UNMANNED VTOL SYSTEMS: An Assessment of VTOL UAS Adoption in the Defence & Security Sector

50 Years of Growth, Innovation and Leadership

UNMANNED VTOL SYSTEMS
An Assessment of VTOL UAS Adoption in the Defence & Security Sector

A Frost & Sullivan
White Paper

Bruno Mucciolo and
Aman Pannu

www.frost.com

Frost & Sullivan

1. THE CONTEXT .......................................................................................................3

1.1 Initial considerations of the UAS market..................................................3

1.2 Why are we writing on VTOLs? .................................................................3

1.3 Frost & Sullivan expertise in the Unmanned Systems Market..................3

1.4 Objectives ..................................................................................................4

2. INTRODUCTION: WHY VTOL ................................................................................4

2.1 Frost & Sullivan’s views on the current and future market of the UAS....4

2.2 The current market for VTOL UAS ..........................................................10

3. AN ASSESSMENT: ADOPTION OF VTOL IN DEFENCE & SECURITY.... ..............15

3.1 Operational factors impacting adoption of VTOLs ..................................15

3.2 Technical challenges and benefits in successful deployment of VTOLs.....19

3.3 Critical Success Factors: Potential business models for VTOLs ...............19

3.4 Benefit Analysis of VTOL UAS .................................................................22

4. CONCLUSION........................................................................................................23

4.1 Summary analysis of supply and demand for VTOLs ...............................23

4.2 Market recommendations ........................................................................24

4.3 Next Steps: Potential Roadmap of VTOL UAS .........................................25

5. GLOSSARY .............................................................................................................26

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CONTENTS

Frost & Sullivan

1. THE CONTEXT

1.1 Initial considerations of the UAS market

Mission commanders immaterial from where they act, in-theatre, base camp or
mission HQ thousands of miles away, have one common dependence factor-
‘Information’. Enhanced situational awareness, ability to conduct missions miles
from its borders, and precision attack capabilities are some of the norms of today’s
warfare. This type of force projection is primarily delivered using unmanned
technologies, whether it is the original unmanned system, the satellites, or the latest
unmanned aerial systems (UAS). With significant flight hours under its belt, the UAS
are fast becoming a must-have item on the military inventory, and bar the regulatory
challenges, the same could be true for the security domain.

1.2 Why are we writing on VTOLs?

NATO categories defining the unmanned platforms include- fixed-wing (FW) UAS,
rotary wing UAS (VTOL), and the morphing UAS (platforms that can hover and fly).
Frost & Sullivan while researching the UAS market over the last decade, identified
the industry’s confidence in the overall capabilities of the FW UAS technology and
its applications. However, when it comes to the VTOLs there is much debate, and
dare we say confusion with both end-users and the industry, in defining the
technical and operational benefits of the VTOLs - independent, in comparison, and
complimentary of substitutes and alternates such as the FW UAS, and the
traditional manned platforms. For this reason Frost & Sullivan has undertaken the
challenge to research the existing perception of the industry, and analyse the
anticipated potential for VTOLs across the defence and security domains.

1.3 Frost & Sullivan expertise in the Unmanned Systems Market

Frost & Sullivan is a market intelligence leader on the UAS domain, with over seven
years of in-depth coverage of the market dynamics and evolution. Our Global UAS
Programme, part of the Aerospace, Defence & Security practice, has developed
thorough leadership analysis on the market for military UAS - from HALE to
Tactical UASs - as well as the emerging civil market. As an ongoing programme, Frost
& Sullivan has a dedicated team of analysts covering current and future market
opportunities in the UAS sector, monitoring the evolution of this ever-changing
market.

As per its day-to-day activities, Frost & Sullivan has supported its main clients from
the Defence and Security sector with detailed assessment of the market to support
their strategic decisions and investment options.

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Frost & Sullivan

As part of our recognised brand in the field, Frost & Sullivan has worked with the The growing
European Commission, EDA and other public entities by providing analysis on the dependence of defence
UAS market in order to increase awareness of the benefits of using the technology, and security end-users
to facilitate initiatives related to regulations for the civil UAS sector, and to define on real-time
optimal strategies for governments and private sector on how to invest in the information aimed at
unmanned idea. improving situational
awareness for
informed-effective
1.4 Objectives
decision making is
driving the adoption
• Increase market awareness of VTOL UAVs of the UAS across
• Explore the challenges in successful adoption of VTOL technologies from multiple theatres and
an end-user and industry perspective missions.
• Provide tangible assessment of the target applications for the VTOLs

2. INTRODUCTION: WHY VTOL

2.1 Frost & Sullivan’s views on the current and future market of the UAS

• Frost & Sullivan’s assessment of the global UAS market

26th June 1935, Hampshire, United kingdom, the first unmanned plane made its first
public flight debut. Used for anti-aircraft gunnery practice, the radio controlled
Tiger Moth bi-plane was nick-named ‘Queen Bee’. Three-quarters of a century later
the Queen Bee has given way to a beehive of unmanned aerial systems (UAS)
deployed across a range of mission critical applications including surveillance,
reconnaissance, earth observation, and target acquisition and elimination. However,
it is in the last ten years that the unmanned systems have experienced a quantum
leap in both, technology development and adoption.

Despite the early mover advantage of the United Kingdom / Europe, it is Israel and
the United States who took the lead in the unmanned systems domain. Although,
the experience of using mature unmanned systems on operational deployment has
dramatically improved the understanding of the usefulness of UAS in Europe and
Asia Pacific, and this in turn is driving a steady growth rate across the military
segment. The growing dependence of defence and security end-users on real-time
information aimed at improving situational awareness for informed-effective
decision making is driving the adoption of the UAS across multiple theatres and
missions. The success of UAS in providing this real-time information to military
commanders has contributed to both mission effectiveness and in protecting
personnel. It is UAS effectiveness in these roles, which has encouraged most
advanced militaries (and now emerging) to fully commit to the use of UAS and this
is expected to drive rapid market growth during the next ten years.

