“War Dollars Come Back to Monrovia” for Beacon Media Newspapers

Locally headquartered Aerovironment continues to collect multi-million dollar contracts as the Iraq and Afghanistan conflicts roll on.

February 2008

As part of an existing contract, the U.S. Army and Marine Corps announced last week that it will invest $45.8 million into Raven Unmanned Aircraft Systems produced by AeroVironment, a Monrovia-based company that also produces industrial vehicle battery charging and power processing systems. Although the $45.8 million are fully funded, the military was unavailable for comment as to the specific source of the funds.

The existing U.S. Army joint small Unmanned Aircraft System program of record for AeroVironment’s Raven allows for a one-year option of additions to the current five-year contract from the Army, Special Operations Command and other U.S. military services and has no definite dollar amount.

According to the U.S. Army, Ravens were flown for approximately 150,000 combat hours in 2007 and they expect those hours to double this year, said AeroVironment director of marketing strategies Steven Gitlin.

AeroVironment’s second Raven model, technically RQ-11B, is a 4.2-pound, backpackable, hand-launched sensor platform that provides day and night, real-time video imagery for “over the hill” and “around the corner” reconnaissance, surveillance and target acquisition in support of tactical units.

AeroVironment produced what they believe was the first hand-launched Unmanned Aircraft System for military application in the late 1980s and that Pointer system was deployed in Operation Desert Storm.

“After 9/11 U.S. special forces went into Afghanistan with some Pointer models and found it to be incredibly useful in that kind of a threat environment,” said Gitlin. “When we were in the throws of the Cold War we were more concerned with their armies, tank battalions and bombers than anything else. In this new environment where we had small groups of very independent mobile agile operators who were facing small groups of adversaries that were often hidden in urban areas, caves or farmland they found the ability to put binoculars in the sky to be very effective in helping them control the airspace around them.”

Each Raven system costs generally $150,000 and consists of three aircraft, a ground control station, system spares, and related services.

“The price varies because each customer defines their system a little bit differently so $150,000 is a notional price and that can move either way,” said Gitlin.

Based on the number of brigades, the U.S. Army created an acquisition objective, (how many systems they plan to acquire), of 1900 Raven systems just for the army branch of the U.S. military and the items provided under the new one-year option on the multi-year contract are to be delivered by February 2009, within one year of the contract award date.

In 2003 the Marine Corps held the first competition within the Department of Defense for a hand-launched Unmanned Aircraft System program.

“A number of companies competed and we ended up winning that program,” said Gitlin. “As a result we became the sole source supplier of Dragon Eye systems for the Marine program of record and we delivered about 1000 Dragon Eye aircrafts to the Marine Corps over the lifetime of that program. Effectively last year the Marine Corps switched from procuring our Dragon Eye to procuring our Raven system which we developed after Dragon Eye.”

The main differences between Dragon Eye and Raven are that Dragon Eye requires two people to launch it by building tension in a bungee cord and Dragon Eye has a programmed flight path whereas Raven is hand-launched and can have a manual or automated flight course. In addition, Raven has extended flight duration, and improvements in optics, imagery and the ground control unit.

In November of last year the U.S. Marine Corps also invested in another AeroVironment UAS when they ordered $19.3 million in Battlefield Air Targeting Micro Air Vehicle systems, each consisting of two Wasp III micro air vehicles and other related items.

“The small size and light weight of Wasp make it ideally suited for deployment directly to platoons, where flexibility, portability and reliability are critically important. We have been evaluating Wasp for some time, and believe that it offers a unique new capability to support our Marines’ missions around the world,” said U.S. Marine Corps Major James Roudebush, Tier I UAV Program Manager, PMA-263.

While Raven is 4.2 pounds, has a wingspan of about four and a half feet, and flies for about 90 minutes on a rechargeable battery, Wasp weighs one pound, has a 29-inch wingspan, and flies for about 35 minutes so “there’s a tradeoff,” said Gitlin. “They both have sophisticated technology, GPS, two-way transmission and can carry thermal imaging cameras but the Wasp packages that to a much smaller air frame.”

Founded in 1971 by physicist and engineer Dr. Paul MacCready, named one of the “greatest minds of the 20th century” by Time magazine, AeroVironment became a publicly traded company early last year. Before it went public, “Mad Money” host Jim Cramer named AeroVironment as the next hot initial public offering last January.

Even though AeroVironment may have the risk of competition, it’s the only company that makes a plane weighing less than a pound and that’s what gives AeroVironment an edge, said Cramer at the time. Though people may be worried that a stock like this might take a hit with the Democrats in control, Cramer told viewers that AeroVironment has deep military contracts and an unbelievably optimistic backlog.

“About 84 percent of our 2007 fiscal revenue came from our UAS, the majority of which are bought by the U.S. military, and that’s a combination of selling hardware and also providing services like training and maintenance,” said Gitlin.

AeroVironment’s revenue for the first six months of fiscal 2008 was $102.9 million, an increase of 34 percent, compared to the $76.7 million revenue in the comparable period of fiscal 2007, according to Business Wire.

“This increase was due to rising sales in AeroVironment’s UAS segment of $25.6 million, or 41 percent, and in its PosiCharge Systems segment of $1.1 million, or 12 percent, which was partially offset by lower sales in its Energy Technology Center segment of $0.6 million, or 13 percent,” said Business Wire.

Should the Iraq War take a different direction, especially if the next U.S. President decides to decrease troops or completely withdraw, AeroVironment is confident in its success.

“Our belief is that these small UAS, because of the value they provide, have become an imbedded part of our military and we’re beginning to see other militaries equip their forces,” said Gitlin, who noted sales to Danish and Singapore Armies. “The U.S. Army has its own acquisition objective and we believe they are going to continue to procure against that objective whether we are in Iraq or not because as long as the threat environment is the same, it’s a very useful tool. From our perspective, what may be affected by a reduction in Iraq activity is the support and services business that we provide to keep those airplanes operating at a very high reliability rate.”

Though the military is the primary Unmanned Aircraft Systems client, AeroVironment has also sold a small number of units to the FBI and believes there are some compelling applications in the civil arena such as border security, law enforcement and infrastructure monitoring.

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