April 01, 2013
Beechcraft's reaction to losing the U.S. Air Force's Light Air Support (LAS) contract a second time reveals as much about the company's post-bankruptcy financial worries as it does about the service's contracting credibility.
With the Air Force's checkered track record on procurement, the company has nothing to lose by once again turning to the Government Accountability Office (GAO) with another protest and petitioning the U.S. Court of Federal Claims to halt further work by the Sierra Nevada/Embraer team in building the small attack aircraft for delivery to Afghanistan. In February, Beechcraft's AT-6 again lost the LAS competition to the A-29 Super Tucano. After protesting the same outcome last year, Beechcraft managed to force a new competition. While the strategy bought the company time to improve the AT-6, which was seen as inferior to the Super Tucano, it was not enough for a win.
The permanent loss of the LAS contract could be a substantial setback for the Wichita-based company, which is trying to regain its footing after emerging from Chapter 11 bankruptcy protection only days before the Air Force announced the A-29 award. While modest in terms of military contracts, Sierra Nevada/Embraer won $427.5 million worth of work for the first 20 aircraft slated for delivery to Afghanistan starting next year.
But that is just the beginning. The contract allows for orders totaling nearly $1 billion for deliveries to other allies.
Beechcraft CEO Bill Boisture is under heavy pressure from shareholders eager to turn the company around after bankruptcy. So, the protest is likely as much about sending a message to investors that the restructured Beechcraft is sound as it is about winning the work. “The stakes are a lot higher for Beechcraft here” than they were in the KC-46 tanker competition for Boeing, which protested its loss of the Air Force's KC-135 replacement competition and eventually won the work, says Byron Callan of Capital Alpha Partners. “Getting the U.S. to buy in on a program is the Good Housekeeping seal of approval.”
And, there is the chance that another misstep could be found in the Air Force's process, though service officials seem confident of their work.
A win would have been a much-needed boost for T-6/AT-6 production, securing a years-long future for the growing defense side of Beechcraft's work. During the economic downturn, the trainer/attack segment grew from just 17% of company revenue in 2009 to 26% in 2011. At the same time, the trainer/attack business grew to account for nearly one-third of the $1.078 billion backlog at the end of 2011.