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Frost & Sullivan

Not purely driven by the diminishing government spending, albeit an important
catalyst, the industry have moved beyond pure military sales and have shown a
significant amount of interest in potential UAS applications in civil and commercial
markets. In line with the prevailing trends across the defence sector, the military
has acted as a first adopter of UAS and has demonstrated their utility, encouraging
the idea of the use of UAS in a large number of non-military applications ranging
from law enforcement and border security to earth observation and
communications. Historically, industry has often been accused of unrealistic
optimism in expecting the rapid emergence of a viable civil and commercial UAS
market. However, at the same time industry has played an effective advocacy role in
driving initiatives in the area, particularly in Europe and to some extent North
America.

• Summary of key drivers and restraints

Whilst the military end-users in the developed countries have now battle tested the
UAS, and better understand its capabilities and limitations, and more importantly
mission types, their counterparts in emerging countries, including many western
nations are unaware and somewhat skeptical of the real benefits of UAS. This
skepticism is not always driven by lack of trust for the technology or unavailability
of funds. Other restraints such as the force demographic, existing infrastructure,
training, regulations, and even lack of established local industry dissuade end-users
from actively adopting UAS solution, as an alternate or compliment to existing
solutions.

Figure 1: Drivers and Restraints Impacting the UAS Market

Restraints

• Troop Withdrawl
• Defence Spending
• Regulations & Legislations
• -ve End-user Perception

Drivers

• Force Multiplier
• Industry & Innovation
• New Applications & Markets
• +ve End-user Perception

Source: Frost & Sullivan analysis

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Frost & Sullivan

Force Multiplier vs. Troop Withdrawal

As the battle in Afghanistan comes to an end, at least from active battle troop’s
point of view, the war is not over. Industry and geo-political experts have indicated
a need for NATO forces to be actively support the Afghan troops in combating the
militant elements from taking over the state. The withdrawal of troops around
2014-2015, is expected to only further enhance the need for deploying UAS to
provide ongoing situational awareness, and to have battle ready engagement where
required. UAS have proven to be a force multiplier for the NATO forces, and it is
expected that UAS will continue to be fielded within this theatre in the foreseeable
future. Frost & Sullivan research indicates an increase in long-endurance platforms,
such as MALE and HALE, with deployment of TUAV (and smaller) to support any
expeditionary mission requirements.

Industry & Innovation vs. Defence Spending

The Global Defence Expenditure in 2010 was around $1,630.00 billion, which is an
increase of 1.3 percent when compared to that of 2009. Interestingly, this is the
slowest annual increase since 2001. The rate of increase in the United States
defence spending had slowed down to 2.8 percent in 2010, while the average annual
increase between 2001 and 2009 was 7.4 percent. In Europe, defence spending in
2010 fell by 2.8 percent. However, at the same time the military spending in Asia
continues to grow rapidly. In the Middle East, the defence expenditure in 2010
witnessed a growth of 2.5 percent when compared to 2009. The economic
recession has taken a toll on the Western nations and will force them to plan for
smarter expenditures in the upcoming days. Meanwhile, the aspirations of the
emerging economies are expected to drive the defence market in the region.

Over the last decade, the UAS have become weapons of choice in most military
campaigns. The military forces have understood and acknowledged the need for
unmanned aerial vehicle capability. In these challenging times the end-users are
looking for innovative ways and technologies to maintain full operational
capabilities, and to meet the dynamic mission requirements of tomorrow. Industry
has proactively responded with innovation in technology aimed at versatility of
platforms and applications, and improving efficiency, along with introduction of new
business models to support and sustain the end-users, which is driving the adoption
of UAS. Procurement models such as Platform Lease, Contracting for Availability
(CfA)/ Performance Based Logistics (PBL), and Total Solution have given end-users
the flexibility to adopt such solutions despite the given challenges. Frost & Sullivan
research indicates that the increasing reliance on UAS complemented with the
industry efforts will limit the impact of budget cuts on UAS.

New Applications & Markets vs. Regulations & Legislations

Research indicates that the market potential on the civil side is considerably larger
than the military sector in the long term. UAS are being considered for active role
in maritime patrolling, surveillance, fire monitoring and fighting, HAZMAT
monitoring, disaster management, search and rescue, counter drug operations,
urban and sub-urban law enforcement, conflict monitoring, environmental and
scientific missions, agriculture, fisheries, and many other applications. However, at
the moment there are major constraints: lack of a central procurement authority
for government applications; absence of legislation and regulations for safe flight in
integrated airspace; dispersed and highly heterogeneous potential customer base; to
name but few.

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Frost & Sullivan

In addition, initiatives to promote and facilitate the use of UAS in non-military
applications have been relatively un-coordinated and ad-hoc in nature. Over the last
The ultimate decision three years work has begun in earnest to kick-start the civil UAS market through a
will be dependent on number of initiatives at national and European level, and in cooperation with
the type of mission military users. These initiatives are primarily aiming to deal with the key problem
requirements, the which is the lack of a framework / rules governing the flight safety on the one hand,
interoperability with and insertion of civil and military UAS in non-segregated airspace on the other.
However, some rules have been put in place. On the civil side, airframes with a mass
existing systems, and
of more than 150 kilos are now required to obtain airworthiness certification at a
the end-users ability European level from the European Aviation Safety Agency (EASA). On the military
to operate such side, the French Military Procurement Agency (DGA) have also developed
systems. Unmanned Aerial Systems Airworthiness Requirements for fixed-wing UAS, which
has been adopted as the basis of NATO’s STANAG 4671.

+ve End-user Perception vs. –ve End-user Perception

End-user perception is driven by varied factors, as indicated earlier. The adoption of
UAS is restrained due to economic, political, social, and technological factors. Most
NATO nations have accumulated significant mileage in flight heritage for UAS, and
are actively deploying or are in the process of adopting the UAS as an integral part
of the defence strategy. However, countries that are not as combat active as the
NATO allies, and others that lack the technical and financial prowess of developing
such systems, have not fully embraced the benefits of UAS. As a result there are two
force types today, ones that have UAS capability, and the ones that do not.
However, daily headlines of the effectiveness of such systems in theatre is not going
unnoticed, and countries across the globe including India and China understand the
need to go on a war-footing to equip the national forces with UAS capabilities.
Another aspect that the end-users are progressively contemplating and finding
solutions for is to find the best fit UAS for conducting specific missions. The
emergence of VTOLs is driven by such an approach wherein the FW UAS are limited
to areas of operation due to the required landing and take-off logistics. The ability
of VTOLs to be launched in almost any terrain, static or mobile, has provided the
impetus to explore and introduce VTOL UAS in the mission inventory.

