Boeing (NYSE: BA) rolled out on Tuesday a jet-powered drone that will employ artificial intelligence in Australia’s air defense.
The Loyal Wingman aircraft is the first of three prototypes for the Royal Australian Air Force. The Chicago-based aerospace company calls the delivery a major milestone.
Australian Prime Minister Scott Morrison said: “This is a truly historic moment for our country and for Australian defense innovation. The Loyal Wingman will be pivotal to exploring the critical capabilities our Air Force needs to protect our nation and its allies into the future.”
Taking the Lead in Revenues
The delivery of the 38-foot-long drone comes as Boeing says its defense business will exceed its commercial business this year.
In its first-quarter earnings report, Boeing said last week that revenues in the defense division were $6 billion, down from $6.6 billion in Q1 2019. The commercial aircraft division saw its revenues sink to $6.2 billion in Q1 2020 from $11.8 billion a year ago.
In 2019, defense was 45% of Boeing’s business, chief executive David Calhoun said last week in a call with analysts. “This year, of course, the defense business will probably be bigger than the commercial business,” Calhoun said, “and that will probably hold for a little while, of course, with these new rates and deliveries. So that’s an important part of our company that I’m not sure a lot of people reflect.”
Pressure on Commercial Division
Boeing’s commercial business has suffered a one-two punch. Design problems grounded the 737 MAX airliner after two fatal crashes and the COVID-19 pandemic has devastated the passenger airline industry.
Warren Buffett announced this week that Berkshire Hathaway (NYSE: BRK.A) is selling its airline stocks because the coronavirus lockdown has changed commercial air travel “in a major way.” This may reduce demand for commercial jets.
It may not help that The Seattle Times won a Pulitzer Prize this week for its coverage of the 737 MAX issues, reminding travelers and investors of the crisis.
The 737 MAX has been grounded worldwide since March 2019 after two crashes killed 346 people in Indonesia and Ethiopia.
“We have assumed that we will resume 737 MAX aircraft production at low rates in 2020 as timing and conditions of return to service are better understood,” Calhoun said in the analysts call. “We expect to gradually increase the production rate to 31 during 2021 with further gradual increases that correspond with market demand. The slower production rate ramp-up reflects commercial airline industry uncertainty due to the impact of COVID-19, and the production rate ramp profile is also affected by the pace of delivery of our stored aircraft.”
The Loyal Wingman “uses artificial intelligence to extend the capabilities of manned and unmanned platforms,” Boeing said in a news release. It is the first Boeing aircraft to be designed, engineered and manufactured in Australia in more than 50 years. And it marks the company’s largest investment in an unmanned aircraft outside the United States.
24/7 Wall St.The ‘Unmanned Teaming Concept’
The prototypes for the RAAF are the basis for the Boeing Airpower Teaming System being developed for the global market. The drones will “use artificial intelligence to fly independently, or in support of manned aircraft, while maintaining safe distance between other aircraft,” Boeing’s website says. By operating alongside manned aircraft they can extend air combat capabilities at a lower cost than adding additional planes with pilots.
“We look forward to getting the aircraft into flight testing and proving out the unmanned teaming concept,” said Kristin Robertson, vice president and general manager of autonomous systems for Boeing Defense, Space & Security. “We see global allies with those same mission needs, which is why this program is so important to advancing the development of the Boeing Airpower Teaming System.”
The prototype will undergo ground testing before taxiing and taking its first flight later this year.
Other Boeing unmanned aircraft systems include the MQ-25 that will be used as an unmanned refueling tanker.
In the stock market, Boeing was trading down about 1% early Wednesday afternoon. The stock’s 52-week range is $89.00 to $391.00, and the 12-month consensus price target is $157.22.
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