Brazil’s $1B+ Order for EC725 Cougar Helicopters
Brazil’s “Project H-X BR” medium transport helicopter competition featured 3 established players: AgustaWestland’s EH101 has found success in Britain, Europe, and Japan, and was chosen as the base for the USA’s VH-71 Presidential helicopter before that program was canceled. Eurocopter’s EC725 Cougar is an updated version of the popular AS332/532 Super Puma, and has been ordered in limited quantities by the French and Mexican governments. An up-to-date version of Russia’s widely used Mi-17 was the 3rd contender; like the Super Puma, Mi-8 and Mi-17 helicopters are already in wide use within Latin America.
In truth, however, Eurocopter always had an edge. The Brazilian Army’s Aviacao do Exercito already uses the AS532/”HM-3″ Super Puma, basing them in the Amazon at Manaus. Its Navy also uses Super Puma variants: AS332s and AS532s both serve in the Navy as the UH-14, flying from Brazil’s NAe Sao Paulo aircraft carrier, and from the southeastern base of Sao Pedro da Aldeia in support of Brazil’s Marines. Now, Eurocopter’s offering will become Brazil’s medium-lift helicopter across all services… thanks to a new contract.
The Cougars and the Opportunities
By 2007 Brazil’s was showing a surprising boost in its defense budget, as well as a revived fighter competition in the works, the selection of a medium transport helicopter and of an attack helicopter, and other programs to follow. After decades of neglect, Brazil appeared set to reconstitute both its armed forces, and a defense industry that once offered an array of competitive products on the global stage.
A few years later, Brazil’s F-X2 is on hold, but it did buy Russia’s Mi-35M as its attack helicopter, to go with its H-XBR EC725 Cougar medium utility helicopters. That “Cougar” designation can be confusing. While Eurocopter itself uses the Cougar designation primarily for its new EC725 and the EC225 civilian version, Helibras’ pages refer to the AS532 as “Cougar,” in line with Aerospatiale marketing efforts since 1990. Compared to the AS532, the EC725 Cougar is a bit larger, and uses more advanced modular design, more composite materials, state of the art avionics, and prognostic monitoring systems for key components.
Brazil’s Navy and Army will each receive 16 helicopters to support their missions. The Air Force will receive 18: 16 for general tasks, and 2 configured as VIP transports.
Meanwhile, the deal itself offers important benefits to both parties. The Brazilians make some progress in the area of fleet standardization, though they will continue to operate helicopters from Bell and Sikorsky. They also strengthen a key defense industry relationship, and build national capability with the upgraded Helibras facility. There are rumors that Snecma’s Turbomeca will also set up an “industrial facility” in Rio de Janeiro for helicopter engines. All of these moves will make a difference to Brazil’s long term costs, and may even provide a base for more government buys. Local production of Cougar helicopters in Brazil also creates a local source for state firms like Petrobras, who may need long-range helicopters for their offshore oil rigs, as well as “para-public” agencies like law enforcement.
EADS Eurocopter gains, too.
The global medium helicopter market is currently very tight, with demand outstripping supply. EH101 production is backlogged to the point that Britain moved to buy Denmark’s fleet, rather than wait for factory deliveries of extra machines for the front lines. NHI/Eurocopter’s smaller NH90 is in an even worse state, and is backlogged by years; so is Boeing’s heavy-lift CH-47F Chinook production line. Sikorsky’s medium-heavy CH-53K will not be a realistic option before 2016 or so. Its smaller H-92 Superhawk has yet to be delivered, has not been ordered in a military transport version, and currently has just one small military customer in Canada. This leaves Russia’s Mi-17, which has its own steady flow of demand, and attracts questions about its Rosoboronexport’s support and negotiating approaches. Or, there’s Eurocopter.
An additional production line, and firm orders for the EC725, offer Eurocopter additional capacity to meet global demand, while fulfilling their existing commitments. It also offers them a key reference customer beyond France, giving their new model credibility as a viable long-term choice for existing Puma and Super Puma operators.
On the other hand, the deal doesn’t quite establish production in a dollar zone, which has been a goal of EADS’ leadership. Brazil’s Real has increased in value from about $0.35 in January 2004 to test peaks of around $0.65 in both 2008 and 2011; and even increased in value relative to the Euro, rising from EUR 0.28 to reach EUR 0.40 and above since 2010. Brazilian Finance Minister Guido Mantega famously said in 2010 that a currency war was going on. The Real may have come down a bit from recent peak values, but with Brazil moving away from the US dollar as a reference currency in international trade, Brazilian production will have to compete on its own economic merits, rather than benefiting from currency externalities.
