An Offset Success StoryAn Offset Success Story

Erwin H. BooneErwin H. BooneRegional Manager Industrial Cooperation Regional Manager Industrial Cooperation

Lockheed Martin AeronauticsLockheed Martin Aeronautics

A08-24623

BackgroundBackground

•• In the Late 1980s, the Economy of South Korea Was In the Late 1980s, the Economy of South Korea Was Expanding Based on the Commercial SectorExpanding Based on the Commercial Sector

•• However, the Korean Government Wanted toHowever, the Korean Government Wanted to−− Modernize the Modernize the RoKAFRoKAF Fighter ForceFighter Force−− Develop an Indigenous Aerospace IndustryDevelop an Indigenous Aerospace Industry−− Infuse New Technologies and Capabilities Infuse New Technologies and Capabilities

Into the Defense SectorInto the Defense Sector

•• The Use of Industrial Cooperation / Offset Was Seen The Use of Industrial Cooperation / Offset Was Seen as a Means of Satisfying Multiple Requirementsas a Means of Satisfying Multiple Requirements

Korea Adopted a Strategic Approach to OffsetsKorea Adopted a Strategic Approach to OffsetsKorea Adopted a Strategic Approach to Offsets

LM Aero Partnership With KoreaLM Aero Partnership With Korea

•• The First Procurement of The First Procurement of FF--16s Under the 16s Under the ““Peace Peace BridgeBridge”” Program Began a Program Began a LongLong--Term Relationship To Term Relationship To Develop Advanced Aircraft Develop Advanced Aircraft Capabilities in Korea Capabilities in Korea

•• Korean Industry Built 40 Korean Industry Built 40 Center Fuselages Center Fuselages

•• Besides Besides CoproductionCoproduction, , Offset Also Resulted inOffset Also Resulted in−− Technology TransferTechnology Transfer−− Engineering TrainingEngineering Training

Strategic Approach to Grow the Aerospace IndustryStrategic Approach to Grow the Aerospace Industry

LM Aero Partnership With Korea LM Aero Partnership With Korea (Cont(Cont’’d)d)

•• The Korea Fighter The Korea Fighter Program (KFP) Expanded Program (KFP) Expanded the Relationship To the Relationship To Develop Indigenous Develop Indigenous Aircraft CapabilitiesAircraft Capabilities−− Phase 1: Purchase of Phase 1: Purchase of

12 F12 F--16s Built in Texas16s Built in Texas−− Phase 2: Assembly in Phase 2: Assembly in

Korea of 36 FKorea of 36 F--16s 16s From KitsFrom Kits

More Than 100 FMore Than 100 F--16s Built in Korea Under License 16s Built in Korea Under License

−− Phase 3: Full Production in Korea of 72 FPhase 3: Full Production in Korea of 72 F--16s 16s

•• KFPKFP--II Built 20 Additional Production FII Built 20 Additional Production F--16s in Korea 16s in Korea

KFP Offset ProgramKFP Offset Program

•• Extensive Technology Extensive Technology Transfer to Korean IndustryTransfer to Korean Industry−− More Than 600 Engineers More Than 600 Engineers

Were Trained in the U.S.Were Trained in the U.S.−− Large Volumes of FLarge Volumes of F--16 16

Technical Data Were Technical Data Were Transferred to Korea Transferred to Korea

•• Market Assessments, Market Assessments, Feasibility Studies, and Feasibility Studies, and Preliminary Design of a New Preliminary Design of a New Advanced Jet Trainer Advanced Jet Trainer

KTXKTX--2 (T2 (T--50) Began as a KFP Offset Project50) Began as a KFP Offset Project

Advanced Advanced TrainerTrainer

MultiroleMultiroleFighterFighter

Other Multirole Fighters, Except the FOther Multirole Fighters, Except the F--16, 16, Had a Complimentary Advanced TrainerHad a Complimentary Advanced Trainer

F/AF/A--1818 TyphoonTyphoon MiGMiG--2929 FF--1616

??

Lockheed MartinLockheed Martin’’s Perspectives Perspective

Advanced Jet Trainer Would Compliment FAdvanced Jet Trainer Would Compliment F--1616

• Capability Gap Between RoKAF’s Jet Trainers and Frontline Fighters Continues To Increase

• Operational Transition Training Time Continues To Increase

Current Advanced Jet Trainers Current Advanced Jet Trainers on the Market Lack . . . on the Market Lack . . .

