The U.S. is the world’s largest aerospace and defense market. But recently, there was a cut in the military budget from $531 billion last year to $525 billion this year. The decline in the budget has reduced the backlogs of various aerospace and defense companies. Hence, some companies have planned new and enhanced products to maintain market share. Here are 3 that are particularly interesting.
Textron Inc. (NYSE:TXT)’s subsidiary, Bell Helicopter, accounts for 35% of total revenue. Under the Bell and The Boeing Company (NYSE:BA) partnership, it has produced an aircraft called the V-22 Osprey tilt-rotor. This aircraft can fly like a plane and land like a helicopter. Recently, the U.S. Navy announced it’s planning to enter a five year contract to purchase 99 units of the V-22, valued at $6.5 billion. The Marines will receive 92 aircraft, and seven will go to the Air Force.
V-22 Osprey tilt-rotor
Source: Military Today
Currently, Bell is facing a decline of $386 million in its backlog due to the military budget cuts. So it’s not surprising to see revenue decline 4.5% in the first quarter. To help make up for it, Bell signed an $85 million contract in May with the U.S. Department of Defense. Under this agreement it will provide engineering and support assistance to America’s allies. Specifically, Bell will service 30 helicopters in Iraq as well as the development of a military helicopter factory in Taiwan.
Also, Bell has expanded its footprint in other countries like Brazil, China, India, and Canada. With increasing orders and expansion, Textron Inc. (NYSE:TXT) should be able to achieve higher revenue in upcoming years.
General Dynamics Corporation (NYSE:GD) launched its G650, a technologically advanced business aircraft, under the Gulfstream G650 program. Gulfstream is a wholly-owned subsidiary of General Dynamics Corporation (NYSE:GD). The G650 has high speed of 704 miles per hour, advanced safety features, and a large cabin. The large cabin can accommodate 18 passengers and four crew members.
General Dynamics Corporation (NYSE:GD) has a backlog of around 200 G650 aircraft, with a price of $65 million per aircraft, amounting to a total value of $13 billion. The company plans to supply 28 aircraft in 2013, 40 aircraft in 2014, and 45 aircraft in 2015. It’s expected that the sale of G650s will grow 16%, to $8 billion, this year.