Study: Drone combat aircraft sales will double even as defense budgets shrink

The makers of unmanned aerial vehicles will continue to rake in big money from drone sales even as annual U.S. and global defense budgets shrink, according to a new report from the Teal Group, a defense-analysis and consultancy shop.

“The market will double over the next decade from current worldwide UAV [research and development] and procurement expenditures of about $5.9 billion to $15.1 billion,” the report states.

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Sales of unmanned combat aircraft grew sharply over the last decade, as the U.S. military — and, to a lesser extent, its allies — began using the drones for everything from surveillance to targeted bombings to intelligence collection.

Unmanned combat aircraft “are a key element in the intelligence, surveillance, and reconnaissance (ISR) portion of this revolution, and they are expanding into other missions as well with the advent of hunter-killer UAVs,” the report states.

Teal projected that the U.S. military will largely drive the growth it expects in global drone aircraft sales.

The outfit projects “the U.S. will account for 77 [percent] of the R&D spending on UAV technology over the next decade, and about 69 [percent] of the procurement. These represent higher shares of the market than for defense spending in general, with the U.S. accounting for about 64 [percent] of total worldwide defense R&D spending and 38 [percent] of procurement spending.”

The Teal forecast comes as Washington is paring its annual military spending after a post-9/11 Defense Department spending spree.

The debt-ceiling legislation signed into law last week has few clear directions for how deeply budgets for the Pentagon and national security agencies should be cut. But the White House and senior Democratic lawmakers say the cuts will total $350 billion.

If a congressional “supercommittee” cannot come up with a deficit-reduction plan by Thanksgiving, the debt-ceiling law mandates massive federal spending cuts — including for the Pentagon and other national security agencies. Those cuts could total an additional $500 billion over a decade.

Should that panel fail, the resulting second round of cuts would force the Pentagon budget back to the 2007 level of $472 billion, said Todd Harrison of the Center for Strategic and Budget Assessments.

That level would be $99 billion less than the $571 billion the Obama administration projected for 2013 Pentagon spending in its last long-term DOD spending plan, which was submitted to Congress in February.

Militaries in the Asia-Pacific realm will account for the second-largest portion of UAV buys and spending, with European militaries coming in third, according to the Teal report.

Aside from sales for military use, Teal said “a civil UAV market will slowly emerge over the next decade, starting first with government organizations requiring surveillance systems similar to military UAVs such as coast guards, border patrol organizations and similar national security organizations.”