House of Commons - Defence

Select Committee on Defence Tenth Report

STRATEGIC LIFT

27. One of the major conclusions of the 1998 Strategic Defence Review was that strategic lift capabilities needed to be enhanced, to support the expeditionary and power projection focus of the UK's defence missions. This is an issue that has been the subject of several reports by successive Defence Committees over the years. We have repeatedly called for vitally needed enhancements to the UK's strategic lift capabilities (as well as the preservation of UK-registration of merchant vessels for use by the MoD in times of crisis).[99]

Sealift

28. To improve sealift capacity, the MoD initiated a Private Finance Initiative scheme to provide six Roll-on Roll-off (Ro-Ro) ships, in place of the two currently on charter, to reduce the need for chartering transport vessels. We briefly discussed progress with this programme during our hearings.[100] During the Kosovo campaign, the MoD chartered 23 ship transport vessels over a six month period to supply our forces to that theatre.[101] On that occasion, the UK were one of the first countries to put significant forces into theatre and the MoD consequently entered the sealift charter market before similar action by allies forced up prices.[102] The MoD should not assume that on other occasions it will be so well placed. The lesson of the Kosovo campaign remains that such deployments depend on a great deal of sealift being readily available. Having dedicated assets, such as the six Ro-Ro ships envisaged by the MoD, will be essential if the UK is to maintain that deployability in less favourable circumstances.

29. The Ro-Ro ships will be merchant vessels under the Red Ensign, and will not be MoD vessels in the same way that warships or Royal Fleet Auxiliaries (under a Blue Ensign) are owned by the Department. As a civil ('non-warlike') programme, therefore, with the vessels to be of 'commercial standard',[103] bidders for the Ro-Ro project have not been restricted to UK firms (nor have the PFI contractors been restricted to UK yards for the construction of the vessels).[104] The MoD is due to select its preferred bidder next month,[105] and at such a sensitive juncture our witnesses felt unable to describe the likely scenario for the Ro-Ro ships' construction. There have, nevertheless, been reports of bids having been received that would entail construction in foreign yards, and we share the concerns that have been expressed in many quarters about the consequences a decision to build the MoD's Ro-Ro ships abroad might have for the UK's shipbuilding capabilities. We trust that the MoD's decision will recognise the wider industrial and strategic issues involved.

Airlift

30. The MoD is already in the process of replacing 25 of its C-130K Hercules aircraft with Lockheed-Martin C-130Js[106]—a programme which has been dogged by excessive delays caused by the US contractors. To replace the remainder (the 'Hercules Rolling Replacement—tranche 2' programme), the MoD identified four main options—the Boeing C-17, more C-130Js (although the MoD told us that at least some other larger aircraft would be needed to provide the outsize dimension of the required lift[107]), a mixed fleet of C-17s and C-130Js, or the A400M[108] being proposed by the Airbus Military Company.[109] Whatever the solution chosen, the aircraft involved could not be in-service with the RAF before 2005.[110] The A400M, for example, was (and still is) a virtual-reality aeroplane. The MoD therefore ran a separate competition to secure improved airlift capability in the short term, in tandem with the longer-term programme to avoid constricting the options for that programme. Below, we examine these airlift programmes further.

THE LONG-TERM AIRLIFT PROGRAMME

•  Competition between Airbus A400M, Boeing C-17 and Lockheed-Martin C-130J.

•  A collaborative programme, UK-led on behalf of up to eight European partners.

•  Programme's first approval by the MoD: 1994 (entire Hercules replacement programme).

•  In-service date: 2005.

•  Costs c. £2-2½ billion.

31. Last month the Secretary of State announced that the MoD intended to acquire up to 25 A400Ms to satisfy its longer term airlift requirements. This is somewhat lower than the 'up to 45' that had been subsumed in collaborative 'requests for proposals' issued to Airbus.[111] Admiral Blackham told us that the lower figure reflected the work done in his organisation to balance investment in air and sea transport.[112] It is quite a dramatic reassessment, however, which has not been matched by any increase in the requirement for sealift. Airlift is needed to deploy lead elements of the MoD's Joint Rapid Reaction Forces[113] such as the Attack Helicopter,[114] with heavy equipment following on by sea[115]—not just tanks and AS90 artillery,[116] but also armoured engineering vehicles and bridge-launchers[117] and in its response to this report we invite the MoD to explain the circumstances in which lead elements of the JRRF will be able to operate without engineering support capabilities. While there are opportunities to trade-off ships and aircraft in providing strategic lift capabilities, Admiral Blackham could not conceive of any circumstances where a substantial deployment would not require elements of both.[118] He also told us that although the C-17 is able to hold a main battle tank[119] (the C-130J and the A400M cannot), the ability to lift such heavy equipment was not part of the airlift requirement. He believed that being able to deploy a regiment of tanks and their supporting equipment by air would be 'convenient', but that it was never going to be a practical proposition for the UK,[120] and that deploying tanks in the much smaller numbers that would be possible with a modest fleet of C-17s (which cost 50-100% more to buy than the A400M[121]) would be of very little utility.[122] In the long term, Sir Jeremy told us, a more realistic proposition for the rapid deployment of heavy armour would be by fast ships rather than aircraft.[123]