Contracts & Key Events
Sept 17/13: ECM. Eurocopter announces that they’ve tested a Brazilian-designed missile warning & countermeasures system, using an existing Brazilian Navy AS332 L1 Super Puma as a surrogate. The system was developed by Helibras’ Engineering Center, and the 6 flight tests were performed at Santa Cruz Air Base near Rio de Janeiro. Eurocopter adds that:
“To date, seven EC725s for the Brazilian armed forces produced by Eurocopter in France have been delivered in the first phase of Brazil’s acquisition and an eighth will be delivered before the end of the year. The next batch of helicopters already is in Itajuba, with some of them undergoing partial build-up on the Helibras final assembly line. After testing and acceptance, they will be delivered beginning in early 2014…. and one EC725 will be used for the development and integration of systems.”
Sources: Eurocopter, “Eurocopter technology transfer sees Brazilian-made countermeasure system integrated on military aircraft”.
Jan 5/12: Eurocopter’s Helibras subsidiary gets a 5-year, BRL 150 million (about EUR 62.2M/ $80.5M) contract to provide central supply and management for EC725 spare parts, stocks and related technical support. It will serve all 3 military services, which is a first for the country.
Activities will include helicopter inspection, overhaul and repair, as well as the deployment of teams to provide on-site base services. Eurocopter’s release adds that “The first three EC725s delivered to the Brazilian armed forces in December 2010 are now being operated by the country’s army, navy and air force.”
Dec 20/10: Eurocopter delivers the first 3 Brazilian EC725s. The helicopters were manufactured in France and delivered in a standard configuration, for final outfitting in Brazil by its Helibras subsidiary. Brazilian Armed Forces personnel have been in training since May 2010 to operate and maintain the EC725s, and conducted the acceptance tests.
Brazilian assembly of EC725 will begin in 2012 at Helibras’ new Itajuba production facility, and their Brazilian-supplied content will increase to a minimum of 50% through 2016. Eurocopter.
May 26/10: The first flight test of the first EC725 helicopter is performed at Eurocopter’s facility in Marignane, France. It’s intended for the 1st Squadron of the Brazilian Air Force’s 8th Aviation Group. FAB release.
May 22/10: Eurocopter subsidiary Helibras holds the ground-breaking ceremony for their new rotary-wing center of excellence in Itajuba, Brazil, where they will produce, assemble and maintain Brazil’s EC725 helicopters. Eurocopter release.
Sept 2/09: Brazil’s Ministerio Do Defesa announces [in Portuguese] Senate approval of the long term budgets for Brazil’s helicopter and submarine programs. The H-X BR program’s budget is EUR 1.847 billion, (about 5.1 billion Brazilian Reals, or $2.65 billion). Budgeting will begin in 2009 and end in 2017, while EC725 deliveries will begin with 3 helicopters in 2010, and finish in 2016.
Brazil’s annual delivery schedule is oddly staggered: 3, 1, 4, 11, 9, 14, and 8. That may create capacity flexibility, and the MDD release adds that Brazil will become the manufacturing source for all EC725s exported to Latin America and Africa. The inclusion of Mexico, who has already ordered 6 EC725s and has a prominent Eurocopter subsidiary in country, is uncertain.
Dec 23/08: French President Nicolas Sarkozy and Brazilian President Luiz Inacio Lula da Silva sign the EUR $1.9 billion (about $2.7 billion) contract in Rio de Janeiro. French government | EADS Eurocopter | Bloomberg
Dec 18/08: Brazil releases a new National Defense Strategy that sets out broad range of goals, including the rebuilding of Brazil’s defense industry. AP report | Estrategia Nacional de Defesa [Portuguese].
June 30/08: Brazil and France sign an agreement in principle for Eurocopter to build helicopters in the South American country via its subsidiary Helibras. Brazil’s Defense Minister Nelson Jobim reportedly said that the country intended to buy 50 “Super Cougar” models, the first of which would be delivered in 2010. The deal’s value was initially reported as $1.2 billion, but reports put the signed contract at $2.7 billion equivalent.
Under the agreement in principle, France would transfer technology and help Brazil expand the export capacity of its aviation industry by aiding the assembly of helicopter components such as engines and electrical systems. Eurocopter will also invest $300-400 million in Helibras Minas de Gerais plant in central Brazil, in order to prepare it for production.
Both countries are expected to also sign a broader strategic defense alliance in December, whose terms could have some influence on Brazil’s choice of fighter for its F-X2 competition. See: India’s Economic Times | Forbes | Reuters | Rotor & Wing short bulletin.