•• Aero PerformanceAero Performance•• Modern Glass CockpitModern Glass Cockpit•• Digital Flight ControlsDigital Flight Controls•• StateState--ofof--thethe--Art AvionicsArt Avionics•• Training Sortie DurationTraining Sortie Duration

. . . Needed To Bridge the Gap. . . Needed To Bridge the Gap

F-4F-5E/F

F-16Blk32

KFPF-16Blk52

F-15K

FXX

BasicPrimary

F-5BT-38Hawk

Capability Gap

CurrentTrainers

Fighter Aircraft

Republic of Korea Air Force SituationRepublic of Korea Air Force Situation

KAI Proprietary Information

Market PotentialMarket Potential

• Study of 50 Country’s Requirements Over Next 25 Years• Replacement of Jet Trainer and Light Combat Aircraft

Significant Number of Aircraft Need To Be ReplacedSignificant Number of Aircraft Need To Be Replaced

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 25 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 300 21 22 23 24 25 26 27 28 29 30

Ann

ual A

ircra

ft R

epla

cem

ent N

eeds

Ann

ual A

ircra

ft R

epla

cem

ent N

eeds

350350

300300

250250

200200

150150

100100

5050

00

AJT / FLI – Advanced Jet Trainer / Fighter Lead-InLCA – Light Combat Aircraft

Market Studies Led to LM InvestmentMarket Studies Led to LM Investment

Investment Based Upon Sound Business, Not OffsetInvestment Based Upon Sound Business, Not Offset

19881988 19901990 19921992 19941994 19961996 19981998 20002000 20022002 20042004 20062006 20082008 20102010

Korean Fighter ProgramKorean Fighter Program

KFPKFP--IIII

• F-16 Licensed Production• T-50 Additional Capabilities Studies• T-50 Marketing Studies

• F-16 Licensed Production• T-50 Additional Capabilities Studies• T-50 Marketing Studies

KTX-2 T-50 FA-50

• F-16 Center Fuselage Production• Training / Tech Transfer•• FF--16 Center Fuselage Production16 Center Fuselage Production•• Training / Tech TransferTraining / Tech Transfer

• F-16 Coproduction• F-16 Licensed Production• KTX-2 Feasibility Studies• Embedded Training Studies• Advance Trainer Market Studies

•• FF--16 Coproduction16 Coproduction•• FF--16 Licensed Production16 Licensed Production•• KTXKTX--2 Feasibility Studies2 Feasibility Studies•• Embedded Training StudiesEmbedded Training Studies•• Advance Trainer Market StudiesAdvance Trainer Market Studies

Lockheed MartinLockheed MartinInvestmentInvestment

20122012

FF--16 Peace Bridge16 Peace Bridge

Funding and InvestmentFunding and Investment Work ContentWork Content

TT--50 Is an International Program50 Is an International Program

55%55%

44%44%

OthersOthers1%1%

70%70%

13%13%

17%17%

FullFull--Scale Development Program Value of $2.1 BillionScale Development Program Value of $2.1 Billion

Korea Aerospace IndustriesKorea Aerospace Industries•• Prime ContractorPrime Contractor•• Aircraft Design and IntegrationAircraft Design and Integration•• Major Component FabricationMajor Component Fabrication•• MateMate--ThruThru--DeliveryDelivery

LM AeroLM Aero•• Investor and Principle Investor and Principle

Subcontractor in FSDSubcontractor in FSD•• Flight Control, Avionics and Flight Control, Avionics and

Wing DevelopmentWing Development•• Technical AssistanceTechnical Assistance

Aerospace Industry LeadersAerospace Industry Leaders

Republic of KoreaRepublic of Korea•• Government: Funding and OversightGovernment: Funding and Oversight•• RoKAF: Program Manager, Flight RoKAF: Program Manager, Flight

Test, User, Test, User, Subject Matter Subject Matter ExpertsExperts

TT--50 Team50 Team

Dedicated To Providing the WorldDedicated To Providing the World’’s Best Jet Trainers Best Jet Trainer

