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Royal New Zealand Air Force

This is a discussion on Royal New Zealand Air Force within the Air Force & Aviation forum, part of the Global Defense & Military category; Stuff is reporting a 200 million dollar blow out in the budget. Cabinet is considering options, including not buying spares. ...


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Old July 17th, 2006   #1
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RNZAF NH-90 Cost Blowout

Stuff is reporting a 200 million dollar blow out in the budget. Cabinet is considering options, including not buying spares.

Only 6 Training Helicopters are authorised to be purchased.

Full Article here...
http://www.stuff.co.nz/stuff/0,2106,...9a6160,00.html
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Old July 17th, 2006   #2
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Exchange rate a red hering

Interesting thing this. If you look at exchange rate movements the NZD has declined 13% against the Euro since the contract was signed. The decline has largely occured over the last 4 months. Now if you take the $400 to $560M cost quoted in the article for the project and factor in a 13% movement you get $55 to $76M of cost increase due to exchange rate movements.

Now assuming the $200M blowout report is accurate only 27% to 38% of the increase is due to exchange rates, the majority appears to due to early estimates not including specialized equipment. So either they didn’t plan correctly in the first place or their has been creep on the fit out of the helicopters. Given the legendary stinginess of the NZ govt on defense purchases I doubt they would have allowed too much creep.

So in addition to (the government or treasury I presume) failing to hedge their forex exposure the defense department inaccurately estimated the system cost to start off with.

Pretty poor show all round.

Quite disappointed in the end result as I was comfortable with a smaller number of NH’s if we had a sizeable number of EC635’s to take on training/liaison/Spec war/light trans/basic recon/basic fire support roles. Could see many situations where a 10 ton helicopter was over kill and 6 smaller helicopter I fear is not enough
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Old July 17th, 2006   #3
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Interesting I was under the impression that a TTH configured NH90 went for arounf EUR20m (I really can't remember where I saw this figure, but is stuck in my head) , which is around NZ$42m, so if you take the article figure of NZ$70m each then you are adding 66% to the base price in support costs!
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Old July 17th, 2006   #4
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$70M for a helicopter is way too much, should maybe have gone with something else even thoughthe Aussies went with them (maybe the S-92) look what happened to the price of the Aussies Seasprites , Maybe we should have gone with more numbers of a slightly smaller aircraft (the AW149 soon to be annouced would be an interesting aircraft option) , the $200 million does sound like abit of conjecture however, I did contact Murray McCully recently and asked him to probe around what was happening in this area, interesting what turned up
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Old July 17th, 2006   #5
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Originally Posted by KH-12
$70M for a helicopter is way too much, should maybe have gone with something else even thoughthe Aussies went with them (maybe the S-92) look what happened to the price of the Aussies Seasprites , Maybe we should have gone with more numbers of a slightly smaller aircraft (the AW149 soon to be annouced would be an interesting aircraft option) , the $200 million does sound like abit of conjecture however, I did contact Murray McCully recently and asked him to probe around what was happening in this area, interesting what turned up
Not sure that any other chopper in the class would be significantly cheaper.

I would prefer the NH90 over the AW149. Don't forget that there is still room for more LUHs in future years that will not require significant $$.
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Old July 17th, 2006   #6
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I think with such a small order the support costs just don't spread out as much. New Zealand faces this problem with every small order. I assume the $200 million blow out consists of an order for 8 NH90s and 6 EC135s, although this is not confirmed. Hopefully, the government spends the extra $200 million instead of chopping the order down to 6 NH90s. That would be too much to bear.

And this government only has itself to blame. Australia in the past have purchased equipment with a New Zealand option included. In every case this government has refused these options, I suspect to the point Australia doesn't bother anymore.
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Old July 17th, 2006   #7
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I don't think the Numbers add up as reported.

70m * 8 = 560
10m * 6 = 60

So that is a total cost of 620m. All I can think of is that they are including GST into their 'blowout' figures.

Sea Toby, there was no NZ option as far as the NH90 goes as far as I'm aware.

FYI the NZ$70m price tag is the same as the Aussie cost (AUS$2b for 34)
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Old July 17th, 2006   #8
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Originally Posted by Whiskyjack
Not sure that any other chopper in the class would be significantly cheaper.

I would prefer the NH90 over the AW149. Don't forget that there is still room for more LUHs in future years that will not require significant $$.
I agree the NH90 stacks up to be one hell of an aircraft and is definately a good machine however at what point do you go for numbers rather than quality, the AW149 looks like it would be a good direct UH-1H replacement while the NH90 is a much larger and sophisicated proposition, the RNZAF may be too scared to fly them incase they lose one.

Will be interesting what the Utility helicopter will be as I think it will be very busy in the utility role as opposed to the training role.
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Old July 17th, 2006   #9
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Originally Posted by Whiskyjack
I don't think the Numbers add up as reported.