32. Had the MoD selected the C-130J or C-17 there would be little development risk, as the aircraft would be essentially off-the-shelf purchases.[124] Although the A400M would entail developing the largest turbo-prop engine ever put into service[125] and Airbus Military Company have never before built a military aircraft,[126] the MoD remains optimistic that this European aircraft, yet to be built, will not be susceptible to significant technical risks. To minimise such risks for the MoD, it will be seeking a contract on the commercial lines used for civil aircraft development and production.[127] There will be no separate development contract, and under a fixed price production contract[128] Airbus would be responsible for the risk management associated with the development needed to deliver the aircraft.[129]

33. CDP was more concerned with the 'collaborative risk' involved in bringing together sufficient commitments from the partner governments to make the A400M viable[130]—requiring orders for somewhere between 150 and 200 aircraft overall.[131] The Secretary of State told the House[132] that the MoD's commitment to the A400M was necessarily conditional, and was dependent on assumptions that the potential partners and Airbus would give sufficient aircraft commitments and have a viable programme; that there would be an affordable unit price; that commitments to a satisfactory in-service date would be made; and that the launch of the programme would be within a reasonable time-frame.[133] The early signs appear promising, with reports that the demand from the partner governments is likely to be around 200 aircraft, and higher than the 180 the company are reported as saying they need to launch the programme.[134]

34. To get the programme off the ground, it is important that prospective partners provide realistic figures for the number of aircraft they will take,[135] and then have a contract quickly finalised which holds them to those commitments. Last year we reported the numbers of vessels that the French and Italian navies were apparently demanding under the now abandoned Common New Generation Frigate programme.[136] There was much doubt about such numbers, with a widespread suspicion that their figures were more to do with winning a significant development workshare than with operational requirements or likely final orders. Indeed, we understand that while the Royal Navy requirement remains at 12 (Type-45) destroyers, Italy and France are now seeking a much reduced number of ships.[137] In view of the risks that remain for meeting the conditions set out by the Secretary of State for the MoD's continued commitment to the A400M programme, it seems to us that the flexibility available to extend the lease of the four C-17s for the short term airlift requirement (see paragraphs 36 to 38 below), and even a possible outright purchase, provide a useful safety-net for the MoD in case of delays or failures of the A400M programme, and an incentive to our European partners not to let the programme lose its way.

35. There are significant UK industrial capabilities that hinge on our participation in the A400M programme, including in particular the lead in wing technologies held by BAE Systems and in aero-engines by Rolls-Royce. We understand that as a rule of thumb the UK's aircraft commitment might need to be about a sixth of the total to retain wing manufacturing for the A400M in the UK (final aircraft assembly is likely to be in Spain[138]), so 25 aircraft may not be enough if overall orders prove to be greater than about 155 . It would be perverse to order aircraft purely to bolster UK industry's share of the collaborative work—the sort of tactic indeed that the MoD has sought to prevent its European partners using. Nevertheless, UK wing and aero-engine capabilities are an important part of the economy and the MoD needs to keep the industrial implications of its A400M commitments under close review. The situation may be even less clear-cut for the aircraft's engine, with Rolls-Royce[139] and Snecma[140] consortia in contention. The Secretary of State told the House that the MoD would "make sure that Airbus Military Company takes full account of the merits of the proposal from Rolls-Royce".[141] At this stage it is of course not possible to judge the cost and merits of each firm's proposals, but CDP told us that the MoD would not pay more for its aircraft just to have them powered by the engine of a particular manufacturer.[142] The most likely scenario, he believed, was that the two consortia would come together and using the best capabilities of each[143] produce a combined engine which would be cheaper than they could produce on their own.[144] Cooperation between Rolls-Royce and Snecma to build the A400M engine could be a useful development but only if the result is a better and more cost-effective engine. Whatever engine solution is adopted, however, the decision must be clearly the result of fair competition, it should not be foreclosed by prior development choices, and the costs and benefits underpinning it must be completely transparent, both to the MoD and to this Committee.

THE SHORT-TERM AIRLIFT PROGRAMME

•  Competition terminated; subsequently direct negotiations with potential contractors.

•  A UK national programme.

•  Programme's first approval by the MoD: 1998 (SDR).

•  In-service date: June-December 2001

•  Cost: c £500 million.

