Army to acquire 41 AAI drones for $99 million

Reconnaissance aircraft contract may raise stakes in sale of Hunt Valley firm

Parent's investors are restive

October 07, 2002|By Robert Little | Robert Little,SUN STAFF

Just as the pressure to sell AAI Corp. reaches a peak, the U.S. Army has announced that it plans to spend nearly $100 million to buy 41 of the company's unmanned aerial vehicles, a major and lucrative milestone for the Hunt Valley defense contractor.

The decision by the Army to begin full production of the Shadow 200 drone is expected to pay a wealth of dividends to AAI, not only in the costs of manufacturing the aircraft but also for the ensuing service, maintenance and upgrades. And it could raise the stakes as AAI's parent company searches for a buyer.

The long-term impact of defense contracts is often difficult to predict because of the federal government's fickle spending habits, company officials say. But the Army's announcement means it has endorsed AAI's signature product - a boon for the small company.

"It's a huge win for us - a real feather in our cap," said Richard R. Erkeneff, chief executive officer and a director of United Industrial Corp., AAI's parent company.

"They've tested it rigorously, done operational testing and evaluation, an assessment of the training, and they like what they've seen."

The Shadow 200 is a "tactical" surveillance drone used for brigade-level reconnaissance and battle damage assessment. Unlike the Predator and Global Hawk drones used frequently in Afghanistan, the Shadow flies at low altitudes and can be launched from a truck instead of a runway. Larger UAVs gather intelligence similar to the way a satellite does, while the 300-pound Shadow, with a 13-foot wingspan, can be launched over mountains or cities to take pictures close to the battlefield.

AAI plans to deliver nine complete Shadow systems to the Army, each consisting of four or more aircraft, six vehicles, ground control stations, video terminals and antennas. The first two systems are expected to enter service this year with Army units in Washington and Texas.

The Army has shown increasing interest in unmanned aerial vehicles in recent years, hailing them as low-risk intelligence gathering devices that allow ground-level commanders to "see first, understand first and act decisively."

The images and data collected from the Shadow are designed to help commanders maneuver troops and equipment, fire artillery and order airstrikes.

The Army expects to spend $99 million acquiring the Shadow systems. Most of the money will go to AAI.

Shareholders of United Industrial elected a second dissident member to the company's six-seat board of directors Friday, pressuring management to accelerate its effort to sell the company. AAI is the meat that makes the company attractive, analysts say, and the Shadow 200 is the premier product at AAI.

"Unmanned aerial vehicles have become a centerpiece in the war on terrorism," Erkeneff said. "And the Shadow has really reinforced our competitive position and enhanced all of our global aspects with potential international customers. This is an important step for us."

Shares of United Industrial closed Friday at $20.12, up 12 cents.

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