U.S. helicopter suppliers fear losing innovation war.

• Author: Wright, Austin

* The military helicopter business is booming in the United States, but the industry mostly is making money fixing up and maintaining the Army's aging fleet. Hardly any Pentagon contracts these days pursue new aircraft designs, industry officials say.

U.S. manufacturers worry about this trend because they see their European counterparts chasing advanced concepts for next-generation helicopters. They are concerned that the United States in the future may not be able to compete in the global market if U.S. firms are perceived as less innovative.

A 2009 report by the Connecticut-based market analysis firm Forecast International says European governments have focused on researching ways to push the industry forward, while U.S. rotorcraft budgets are increasingly consumed by maintenance costs for existing fleets.

"We could see the potential erosion of the U.S. rotorcraft industrial base," says David C. Palm, the director of business development and strategy in Boeing's rotorcraft division.

"European countries are funding new helicopters," he says. "But most of the development work happening here [in the United States] is because of companies investing their own money. There aren't a lot of government subsidies."

Most of the development research is intended to improve core technologies--"making the things helicopters already do better," Palm says. Development projects generally focus on three areas: increasing helicopter speed, the amount of weight they can carry and how high they can fly.

Manufacturers also are focusing their research funds on finding ways to cut costs, he says. "Helicopters have a lot of moving parts and a higher cost per flight than fixed-wing aircraft," he says. "We want to get prices down close to what fixed-wing aircraft cost. That will really move the industry forward."

But he fears that European companies will beat U.S. manufacturers to the punch in building a new generation of cheaper, faster military helicopters that can carry heavier payloads and hover at higher altitudes.

Forecast International's report echoes Palm's concerns. In recent years, the Defense Department has favored refurbishment programs over projects that build new helicopters from scratch, the report says.

"Disproportionately, the all-new designs entering the market are the products of manufacturers outside of the U.S., while derivative models are generally of U.S. origin," the report says. "U.S. firms are increasingly finding themselves at a...