Research indicates that an active adoption of UAS across defence and security
applications needs a combination of end-user acceptance and industry engagement
besides the PEST factors discussed above. Speaking with various industry
stakeholders indicates that end-users widely acknowledge the success of UAS, and
are actively exploring options that are best suited for their own forces. The ultimate
decision will be dependent on the type of mission requirements, the interoperability
with existing systems, and the end-users ability to operate such systems.

• Views of the Future

The major military forces in the world have understood and acknowledged the need
for UAS capability. Though many nations have strong UAS aspirations, availability of
funds reflects the actual market revenues.

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Frost & Sullivan

Figure 2: Total Military UAS Market: Unit Procurement and Revenue
Forecast (Planned / Anticipated Programs)

8,000 250

7,000
200
Revenue ($ Million)

6,000

5,000
150

Units
4,000

3,000 100

2,000
50
1,000

0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
4.547.6 6,082.0 5,482,0 6,041.0 6,253.0 6,024.0 5,715.0 5,679.0 5,818.0 6,969.0 7,314.0
103 153 178 173 178 177 181 168 190 220 224
Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan analysis

Frost & Sullivan’s research indicates the following demand trends for UAS globally;

• The spending by the United States for mid- and large-sized UAS will
decrease from $5.09 billion in 2011 to $2.35 billion in 2020. This
reduction in spending by the United States is expected to slow down
the global UAS market which will be partly compensated by the
European and Asian markets.

• Asia Pacific and European markets will witness a growth rate of 26.3
percent and 20.3 percent, respectively, from 2010 to 2020.

• Competition in MALE UAS segment will be intense in Europe, as there
is a trend of increasing collaborations to develop such capabilities.

• The Asian market has a strong immediate demand for high altitude, long
endurance (HALE) and medium altitude, long endurance (MALE) UAS.
During 2011 to 2020, 41 HALE and 202 MALE UAS are expected to be
procured in the APAC region.

• The Middle East and Latin American markets are largely untapped.
Middle East and Latin American markets are expected to grow at rate of
15.1 percent and 19.3 percent, respectively from, 2010 to 2020.

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Frost & Sullivan

Figure 3: Total Military UAS Market: Growth Position Map, Global,
2010–2020

High

1 Sectors with
highest total
2 growth
4 potential
3
CAGR

1 - APAC
2 - Europe
5
3 - Middle East
4 - Latin America
Low Small Medium Large
(<$15 B) ($15 B - $30 B) (>$30 B) 5 - North America

Market Size

Source: Frost & Sullivan analysis

• Ongoing military operations and force modernisation efforts are the
major drivers for the military UAS market.

• Withdrawal from Afghanistan will have a short-term impact on the UAS
market, as the existing lease agreements will come to an end. However,
a need to sustain situational awareness, geo-political dominance in the
region will demand a rethink of strategy.

• In the long term, withdrawal from Afghanistan will turn into a driver, as
the countries will be able to allocate resources for equipment
procurements.

• The global market for medium and large sized VTOLs is still nascent.
Although ongoing development programmes (and limited in-service) are
gaining traction with the end-users in active deployment of VTOL
systems for niche applications.

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Frost & Sullivan

Figure 4: Total Military UAS Market: Unit Procurement and Revenue
Forecast by Vertical (Planned / Anticipated Programs)

,)+
‘Flexible-Deployable-
Responsive’ surmises
,++ the end-users
perception of VTOL
platforms with an aim
Units

*)+
to deliver specific
mission requirements
*++

)+

+
,+*+ ,+** ,+*, ,+*( ,+*$ ,+*) ,+* ,+* ,+*% ,+* ,+,+

,+ (+ ,% (, ,$ (* (+ ,, (* ,% ,(
! ) ( $ % % %+ %( %+ *+% *, *,
! , ) ( $ *( *+ *+ * * , (+

! ,, ,) )( $% )$ ) )% )+ (, ( $$

Source: Frost Sullivan analysis

2.2 The current market for VTOL UAS

At the time of writing this white paper Frost Sullivan followed about fifteen different
types of VTOL UAS (some deployed, many in advanced development stages), of which
two were fielded within 24 hours of each other. It is essential to note that of these a
significant number are driven by industry led research and development programmes,
a sign of industry’s belief in the technology and potential applications that are
expected to drive demand. While the Fixed Wing (FW) UAS have been widely deployed
within the defence (and security, albeit partially) domain, the Rotary Wing (RW) UAS-
VTOL are yet to have a foothold within these domains. The confusion clouding the
technical ability or complexity of deploying VTOLs to fulfill mission requirements
continues to challenge both, the end-user and the industry.

Frost Sullivan, through this white paper based on primary research conducted
across industry experts and end-users aims to bring forth the drivers and restraints
influencing the successful adoption of VTOLs in-theatre.

• End-user Perception of VTOLs

‘Flexible-Deployable-Responsive’ surmises the end-users perception of VTOL
platforms with an aim to deliver specific mission requirements. End-users indicate
that in time as VTOLs establish proven flight heritage, they will actively participate in
supporting defence and security mission requirements. However, most if not all end-
users foresee the deployment of VTOLs, although essentially in niche mission areas
when compared to the broader scope of FW UAS and other manned platforms.

