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10-Year Airborne ISR Market Worth $43Bn (Oct 26)

VIRGINIA BEACH, Va. --- Teal Group's Airborne Intelligence, Surveillance and Reconnaissance (ISR) Market Forecast, released today during the 42nd Annual Association of Old Crows (AOC) International Symposium & Convention, forecasts the annual airborne ISR market will increase from about $1.5 billion in FY 2000 to a peak of almost $5 billion in FY 2013, and that Lockheed Martin will garner the biggest share of the $43 billion future market (total funding from FY 2005 to FY 2014).

Teal Group's forecast provides a comprehensive analysis of the airborne ISR market over the next ten years, including numerical forecasts based on a cumulative program-by-program analysis of all ISR systems involving U.S. firms, derived from comprehensive data by the Teal Group Corp., Fairfax, VA.

Lockheed Martin will increasingly dominate the largest market segment of the next ten years -- manned EO/IR (electro-optical/infrared) targeting and surveillance -- fighters and attack helicopters. With solid production begun for Sniper/PANTERA and at least a half-share of F-35 JSF EO/IR development, Lockheed Martin already has about 40% of the fighter market. Northrop Grumman will also hold about 40% of the market for the next couple of years, but then Raytheon's ATFLIR will eat into this.

By the end of our forecast in FY 2014, Raytheon will be squeezed back down to a perilous 10% in the fighter market and Northrop will rebound to about 30%, but Lockheed Martin will hold 60% by then, returning to the dominance of its LANTIRN days.

However, more than 90% of the fighter/attack helicopter market is already contracted for programs recently entered into production. In terms of available markets, there is $14.2 billion of funding from FY 2005 to FY 2014 still uncontracted or unallocated, and Lockheed Martin has anything but a lock on this. Unlike the US Air Force's fighter Advanced Targeting Pod competition of a few years ago, other segments -- not fighter EO -- will offer the most important and most intensely fought over new programs of the next few years.

Hyperspectral sensors and UAV ISR (EO and synthetic aperture radars - SAR) will offer better market opportunities. Teal Group estimates the UAV EO ISR market will more than double over the next ten years, with worldwide spending available to the US growing from $300 million to about $650 million annually. The future for UAV SARs, at least in terms of growth, is even greater. The UAV portion of the SAR ISR market will grow from negligible a few years ago to 62% of the market by FY 2014. Total UAV SAR funding will top a half billion dollars for the first time in FY 2008. Global Hawk -- including MP-RTIP -- will continue to dominate, keeping more than 40% of the total world UAV SAR market through the next ten years, though J-UCAS (Joint Unmanned Combat Air System) SAR production could rival this next decade.

In the world SAR ISR market, Northrop Grumman and Raytheon will be the primary competitors, with Northrop Grumman having the single largest program (MP-RTIP) and Raytheon controlling most other manned SARs. Raytheon will lead through FY 2009 with Northrop taking over after that. In total, from FY 2005 through FY 2014, Northrop will earn at least $2.84 billion from SARs, with Raytheon garnering at least $2.96 billion. Two other significant producers will also compete, and in fact become stronger through the decade. General Atomics (earning at least $700 million in funding) and Telephonics (at least $630 million) will keep the leaders honest. But the big surprise is the near total absence of Lockheed Martin.

Thus, overall, there will be a surprising parity in the total airborne ISR market between the Big Three defense electronics firms, at least for the next few years, with Raytheon actually leading in FY 2005 and FY 2008. ISR funding for these three from FY 2005 to FY 2014 (not including uncontracted or unallocated funding) will be: Lockheed Martin ($8.5 billion), Raytheon ($7.4 billion) and Northrop Grumman ($5.4 billion). FLIR Systems, Inc., BAE Systems and L-3 WESCAM will also be players in the EO market.


Teal Group Corp. is a competitive intelligence forecasting firm based in Fairfax, VA.

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Teal Group Forecasts Lockheed Martin Will Dominate the Airborne ISR Market Over the Next Decade, Closely Followed in Total Funding by Raytheon and Northrop Grumman