The looming US budget crisis has been well documented. Sequestration seems to be just around the corner and the defense industry is already bracing for the catastrophic impact of an additional $500 billion cut to the DoD’s budget over the next 10 years. Other countries, especially those in Europe, are also feeling the effects and anticipating drastic austerity measures. What’s lost on some, perhaps, is that there are growth opportunities elsewhere. Countries such as Saudi Arabia, India, and Brazil, are beefing up their defense purchases and capabilities. In fact, the latest projections from SIPRI (Stockholm International Peace Research Institute) indicate that many of these countries will have healthy defense growth rates for the next several years (see Figure 1).

Figure 1: International Defense Budgets

So what’s driving this growth? Well, a number of weapons systems and R&D projects. But certainly UAVs are one of the more important areas. Several well-respected organizations project a tremendous amount of money spent on UAVs over the next 10 years, and this will almost definitely change the landscape of aircraft inventories.  When we consider just the US inventory alone, we see 45 times more UAVs today than we had only 10 years ago (see Figure 2).

Figure 2: DoD UAV Inventory

When we compare that to the US manned aircraft inventory, the trend becomes quite apparent – we’re steadily moving towards a 50/50 convergence between manned and unmanned assets (see Figure 3). Other countries and regions will follow (some quicker than others) as the US leads the trend.

Figure 3: DoD UAV Trend

Much of the growth, both domestically and internationally, can be attributed to the large UAVs. To that point, many countries around the world lack the capabilities and funding to either procure or manufacturer these larger, more complex systems. However, countries such as India and Brazil are forming partnerships today to help build those capabilities now so that, in the not-too- distant future, they can manufacture more expensive systems indigenously. Thus, the larger UAVs will continue to dominate total sales while representing only a small portion of the total volume (see Figure 4).

Figure 4: World UAV Forecast

In terms of UAV growth, it should come as no surprise that the US has been the clear leader for some time now. However, other regions around the world have taken notice and will continue to enhance their defense arsenals by increasing budgets allocated for UAVs. Asia-Pacific and Europe are projected to be the leaders behind the US, with the Middle East, Americas, and Africa rounding out the rest (see Figure 5). 

Figure 5: UAV Global Forecast

So, I think we can safely reference Malcolm Gladwell and say that we’ve reached the tipping point with respect to UAVs and their manned alternatives. Although we shouldn’t expect to see UAVs performing the more intricate, complex and dynamic missions such as air-to-air combat anytime soon, we should expect to them to take over the dull, dirty, and dangerous ones, thus leading to a strategic shift in aircraft inventories around the world.

Fly safe,

Marc