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Frost Sullivan

VTOLs ability to take-off and land in practically most mission areas gives it the
flexibility to be deployed in situations that demand rapid response. The
expeditionary nature of today’s battles has led to increase in demand for real-time
situational awareness, and operationally responsive equipment. VTOLs have a unique
ability to fulfill this task and support the expeditionary forces of today immaterial
of the terrain. It is this ability to deploy from mobile platforms that has attracted
Naval forces, including Coast Guards to explore the acquisition of VTOLs on board
its fleet. End-users, similar to UAS, look at VTOL as a force multiplier, enabling fleet
commanders to undertake tasks and make decisions in a more informed and
responsive manner. However, end-users are vary of introducing VTOL systems
within the larger battle management system without clearly defining the mission
requirements VTOLs best fit. Research indicates that some of the most important
questions that end-users want the industry to answer are;

- What will the platform be used for?
- How will the platform support a mission?
- What is the value-add: technology, cost, process, efficiency,
applications etc?

A single task such as Anti-Piracy mission may have multiple scenarios and
requirements. The end-user needs will define the capabilities of a VTOL platform-
ISR capable, weaponised or non-weaponised, monitor or engage enemy. Frost
Sullivan research identified an end-user expectation, which proposes that the
industry should focus on concept of operations (CONOPS). This CONOPS should
then be used to develop the platforms, rather than doing it vice-versa, wherein the
capabilities / limitations of platforms define the missions it can be deployed to.

• Industry Perception of VTOLs

An important question to answer for the industry is that are VTOLs an innovation
or an adoption of existing solutions. Interestingly enough this is a chicken and egg
dilemma for the industry. What came (comes) first?

Frost Sullivan research indentified dual approach from the industry in developing
the same solution- an efficient, and easy to use and deploy VTOL UAS. One group
of industry participants are focusing on developing the platform, which would then
be loaded with systems and capabilities that apply to multiple missions. The other
group is focused on developing systems and sub-systems integrated into a platform
solution, which can then be applied to multiple missions. The advocates of the latter
believe that this approach ensures that VTOL capabilities are custom designed to
operate across multiple mission areas. This also takes into consideration the
complexities originating from the deployment of a RW platform, such as vibration,
wear and tear, and noise levels. However, this approach tends to have longer
development cycles and potentially higher development costs, which are critical
success factors in selecting defence and security solutions today.

Independent of the above discussion, the industry perceives that VTOL UAS with its
ability to conduct stop and go missions, capability to hover and focus on a
particular area, and ability to take-off and land in most terrains presents a unique
value proposition for end-users. In the current circumstances where the regulatory
frameworks for integration into the civil airspace are yet to be clearly defined,
VTOLs are considered an apt solution for operating in high risk, segregated
airspace, which requires a responsive solution.

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Frost Sullivan

This includes a potentially high demand for security applications such as law
Frost Sullivan
enforcement, first responder services, fire fighting and monitoring, disaster
management, crowd monitoring and control etc. Despite the progress in technology research indicates that
and platform development, industry acknowledges the need to make further the main end-users for
advances in areas of endurance, platform stability, automatic-mobile landing, and VTOL UAS are
overall efficiency. However, the current platforms are capable to meet the mission military and civil
requirements of today. As VTOL UAS accumulate operational flight hours, the operators, each with
product and technology will continue to evolve to meet the future requirement of
different drivers and
the end-users, a product lifecycle pattern similar to the now experienced FW UAS,
and the more mature manned platforms. challenges.

• Current Estimate of Market Size for VTOLs

The market for VTOL UAS systems is in its early stage. Requirements seem not to
be clear amongst end-users, who mostly are conducting experiments with the
technology today. Technology reliability is still the key factor to convince end-users
of the benefits of VTOL systems, and to assist them to better shape their
requirements. Frost Sullivan research indicates that the main end-users for VTOL
UAS are military and civil operators, each with different drivers and challenges. The
civil domain does not yet represent a real market given airspace regulations and
certification issues. However, once regulations come into place (likely around 2017)
the market will see a major boom. As for the Military / Defence, particularly
developed nations (those who historically adopt new technologies and logically are
initial customers) are today heavily suffering from budget limitations. Research
indicates that Advanced / Modern Armed Forces want to deploy VTOL systems.
However, technical requirements (again reliability as the key factor) are yet to
impress military operators and convince budget holders of its cost-benefits. As
noted earlier, maritime patrol (persistence and tactical surveillance) is the key
application for the military. The table below presents the Frost Sullivan
assessment of the main VTOL applications across market verticals.

Over the period 2011-2020, Frost Sullivan research indicates circa 300 VTOL UAS
units to be inducted across the globe. Defence and Security applications in the Asia
Pacific markets are expected to create a leading demand for VTOL UAS, accounting
for more than a third of the total demand over this decade.

Defence Security

Natural Disaster
Army Air Force Navy Law Fire Fighting Monitoring
Enforcement / Safe Cities

• Border • Climate
Security • Maritime • Border Monitoring
• Convoy Patrol Security • Forest Fires • Aerial
• Persistent Photography,
Protection • Anti-Piracy • Coastguard
Surveillance Mapping and
• Force • Search • Emergency • Urban Fire Surveying
Protection Rescue Rescue (e.g. Tactical Support
• Recce • Seismic Events
(bases) Support Mountain
• Major Incident
• Counter-IED Rescue) and Pollution
Monitoring


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Frost Sullivan

Figure 5: VTOL UAS Applications Overview for Defence Security
The volatility of the Middle Eastern region, and the need to protect the critical oil
reserves, boosted by the recent relaxation of US regulations in selling unmanned
systems to the region has lead to the procurement drive for UAS. Research
indicates a move towards procurement of VTOL UAS aimed at maritime patrol and
law enforcement requirements.

Withdrawal from Afghanistan will temporarily temper the demand for procurement
of new technologies / products such as the VTOL UAS in both US and European
markets. However, this is mainly expected to last over the current decade, which
can be considered as platform validation phase for VTOLs across multiple end-users
and applications.

Figure 6: Total VTOL UAS (Military) by Region (cumulative units), Global,
2011-2020

+,) ,$

$**)

$*
()

!'# #' !'# !'#

#'' '
#


The VTOL UAS markets in the US and Europe are expected to experience a boom
post 2020, when the existing fleet of UAS is expected to be upgraded or changed,
giving way for a mixed fleet of FW and RW UAS complimenting the manned
platforms.