70m * 8 = 560
10m * 6 = 60

So that is a total cost of 620m. All I can think of is that they are including GST into their 'blowout' figures.

Sea Toby, there was no NZ option as far as the NH90 goes as far as I'm aware.

FYI the NZ$70m price tag is the same as the Aussie cost (AUS$2b for 34)
Interesting it says "Sources said" sounds like abit of a probe in the dark to be honest, I would suspect the release is more intended to flush out the reality of the situation rather than to quote hard facts.
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Old July 17th, 2006   #10
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Australia bought one aircraft, not two different types. Maybe New Zealand has to buy more spare parts up front for two different types of helicopters.

$70 million x 34 aircraft is $2.380 billion, not $2.0 billion.

In the next decade New Zealand will be faced with acquiring several C-130s and P-3s replacements. They are going to cost much much more.

The $110 million lease over 10 years of 28 cream puff F-16s look better and better as time passes.

If Ms Clark wanted to save bundles of money, maybe she should have kept the air combat force and sold the transport and patrol aircraft instead.

Last edited by Sea Toby; July 17th, 2006 at 06:17 PM.
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Old July 17th, 2006   #11
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Originally Posted by Sea Toby
Australia bought one aircraft, not two different types. Maybe New Zealand has to buy more spare parts up front for two different types of helicopters.

$70 million x 34 aircraft is $2.380 billion, not $2.0 billion.

In the next decade New Zealand will be faced with acquiring several C-130s and P-3s replacements. They are going to cost much much more.

The $110 million lease over 10 years of 28 cream puff F-16s look better and better as time passes.

If Ms Clark wanted to save bundles of money, maybe she should have kept the air combat force and sold the transport and patrol aircraft instead.

The RNZAF is moving away from holding large quantities of spares for its A/C , they recently carried out a project that substantially reduced the C-130parts inventory instead relying on a US logistics company to supply at short notice those components that are not frequently used. If they go with the EC135/EC635 they could tap into the civilian logistics supply as that Aircraft is already operated in NZ.
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Old July 17th, 2006   #12
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Originally Posted by Sea Toby
Australia bought one aircraft, not two different types. Maybe New Zealand has to buy more spare parts up front for two different types of helicopters.
True but one type is a basic civillian type, so I do not see a lot of money comming into play for the LUH.

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$70 million x 34 aircraft is $2.380 billion, not $2.0 billion.
I don't think you are converting it from the NZ$ to the AUS$. The AUS$ is at .83 which makes AUS$2b to be NZ$2.4b.

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In the next decade New Zealand will be faced with acquiring several C-130s and P-3s replacements. They are going to cost much much more.
Yes they are, but we will have 10 years to come up with the money. The P3 don't need replacement until the 2020 mark given the recent structural upgrades. Similar with the C-130.

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The $110 million lease over 10 years of 28 cream puff F-16s look better and better as time passes.
They would still have to have gone through an MLU and be maintained etc...
It would still have been cheaper tho I grant you.
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Old July 18th, 2006   #13
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Here is an update from Phil Goff to the alegations of a "Budget Blowout", looks like there was a degree of truth there : Looks like 8 is the confirmed number of airframes.

http://www.nbr.co.nz/home/column_art...cname=Politics
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Old July 18th, 2006   #14
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This clearly demonstrates why it is so risky being one of the first countries to order a new aircraft. You have no accurate figure for aircraft cost or support costs.

Small countries that are making small orders should stay with weapon systems that are well developed and provide low risk with a firm total price.

An example is when Australia bought the new Tiger Helicopter, it wanted to customise it a bit and it ended up costing significantly more than what was originally quoted. If they knew the true cost Australia would have gone with a developed helicopter like the Apache. The Apache would have ended up costing the same as the Tiger but it is a far more capable helicopter and can provide alot more flexibility.

In new zealands case they should have bought new older model helicopters that have been in service for many years.
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Old July 18th, 2006   #15
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Originally Posted by rjmaz1
This clearly demonstrates why it is so risky being one of the first countries to order a new aircraft. You have no accurate figure for aircraft cost or support costs.

Small countries that are making small orders should stay with weapon systems that are well developed and provide low risk with a firm total price.

An example is when Australia bought the new Tiger Helicopter, it wanted to customise it a bit and it ended up costing significantly more than what was originally quoted. If they knew the true cost Australia would have gone with a developed helicopter like the Apache. The Apache would have ended up costing the same as the Tiger but it is a far more capable helicopter and can provide alot more flexibility.

In new zealands case they should have bought new older model helicopters that have been in service for many years.
exactly New Zealand cant afford to buy new designs its just too risky if something goes wrong. we should go with something thats proven and reliable. I was talking to an airforce pilot recently and he said he dosnt care what type of helicopter they got as long as it was an improvement on what they have.

what about Russian Helicopters how do they stack up against others in price and preformance.
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