36. The package announced by the Secretary of State last month included the decision to lease four C-17s from the middle of next year[145]to meet the MoD's short term requirement for improved airlift—indeed, the original SDR requirement had been expressed in terms of 'four C-17s or their equivalent'. The competition for this programme had been terminated in August 1999, because none of the bids had offered 'the right combination of capability and cost'.[146] In evidence to our Annual Reporting Cycle inquiry in January this year, CDP told us that—

147

37. CDP had told us that to secure the option of using C-17s, discussions had been taken forward with both Boeing (the manufacturer) and the US Air Force (currently the aircraft's only user).[148] Last month, he told us that as a result of those discussions an affordable C-17 lease was now possible, mainly because he had been able to negotiate with the US that the RAF would not have to provide all of the training[149] and support infrastructure which would otherwise remain on the MoD's hands at the end of a lease. The MoD would be able to use US Air Force facilities, and pay only for their use[150] (with some reports suggesting a saving of 60% on such costs).[151] There was some self-interest for the US DoD in helping to make such an arrangement possible, because the UK's C-17s would come off the Boeing production line and fill the gap in the deliveries for the US Air Force that had arisen when the DoD had cancelled orders for their own wider industrial policy reasons.[152] The MoD's £500 million contract[153] allows it to lease the C-17s for up to seven years, but with extensions possible thereafter.[154] Leasing rather than buying should be cheaper, but not if the leasing period is extended for many years (CDP thought nine years, for example, would be getting 'close to the knuckle').[155]

38. The Kosovo campaign highlighted the MoD's currently limited options for meeting significant demands for airlifting our forces and their support, which the MoD's C-17 and A400M programmes will be seeking to address. It also highlighted, however, the risks of relying on the Antonov aircraft, which currently comprise a large part of the civil outsize airlift market. In his evidence to us on our Annual Reporting Cycle inquiry, CDP had explained the MoD's reservations about selecting a contractor who would provide Antonov aircraft for the UK's airlift programmes. These doubts hinged particularly on possible future constraints being imposed on that aircraft's certification clearances, which would in turn be dependent on Russian and Ukrainian government support for the aircraft's use by the RAF on particular missions.[156] In Operation Allied Force, the Russian government was reported as being responsible for having put pressure on Ukraine, who then did not make Antonovs available for the RAF for the duration of the air campaign. (In the event, 84% of the MoD's commercially chartered flights were flown outside the period of the Kosovo air campaign.[157]) Not surprisingly, then, our witnesses told us in our current inquiry that such concerns about the aircraft's assured availability had still not been resolved.[158] Also, although the Antonov had a significant load/range advantage over the C-17,[159] they highlighted other operational factors where the C-17 had advantages over the Antonov.[160]

39. We welcome the fact that the MoD has made a clear decision on its short-term and long-term airlift programmes. This is a real step towards providing the range and the depth of strategic lift that is needed to meet the operational demands envisaged by the Strategic Defence Review. Part of that wider solution is the MoD's programme to triple the Ro-Ro ships it will have available for sealift, and we will be monitoring the developments of that programme. We recognise the compelling reality that providing a capability to carry a worthwhile heavy armoured force by air is a super-power capability and one that would not be a sensible use of the MoD's limited resources (see paragraph 31). This is properly the domain of sealift.

40. In that context, we welcome the selection of the A400M for our long term airlift requirements, as an effective way of rapidly deploying the lead elements of the Joint Rapid Reaction Force cost-effectively. In the meantime, the introduction of the four C-17 aircraft from next year will give us an early and effective boost to our capabilities. At first sight, the MoD's recent decision on the airlift programme potentially adds another two aircraft types to the RAF inventory, with all of the support costs that could potentially entail. What is welcome on this occasion, however, is that (we presume) the leased C-17s will be handed back when the A400Ms come on stream, and in the case of the C-17s a large part of the support infrastructure will be provided by the US (though on repayment terms). Furthermore, as a package these two strands of our airlift capability unusually offer the MoD the best of all worlds. They hold out the prospect of acquiring an effective aircraft for the UK's long term needs, which would improve and standardise this important European military capability, and could provide a possible vehicle for further consolidating the European defence industry. At the same time, the lease of the C-17s gives the Department an insurance policy, in that if the A400M remains on the ground the UK's capability need not. Airbus and our A400M partners would do well to take this on board as they endeavour to take the programme forward.

99 First Report, Session 1984-85, HC 114; Fourth Report, Session 1987-88, HC 476; Ninth Report, Session 1988-89, HC 495; Fifth Report, Session 1996-97, HC 233 Back

100 QQ 147-158 Back

101 Kosovo, The financial management of military operations, Report by the C&AG, Session 1999-2000, HC 530, para 3.11 Back

102 C&AG's report, Session 1999-2000, HC 530, op cit, para 11 Back

103 HC Deb., 20 April 2000, c640w Back

104 Ev p 69, para 11 Back

105 Ev p 69, para 13. MoD Press Notice 437/99 (13.12.99) Back

106 Ev p 65, para 1; Ev p 93, para A5 Back

107 Second Report, Session 1999-2000, op cit, Ev p 92 (Q 502) Back

108 Then termed the 'Future Large Aircraft' Back

109 Ev p 65, para 5 Back

110 Ev p 66, para 9 Back