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Frost Sullivan

Figure 7: Total VTOL UAS (Militar y) by Region (Units- Planned /
Anticipated Programs), Global, 2011-2020
The experience gained
()
in the new markets is
expected to contribute
(+
towards the validation
and eventual adoption
,) of VTOL UAS in the
VTOL UAS (units)

wider markets.
,+

*)

*+

)

+
,+** ,+*, ,+*( ,+*$ ,+*) ,+* ,+* ,+*% ,+* ,+,+
!'# #' !'# !'#

#'' '
#


Please note that the above forecast includes planned and anticipated UAS systems as
of 2011. The forecast considers VTOL UAS within the following classifications;

- Range (km): up to 200
- Altitude (ft): up to 20,000
- Endurance (hrs): 5-8
- Weight (kg): up to 1430

The current market might present a fragile outlook, with most VTOL solutions in
development stage. Frost Sullivan anticipates that the industry and the end-users
would overcome the interim challenges - technical, regulatory, and operational over
this decade. Frost Sullivan envisages that the desire to modernise the armed
forces, and plans to enhance the in-country capabilities, especially in emerging
countries such as India and Brazil will drive procurement of VTOL UAS in both
defence and security domains. Recent procurements in the Middle East indicate, in
the short to midterm, a greater potential for uptake of such technologies, in
comparison to the western nations.

This is mainly due to the ongoing economic crisis, and somewhat higher importance
to regulatory frameworks in the western nations. The experience gained in the new
markets is expected to contribute towards the validation and eventual adoption of
VTOL UAS in the wider markets.

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Frost Sullivan

The figure below presents the global demand for VTOL UAS in the long-term.

Figure 8: Global Demand Map for VTOL UAS

High Demand Markets
( 20 VTOL Systems)
Medium Demand Markets
(5 20 VTOL Systems)
Low Demand Markets
( 5 VTOL Systems)


3. AN ASSESSMENT: ADOPTION OF VTOL IN DEFENCE SECURITY

3.1. Operational factors impacting adoption of VTOLs

Prohibitive Frameworks Impeding Adoption

When it comes to regulations and operational standards, including integration into
the Civil airspace, VTOLs are up against similar challenges to that of the FW UAS.
Current regulatory frameworks limit the deployment of UAS in most missions
pertaining to security domain. VTOLs could have a slight advantage in this context
wherein they are deployed in localised areas, in a segregated space. In context of
Military operations, where most missions are within segregated space, the impact
of regulations is somewhat limited. However, defence and security applications in
some regions interface seamlessly, especially when considering border surveillance
and coastal patrolling. In such markets it is crucial that the key regulations are
defined prior to adoption of UAS into active service.

In consideration of these limitations, most civil applications are, as of today, based
on VLOS (Visual Line of Sight) missions. However, it is anticipated that the ongoing
industry efforts, mostly in Europe and the US, will lead to much defined regulatory
framework when it comes to operating UAS in civilian airspace. Frost Sullivan
research indicates a potential adoption of such guidelines around 2017. When it
comes to certification, the ongoing work within this area is promoting the
adoption of most (relevant) certifications that are applicable for manned
platforms. However, when considering the UAS systems, the certification process
becomes more complicated.

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Frost Sullivan

The complexity is primarily driven by the need to certify the total system
(platform, data links, and control station), only then a UAS is certified to fly. The
time and cost effort involved can make the UAS solution prohibitive for both the
industry and the end-users. Frost Sullivan research indicates a high level of
optimism within the industry when contemplating the impact of defined regulations
and certifications on the adoption of VTOLs within the civil security domain.
However, the end-users are somewhat skeptical of the specific impact for VTOLs,
although they anticipate a larger participation of UAS (RW / FW) post
implementation of defined regulations. In the chart below Frost Sullivan
summarises the potential roadmap for defining and implementing regulations and
certifications for UAS, and the principal factors governing the evolution of the
European civil UAS market.

Figure 9: Principal Factors Governing the Evolution of the European
Civilian UAS market

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
and beyond
ATM and Airworthiness Certification (EUROCONTROL and EASA)
Evolutionary development of a regulatory framework governing usage of civilian UAS in European controlled airspace (based on MASPS,
then MOPS produced from EUROCAPE’s WG-73 and RTCA’s SC-203 recommendations)

Ad hoc Exemptions on demand are replaced by the phased introduction of Regulation (EUROCONTROL)
standards and regulations, each with limited coverage, as and when these are Roll-out of comprehensive
agreed and become available legislation which emerges from
the above recommendations
No national, European nor global Radio Frequency (RF Spectrum and Bandwidth Allocation (ITU)
strategy or framework for UAS RF UK only = Ofcom. Initial discussions and proposall towards agreement on spectrum allocation of
allocation. (Local, ad hoc RF bandwidth for European Civillian UAS at ITU conference (WCF) in 2011. Availability of
allocations on demand) spectrum possible from 2015, meanwhile EDA looking at an interim solution for Europe

Technology (EDA, EUROCAE)
EDA project to develop working SA, datalinks, including for C2 etc.

Emerging Propulsion and Materials Technologies
Introduction of fuel cells and revolutionary aerodynamics such as variable aerofoil and increasing use of lighter,
composite materials


VTOL manufacturers for starters should ensure that the systems are ceritified
within the existing framework. Frost Sullivan research indentified the NATO
Standardisation Agreements for procedures, systems and equipment components,
STANAG, as most relevant available / starting point standards to be considered in
developing UAS, including VTOLs, this includes;

- STANAG 4660: Interoperable Command and Control Data Link
- STANAG 4670: Training Requirements
- STANAG 4671: UAV Systems Airworthiness Requirements
- STANAG 4586: Data Link Interface, and Command and Control
Interface

It is essential to provide a certain degree of flexibility when designing the systems,
such that the system can be adapted to national level standards with limited impact
on system cost and / or capabilities.