MarionComposites

RockwellBFGoodrichAerospace

Established Structure for WorldEstablished Structure for World--Wide MarketingWide Marketing

Joint Marketing AgreementJoint Marketing Agreement

•• KAI and LM Aero Signed a Joint KAI and LM Aero Signed a Joint Marketing Agreement (JMA) in Marketing Agreement (JMA) in November 2000November 2000–– KAI Responsible for Marketing KAI Responsible for Marketing

TT--50 in Korea50 in Korea–– LM Aero Responsible for LM Aero Responsible for

Marketing TMarketing T--50 in U.S. 50 in U.S. –– KAI / LM Jointly Market KAI / LM Jointly Market

TT--50 Internationally50 Internationally

Program StatusProgram Status

• Phase I (Preliminary Design)Completed December 1995

• Phase II (Full-Scale Development)October 1997 ~ December 2005

• Phase III (RoKAF Production) December 2005 ~ 2015

• Phase IV (International Sales)

Production

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 1110

PreliminaryPreliminaryDesignDesignPhasePhase

First FlightFirst FlightAug 2002Aug 2002

First DeliveryFirst DeliveryDec 2005 Dec 2005

RolloutRollout31 Oct31 Oct

OMLOMLBridgeBridge

ProgramProgramCDRCDR

PreliminaryDesign

Full-Scale Development

DesignDesign

DevelopmentDevelopment

ProductionProduction

1312 14 15

FullFull--Scale Development Scale Development Program StatusProgram Status

•• Flight Test ProgramFlight Test Program–– Four Flight Test AircraftFour Flight Test Aircraft–– 1,411 Sorties Flown1,411 Sorties Flown

•• Ground Test ProgramGround Test Program–– Static Loads Testing CompletedStatic Loads Testing Completed–– Second Lifetime Durability CompletedSecond Lifetime Durability Completed–– Environmental Testing CompletedEnvironmental Testing Completed

•• Integrated Logistics Support (ILS) and Integrated Logistics Support (ILS) and GroundGround--Based Training System (GBTS)Based Training System (GBTS)–– Developed Simultaneously With Developed Simultaneously With

TT--50 Aircraft50 Aircraft–– Initial Systems Delivered To Support Initial Systems Delivered To Support

RoKAF OperationsRoKAF Operations

Development Program Completed!Development Program Completed!

•• Initial Production ContractInitial Production Contract–– Signed December 2003Signed December 2003–– Delivered All 25 AircraftDelivered All 25 Aircraft

•• FollowFollow--On Production ContractOn Production Contract–– Signed October 2006Signed October 2006–– 47 Aircraft47 Aircraft

•• ““Black EagleBlack Eagle”” Aerial Aerial Demonstration TeamDemonstration Team–– 10 Additional Aircraft10 Additional Aircraft–– Contract Signed March 2008Contract Signed March 2008

•• FAFA--50 Light Attack Variant50 Light Attack Variant–– 60 Aircraft (Future)60 Aircraft (Future)

Production Program StatusProduction Program Status

RoKAF Production Program on ScheduleRoKAF Production Program on Schedule

TT--50 Growth50 Growth

One Aircraft for Both Trainer and Light CombatOne Aircraft for Both Trainer and Light Combat

•• TrainerTrainer–– AJT / LIFTAJT / LIFT–– WSOWSO–– CompanionCompanion–– Aggressor / DissimilarAggressor / Dissimilar–– Pilot CurrencyPilot Currency

•• Light CombatLight Combat–– Homeland DefenseHomeland Defense–– Close Air SupportClose Air Support–– ReconnaissanceReconnaissance

900+ Aircraft Potential Worldwide Through 2030900+ Aircraft Potential Worldwide Through 2030

•• ROKAF: 100ROKAF: 100––300300

•• International: 600+International: 600+

Market PotentialMarket Potential

KTXKTX--2 / T2 / T--5050

Lockheed MartinLockheed Martin

KFP-1Offset

KFP-2Offset

T-50Development

KAIKAI International SalesInternational Sales

WorkWork--shareshare

T-50Offset

InternationalInternationalCustomersCustomers

International OffsetInternational Offset

TT--50 Offset Evolves50 Offset Evolves

Preparing Offsets to International CustomersPreparing Offsets to International Customers

Questions?Questions?