"There are those that see JSF as the last manned fighter. I'm one that's inclined to believe that."
-- Adm. Mike Mullen, former chairman of the U.S. Joint Chiefs of Staff
"[The F-35] almost certainly will be the last manned strike fighter aircraft the Department of the Navy will ever buy or fly."
-- Ray Mabus, current Secretary of the Navy
For nearly a decade now, we here at The Motley Fool have been covering the rise of unmanned aerial vehicles -- flying killer robots -- for investors in the defense industry. We want to know, and want you to know, who makes these "drone" aircraft, who's leading the industry, and who's earning the most profit from it. We've watched with special interest as UAVs have evolved from unarmed surveillance platforms to weapons capable of launching attacks on ground targets.
Most recently, we've been absolutely riveted by a groundbreaking new U.S. Navy program to develop a true robotic fighter jet, full-size and capable of performing real fighter jet missions: the X-47B.
Introducing the X-47B
Developed over a course of years, Northrop Grumman's (NYSE:NOC)X-47B Unmanned Combat Air System (UCAS) is roughly the same size as a (piloted) F-16 fighter jet -- shorter, lighter, with less tail, but wider wings. It cost the U.S. Navy upward of $744 million to build its X-47Bs (they have two), or more money than the projected unit cost of the Air Force's new Long-Range Strategic Bomber.
Unlike the LRS-B, though, which is little more than sketches on a notepad, the X-47B is a fully vetted, operational, and successful stealth fighter drone, and one big enough that you can imagine it dogfighting other fighter jets on its own one day. According to the Navy, X-47B has conducted "37 deck touchdowns, 30 precise touch-and-go landings and multiple catapult launches, arrested landings and planned autonomous wave-offs." Last month, X-47B successfully docked with an aerial tanker and refueled in-flight.
So of course... the Air Force wants to get rid of it.
No good deed goes unpunished
According to our friends at Flightglobal.com, starting up the UCAS project cost the Pentagon some $635 billion. Subsequent contracts in 2013 and 2014 gave Northrop Grumman a further $46 million, and a June 2014 award pushed the total past $740 million.
This investment bought the Navy two X-47B drones, and years of test flights generating data that will be used to develop an even newer drone, the Unmanned Carrier-Launched Airborne Surveillance and Strike (UCLASS) aircraft. (Northrop is bidding to build this one as well, as are rivals Lockheed Martin (NYSE:LMT), Boeing (NYSE:BA), and privately held General Atomics.)
The Navy expects to spend nearly $2.7 billion developing UCLASS, and hopes to have an operational aircraft ready by 2020. In the interim, the Navy will have no operational combat drone to experiment with.
And yet, the X-47B still has a lot of life left in it. According to USNI News, both of Northrop's X-47B aircraft have flown only about 20% of the flight hours they were built to endure. They've got literally years of life left in them. Years in which Northrop could, in theory, be paid to continue test flights. But rather than continue to experiment with the aircraft -- or put them in operational use -- the Navy plans to retire both aircraft to Davis Monthan Air Force Base in Arizona.
A colossal waste of money -- and not for the first time
With 80% of their useful lifespan still ahead of them, this sounds like a huge waste -- $595 million worth of potential service life consigned to the Air Force's "boneyard." But it isn't the first time the Pentagon has taken a successful drone program and tossed it onto the proverbial ash heap of history.
Last year, we told you about the U.S. Marine Corp's decision to wind down Lockheed Martin's successful K-MAX drone helicopter program after several years' successful service in Afghanistan -- also for no good reason. Lockheed's drones had successfully completed 1,950 sorties, flown 2,150 flight hours, and delivered 4.5 million pounds of cargo to U.S. troops in the field, and were still flying just fine. The Pentagon shut down the program regardless.
Second verse, same as the first?
Granted, there's movement afoot to stop this waste. Senate Armed Services Committee Chairman John McCain has criticized the Navy's decision to retire X-47B, pointing out, "Our nation has made a sizable investment in this demonstration program to date, and both air vehicles have consumed only a small fraction of their approved flying hours."
If McCain wins this fight, X-47B could still be saved -- and taxpayers' investment in it be preserved. Granted, this would also probably mean a few tens of millions of dollars in follow-on contracts awarded to Northrop Grumman, to conduct further testing through the 80% of the airframe's remaining lifespan. But that would be a small cost to pay to avoid throwing away the nearly $600 million worth of value left in the X-47B.
Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 359 out of more than 75,000 rated members.
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