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Frost Sullivan

CONOPS driving platform selection: Vice versa is a no-go strategy

End-user inhibitions
in deploying VTOLs / Frost Sullivan research brought forth a key concern of the end-users, who are
challenged by the Industry pitching high tech platforms, with limited insights into
UAS primarily stem
the CONOPS and the related requirements. End-users engage better with capability
from the dilemma of based solutions that reflect the core mission and operational requirements,
how the system can be generating a higher value proposition. The expeditionary nature of today’s missions
deployed within the could benefit from the VTOL capabilities, which enables rapid response to high risk
existing and future scenarios. Ability of the VTOLs to be deployed rapidly, from most terrains, including
requirements of a mobile platforms is seen as a convincing capability to deploy within the military
environment. However, end-users are aware of challenges, which have traditionally
mission.
limited the deployment of RW platforms in specific missions only, and impose
similar limitations on the deployment of VTOLs. These include comparatively slower
speeds, with limited endurance when pitched against the FW UAS.

Frost Sullivan discussions with the end-users indicate that VTOL capabilities are
best fit for specific missions. Missions requiring sustained / focused surveillance and
maneuvering flexibility benefit from the VTOL ability to hover on defined mission
targets, and may not be relevant for FW solutions. The ability to conduct ‘stop go’
missions independent of the terrain enables VTOLs to be deployed as a significant
force multiplier. End-users have indicated the effective use of VTOL as dormant
assets across enemy lines, activated in event of a situation / conflict. Recent
development plans have focused on using the VTOL platforms for logistics tasks,
although this may for now be focused on in-theatre requirements, operating in a
defined segregated space. There is much a-do about deploying VTOLs for MEDEVAC
missions, including a NATO programme exploring similar options. However, the
cost of certifying a VTOL UAS for manned operations, for now is considered
prohibitive. Significant work needs to be undertaken to:

- design reliable systems for manned operations;
- resolve operational challenges of conducting life saving operations
in high risk scenarios;
- overcome general perception of deploying UAS for manned
operations.

VTOL may not be the most suitable platforms for large area coverage, due to the
comparatively lower endurance levels (this is an end-user perception despite
introduction / ongoing development of some longer endurance VTOLs). Taking for
example maritime missions, at present the most relevant applications for VTOL are
focused on short mission runs, including providing better situational awareness in
event of anti-piracy missions. The wider end-user perception is that deploying VTOL
on long endurance missions may not be as cost efficient as deploying FW UAS. Most
VTOLs are categorised under the TUAS segment, which brings forth an operational
limitation, such that the flight ceiling of VTOLs makes them vulnerable to ground
attack.

End-user inhibitions in deploying VTOLs / UAS primarily stem from the dilemma of
how the system can be deployed within the existing and future requirements of a
mission. Industry’s ability to clearly state the capabilities of the VTOL systems in
terms of ‘See, Sense, Strike’ need to fit the operational requirements of a mission.
Taking the case of an anti-piracy mission, it is critical to understand the end-user
mission requirements.

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Frost Sullivan

Frost Sullivan’s research has identified some of the key (non-exhaustive) elements
considered by end-users in deploying VTOLs for such missions;

- What does an anti-piracy mission entail- surveillance, deterrence,
engagement?
- What does the end-user want to fulfill this mission- weaponised /
non-weaponised?
- What is the value proposition of the VTOL- rapid deployment;
accessible aerial capability; enhanced situational awareness; cost
efficiency?

Approaching the end-users with a capability focused solution for VTOLs is expected
to create more interest with the main end-user stakeholders. However, the cost
implications of such a solution cannot be overruled. System-up solutions tend to
have longer development cycles, and tend to have higher solution customisation
costs. Cost viability of a proposed solution is essential, and this is not limited to
initial platform cost. The total cost of ownership taking into consideration the
through life operational and sustainment costs are primary elements to consider.
Research indicates that although there is not much flight data available on VTOLs
when compared to FW UAS and / or manned platforms, the available information
indicates a lower through life cost for VTOLs. This is primarily linked to the logistical
footprint required to operate and deploy VTOL, such as limited take-off / landing
mechanisms / areas, and comparatively reduced number of man hands (mostly due to
the limited-endurance mission types).

Figure 10: Technical Challenges and Benefits in Successful Deployment of
VTOLs
HIGH Innovation Opportunity Enabler
Through Life Cost

Operational Cost Deployability

Modularity Hovering
Maintenance Cost
Configurability Logistical Footprint
Operational Complexity
Endurance
System Customisation
Efficiency Range

BENEFITS Technical Matrix
Airspace Integration
Wear Tear
Flight Stability
Vibration
Aerodynamics - Drift

Noise Levels

Stealth Mode
Disabler Improve
LOW
HIGH CHALLENGES LOW


End-users within the security domain have highlighted a need to deliver significant
cost benefit, such that the stakeholders can substantiate the decision to select a
VTOL UAS solution to meet a specific operational requirement, which traditionally
has been delivered using substitute technologies including manned platforms. One of
the main considerations for end-users in this regard is to overcome wider public
perception of deploying unmanned systems in urban and rural areas in return for
evident cost and operational benefits.

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Frost Sullivan

On assessment of technical challenges and benefits, although non-exhaustive, the
primary interviews across industry stakeholders identified parameters that could
End-users across further facilitate adoption of VTOL UAS across various end-user environments.
defence and security Frost Sullivan analysed and categorised these parameters across four quadrants,
emphasised as explained below;
‘CONOPS’ as the
leading CSF driving • Enabler: The industry should show-case these as drivers for adopting
procurement and VTOL UAS, emphasising the positive impact in fulfilling end-user mission
deployment of VTOL requirements.
UAS. • Innovation Opportunity: Needs ongoing RD investment to position
them as primary enablers for VTOL UAS
• Improve: Industry should focus on improving technologies and processes
to evolve as technical Enablers.
• Disabler: The industry needs to overcome the challenges, or introduce
substitutes, and/or minimise negative impact for these parameters.

