the only two other players of note within portable and handheld markets
• This market is still essentially limited by the number of
  aircraft; even with 3,500 new airframes/year the total addressable
  market remains stable
• There is a shrinking addressable market for retrofits in
  both business and general aviation, due to market saturation, equipment
  and installation costs and economics of upgrading aging platforms
• The trend toward forward fit GPS and/or integrated avionics
  suites in new aircraft further decreases retrofit opportunities through
  2018 and beyond
• Roughly 3,500 aircraft/year are produced within BA and GA in
  North America; nearly all will have GPS and/or integrated avionics
  capabilities

• Emerging markets (Developing nations) constitute the near to
  medium term addressable market for affordable airborne surveillance
  solutions
• Company must be capable to offer affordable high technology, and reliable airborne solutions
• A strong strategic partnership essential for market penetration
• Dominant end user considerations will remain
  price/performance offer and the support quality that can be expected
  over the product life cycle
• Market is just beginning to shape up and opportunities abound with a total market value expected to exceed $3.3 billion to 2016
• Users will be very sensitive to offset benefits as well as the stability and strength of the partnership between integrators and OEMs

• The emergence of a new line of light and personal business jets will significantly impact avionics market mix over the next five years
• The Light jets avionics market represents $4.7 billion in revenue terms from 2007 to 2018
• Growth will be moderate as prices of these new avionics suites remain low compared with other advanced avionics systems such as Proline, Primus Epic or EASy
• Consolidation is expected to continue at the second tier of the market, with tier one players seeking to expand their business activities in adjacent market segments where current core competencies can be leveraged
• The emergence of new competitors in the VLJ segment has increasingly contributed to this market fragmentation. Some of the most successful players will eventually migrate into other segments of the business aviation, military or commercial air transport markets.