3.2 Technical challenges and benefits in successful deployment of VTOLs

Frost Sullivan research indicates that the industry needs to focus on addressing
the immediate concerns of the end-users, whilst show casing the ‘enabler’ for VTOL
UAS. End-users indicated industry initiative in resolving CONOPS related issues to
start with. Limited modularity is one of them, and is an important factor to
consider. Modularity is not limited to payload modularity, this need to consider and
include other components of the system such as data links, control elements,
support elements etc.

Such that the system can be adapted to a specific mission. Modularity for VTOLs is
somewhat restrictive, due to on-board space constraints. Features such as ease of
deployability, hovering capabilities, mobile platform launch are considered unique
value propositions for VTOLs, and make them a preferred choice of inventory for
specific missions requiring these capabilities. However, some inherent challenges of
the RW platforms migrate onto the VTOL perception, although just like the RW
platforms end-users are accepting the fact that immaterial of some limitations, the
benefits of VTOLs outweigh the challenges for niche (and critical) applications.

3.3 Critical Success Factors: Potential business models for VTOLs

In discussions with main industry and end-user stakeholders, Frost Sullivan
identified the most critical success factors (CSF) considered when selecting VTOL
UAS for defence and security applications. End-users across defence and security
emphasised ‘CONOPS’ as the leading CSF driving procurement and deployment of
VTOL UAS. Industry is expected to present a complete understanding of the
mission requirements, and prove the technical and operational feasibility of the
system on offer.

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Frost Sullivan

Figure 11: Frost Sullivan Survey on Critical Success Factors impacting
the Selection of VTOL UAS for Defence Security Domains

Rating scale- '1' Least Important; '5' Most Important


Taking into context the operating environments of the two domains, and the
existing capabilities, it is not surprising that defence stakeholders have a higher
rating for supplier heritage, which indicates confidence in engaging with established
OEM solutions over other somewhat exploratory participants, at least for now.
However, it is anticipated that security domain is going to be more open to a
broader supplier choice independent of OEM heritage.

Reliability is considered as a given must-have, although it is interesting to note that
end-users across both domains accept the nascent stage of the VTOL UAS, and are
open to gaining flight heritage in operations. However, some end—users’
empahsised the importance of having reliable, proven systems on board these
platforms, such that technology, although adapted and ruggedised for defence and
security environment, has been validated in tangent industries, and / or is supported
with significant test data.

Another factor that has been given a higher rating from defence end-users is system
redundancy. This is mainly driven by the need to operate in extreme environments,
across mission critical and highly sensitive applications. However, the cost
implications of providing a redundancy based system design are yet to be validated.
In light of the ongoing economic crisis it is not surprising that the Total Cost of
Ownership and Through Life Support are considered a CSF across the defence and
security domains. Frost Sullivan understands that the various models available
and/or being considered in regards with VTOL UAS are similar to the wider UAS
systems.

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Frost Sullivan

Figure 12: VTOL UAS Market: Identified Business Models, Global, 2012

Frost Sullivan
research noted an Local Partner
optimistic view
Type-2
towards deployment
of VTOLs to fulfill
VTOL UAS Type-1
mission requirements Manufacturer End-User
across both, defence
and security domains. Defence
Type-3

Security
Type-4
3rd Party

End-user procurement based on End User Skeptical
Total Cost of Ownership about Technology

High Equipment Cost Lack of Local Expertise


Type-1: Direct Deal: The end user procures equipment directly from
the manufacturer, both domestic and foreign.

Type-2: Local Partner: The foreign supplier enters into an agreement
with a domestic partner to tap market opportunities.

Type-3: Equipment Rental/Lease: The supplier rents/leases the
equipment to the end user directly.

Type-4: 3rd Party Equipment Rental/ Lease: The foreign supplier
rents/leases the equipment to the end user through a
third party.

The aforementioned business models can be best placed as potential route to
markets, and may vary from market to market. However, these business models
alone are not driving procurement in the defence and security domains. As
mentioned earlier total cost of ownership and through life support are
progressively being adopted as the preferred modes of procurement. The shift
towards alternate contracting models is driven by the end-users expectation to
share risk with the industry, especially when inducting a new solution.

The figure below presents the Risk vs. Revenue analysis across various contracting
models.

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Frost Sullivan

Figure 13: Contracting Models- Service Based Contracts

Contracting for
Capability
Contractor Risk

Contracting for
Availability

Spares Inclusive

“Traditional”

Contractor Revenue


3.4 Benefit Analysis of VTOL UAS

Considering that VTOL UAS have not yet earned significant flight heritage,
conducting any in-depth comparative assessment with the FW UAS and existing
manned systems. Within consideration Frost Sullivan for this white paper
attempted to conduct an assessment based on industry perception of current and
anticipated levels of technology maturity, operational effectiveness, cost efficiency,
system configurations, and potential applications.

During our survey with the industry stakeholders many observations were shared,
of which some were known, debatable, others somewhat even more debatable than
the others. These included observations / concerns about higher maintenance cost,
integration costs, system complexity- operational and maintenance, endurance and
range, aerodynamics, modularity and configurability, and overall sustainment needs.
Despite the concerns noted by the industry stakeholders, Frost Sullivan research
noted an optimistic view towards deployment of VTOLs to fulfill mission
requirements across both, defence and security domains. This optimism was driven
by the unique value proposition of the VTOL UAS, which includes payload carrying
capacity vis-à-vis endurance, external payload carrying capacity, ability to hover and
fly, flexible and responsive accessibility and deployability, low logistical footprint,
mobile launch capabilities, perception of overall lower cost of operations due to the
nature of missions- shorter mission hours in comparison to similar size FW UAS,
and lift and drop capability.

Discussions with industry stakeholders, both end-users and suppliers, indicated that
VTOL UAS are widely acknowledged as most suited for niche applications, involving
short to medium range missions, which require a responsive and easily deployable
capability. The low logistical footprint in comparison to the FW UAS and the other
Manned platforms is a significant advantage, both operationally and financially.

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Frost Sullivan

However, end-users, based on the perception from manned RW anticipate that the
VTOL UAS are more complex to operate, a perception that is different from that
of the industry. This is mainly because leading industry participants have worked
towards minimising the complexities of the traditional Manned RW when designing
the UAS versions, both in operating and maintaining the systems. However, Frost
Sullivan research indicates that such an assessment of the VTOL UAS with potential
substitutes is somewhat limited due to unavailability of extensive flight heritage.
Below is a summary of some of the main benefits of VTOL UAS (as noted
throughout the white paper):

• The industry perceives that VTOL UAS with its ability to conduct stop
and go missions, capability to hover and focus on a particular area, and
ability to take-off and land in most terrains presents a unique value
proposition for end-users.

• This ability to conduct critical 'highly responsive' missions independent
of the terrain enables VTOLs to be deployed as a significant force
multiplier, enabling battle commanders to make informed decisions, and
fulfilling expeditionary missions effectively.

• The logistical footprint required to operate and deploy VTOL, such as
limited take-off/landing mechanisms/areas, and comparatively reduced
number of man hands (mostly due to the limited-endurance mission
types) indicates a lower through life costs in comparison to other
platforms.

• End-users are open to exploring and deploying VTOLs in niche
environments and applications including MEDEVAC, crowd control, fire
monitoring and control, and nuclear monitoring, which are not
effectively covered by the existing FW platforms.

• VTOLs are considered an apt solution for operating in high risk,
segregated airspace, which requires a responsive solution.

4. CONCLUSION

4.1 Summary analysis of supply and demand for VTOLs

VTOL UAS are considered at the early stages of the product lifecycle bell curve.
However, industry and end-users have indicated confidence in its evolution,
especially considering the experience it can leverage from flight proven manned
rotary platforms combined with the increasing flight heritage of the FW UAS. The
supplier world has diverse participants with experienced OEMs pitching a corner,
up against the niche and new participants. Frost Sullivan research indicates a
preference for OEMs over the Niche Participants, although the eventual success is
expected to be driven by accumulation of successful flight heritage across different
markets and end-users. Frost Sullivan analysis indicates potential merger and
acquisition activity later in the decade, wherein the OEMs will explore
opportunities to expand capabilities in this area through in-organic modes, mainly
aimed at technology/product acquisition.

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Frost Sullivan

The nearly 300 VTOLs (a conservative outlook) forecast over this decade are
expected to complement the mission inventory of the defence and security end-
users, and this complimentary role is not expected to become competitive to Another concern that
existing systems in the long-term. However, accessibility to VTOL systems in mobile the industry needs to
and hard to land/take-off areas would potentially reduce the workload on manned actively win over is
and FW UAS platforms, making them free to focus on other mission critical areas. the public perception
on deploying UAS in
4.2 Market Recommendations the local skies, for
task that have been
The Industry: Product Technology till date somewhat
‘effectively’ delivered
End to End Solution, Not just the Platform: The primary recommendation emerging by substitutes.
from Frost Sullivan research is for the industry to focus on end to end solutions
rather than pitching hi-tech platforms with limited direct relevance to the concept
of operations within the end-users operating environment.

Cost-benefit Analysis of End to End Solution: A related recommendation to
packaging end to end solutions to end-users, is the importance of analysing the true
cost of delivering a particular service / accomplishing a mission successfully and
implying the value add of deploying VTOL UAS in comparison to alternates /
substitutes. The main questions that the industry should aim to answer for the end-
users are;

• What are the mission requirements that the proposed system will be
used for?
• How does the end-user currently deliver this mission?
• Does the proposed system fulfill the end-user requirements?
• What value add does the proposed system bring to the end-users
• Gain efficiency
• Additional capabilities
• Force Multiplier
• Cost efficiency?

System Configurability: The industry needs to develop flexible, easy to use
platforms that are scalable and modular. However, ability to configure systems fit for
purpose, apt to be adapted to multiple missions within a quick turnaround time is
considered as a primary feature for end-users.

Market End-users

Leading markets: In the coming decade emerging markets such as the Middle East
and Asia Pacific are expected to provide for the much needed test beds. However,
it is the US and the European markets that are expected to drive technology
development and validation for a sustained adoption rate in the long-term.

Industry to work towards overcoming the regulatory issues: The evolution of the
Civil Security domain for VTOL UAS is optimistically debated. However, the
industry is of the unanimous view that any such spike in demand will only
materialise with concrete resolution on the regulatory frameworks at all levels,
global, regional and national.

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Frost Sullivan

The industry is encouraged to continue with its efforts to build a convincing
argument in favour of opening the skies for integration of UAS into civilian airspace.
This is by any measure not considered an easy task. Although the progress made
with ongoing programmes, especially in Europe and the US are considered positive
steps in the right direction. Frost Sullivan research indicates an initial adoption of
such new standards in the later half this decade, giving way to a more aggressive
adoption of UAS (including VTOL UAS). Finally, another concern that the industry
needs to actively win over is the public perception on deploying UAS in the local
skies, for tasks that have up to now been somewhat ‘effectively’ delivered by
substitutes.

4.3 Next Steps: Potential Roadmap of VTOL UAS

Frost Sullivan discussions with the industry stakeholders presents a potential
roadmap of VTOL UAS. Using the cliché- the potential roadmap for the VTOL UAS
rests on the four pillars of evolution across the two universes, the End-user
Universe and the Industry Universe.

1. Understanding the mission requirements of the end-users
2. Introducing the solution to end-users by increasing the level of
awareness of the solutions value proposition.
3. Whilst the industry continues its efforts towards optimum technology
maturity
4. Generate economies of scale driving cost effectiveness for the end-
users

Figure 15: Road Map for Technology Adoption Critical Factors Dictating
the Adoption of VTOL UAS (Defence and Security Domains)

Level of Awareness Low Technology Maturity

Analysis Analysis
Adoption
on Low of VTOL Low on
UAS
End-Users Industry

Mission Requirements Low Cost-Effectiveness

Where End-Users Stand (Average of Defence and Security)

Where Industry Stands


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UNMANNED VTOL SYSTEMS: An Assessment of VTOL UAS Adoption in the Defence & Security Sector

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