The Apache attack helicopter: another $5 billion in stranded assets?
Destroyed Russian helicopter in Ukraine

Attack helicopters have proven to be so vulnerable in the Ukraine war they are now operated only back from the frontline. Yet Australia is about to spend $5 billion buying these stranded assets.

Written by

Marcus Hellyer

It’s no secret that technological change can lead to companies having stranded assets, that is, facilities or equipment that are no longer profitable. Smart companies try to avoid this by future-casting, understanding their operating environment, and avoiding the temptation to keep doing the same thing so that they don’t acquire assets that won’t deliver an on-going return on investment. Companies that already have such assets on their books write them down to or try to bring forward their retirement as soon as possible—as Australia’s electricity generators are doing with their coal-fired power plants.

Smart companies certainly don’t double down and acquire more of the same. Nobody in the energy sector is seeking to build more coal-fired power plants now that renewables have eaten their lunch. If your current assets are killing your business model, you don’t acquire more of the same that will be on the books for another thirty years. Commercial companies won’t last for three years let alone another thirty years doing that.

Yet that is exactly what the Department of Defence is doing with its acquisition of 29 Apache attack helicopters for the non-trivial sum of $5 billion.

I have to admit that I have some intellectual skin in the game on this issue. In late 2019 I published a report, arguing that Defence should not rush to replace its existing Tiger Armed Reconnaissance Helicopter with another crewed system. Even back then you didn’t have to be Nostradamus to see that crewed helicopters would be extremely vulnerable on the modern battlefield against a near-peer adversary. Moreover, affordable, attritable uncrewed systems that could deliver the same effects were rapidly maturing.

Nevertheless, in the 2020 Defence Strategic Review programmed $3.4-5.1 billion to the Tiger replacement. When I asked capability analysts in Defence what justified this prioritisation of resources, all they could do was shrug and say it wasn’t based on their advice.

Then in May 2022 the previous Australian government announced it would acquire a new fleet of Apache attack helicopters. Remarkably this was three months after the start of the war in Ukraine that had sharply highlighted the vulnerabilities of attack helicopters in modern conflict. From the very start of that war attack helicopters were being shot out of the sky at a rate that made their traditional role of battlefield reconnaissance and fire support unsustainable.

Meanwhile in the same conflict the proliferation of attritable uncrewed systems was already accelerating, leading to the current situation where they have replaced crewed battlefield platforms in many roles while being consumed in the thousands.

Both the Ukrainians and Russians have sought to salvage their stranded helicopter assets by putting them into the role of inefficient rocket launchers, lobbing rounds from well behind the front lines. And even in that role they are extremely vulnerable; recent social media footage shows three Ukrainian attack helicopters destroyed on the ground while rearming. Once they were detected by uncrewed surveillance assets, they were rapidly targeted by an air-burst munition.

Other militaries have faced up to the quandary of their stranded attack helicopter assets. Japan is retiring them; in early 2023, it announced as part of its defence build-up plan that it would eliminate ‘obsolete’ attack and reconnaissance helicopters and replace them with uncrewed systems.

For its part, the US has decided not to acquire more stranded assets. In February this year, the US Army announced it was cancelling its Future Armed Reconnaissance Aircraft project—explicitly justifying the decision as based on lessons learned from the war in Ukraine. “We are learning from the battlefield—especially in Ukraine—that aerial reconnaissance has fundamentally changed,” said the Chief of Staff of the Army, General Randy George. “Sensors and weapons mounted on a variety of unmanned systems and in space are more ubiquitous, further reaching, and more inexpensive than ever before.”

What is the Australian Army doing? One might have thought that it would leap at the opportunity to get out of what has been, in defence terms, an extremely unprofitable business. Army leaders have publicly lamented the high cost of crewed rotary-wing assets and the limited return they have received on that investment. Helicopters are the Army’s most expensive systems to maintain.

Yet the ADF did not deploy a single Tiger ARH, MRH-90 or Blackhawk utility helicopter to either Iraq or Afghanistan, despite a combined acquisition cost of around $7 billion and annual sustainment cost approaching $500 million. While critics of autonomous system fear they may not be able to do the job and consequently present poor value for money, those crewed platforms provided no return on investment in those conflicts. Nevertheless, Defence is pressing on with the Apaches.

Similarly, with Defence having been raked over the coals for not providing an assessment of value for money in its questionable Hunter class frigate purchase, one might have thought it would be eager to explain why the Apache purchase, costing every man, woman and child in Australia around $200 each, does provide them with value for money. Yet when given the opportunity to do so at recent Senate estimates hearings, Defence did not present a compelling business case.

First the Chief of Army gave an inaccurate description of the US Future Attack Reconnaissance Aircraft (FARA) program saying it wasn’t going to deliver until the 2050s and 2060s. Actually, it was aiming to start production around 2030 and was in the middle of the final down-select between the last two contenders’ prototypes. This was very much a real decision about actual capability, not an adjustment to far off, theoretical possibilities.

He then said that ‘one of the important things about the Apache helicopter and one of the reasons why it was selected for the ADF’s use is that it has the capacity to human-machine team. In other words, as we move from a predominance of crewed systems to a predominance of uncrewed systems, there’s a very necessary way point in between which we describe as a human-machine team. That’s the combination of crewed and uncrewed systems.’

That is a significant point worth considering. HUMT (Human-machine teaming) or MUMT (Manned-unmanned teaming) concepts are often deployed as stepping stones to more autonomous futures. Of course, HUMT can be a fairly vacuous concept; a soldier with a rifle is a human-machine team and it’s hard to imagine any future that doesn’t involve humans and machines working together (except maybe once we reach the AI singularity and machines do away with us hopeless humans).

But HUMT arguments tend to be the fall-back position of people desperate to find value in their stranded crewed assets, for example as motherships or command and control nodes for uncrewed assets—as the US Army is doing with its existing Apaches (and incidentally other operators of the Tiger have done; the Apache is not unique in this regard).

But if you are building a new system unencumbered by those stranded assets, why would you deliberately build it around something that fundamentally limits the possibilities and value of the uncrewed systems?

If we want to deliver a system that realises the benefits of the small, the smart and the many such as scale, affordability and tempo, why build it around vanishing small numbers of hideously expensive yet extremely vulnerable crewed platforms that have a huge logistics train. Why build that single point of failure into it. And once we blow $5 billion on it, will we actually have any money left for the autonomous systems it is meant to sit at the centre of?

It’s hard to see how Apaches will offer a meaningful capability return on investment.

They are unlikely to be survivable in a conflict with a peer adversary such as the PLA but in a regional stabilisation or peace-keeping operations, uncrewed systems can already provide a cheaper, more sustainable solution. There may well be some Goldilocks contingency between these two poles that could warrant the Apache’s cost (Defence does excel in generating such Goldilocks scenarios in its force planning that perfectly justify what it already wanted to buy), but the Chief of Army didn’t describe what that operational space is.

The Chief of the Defence Force also dodged the opportunity to present parliament and the public with a convincing business case for their $5 billion contribution to the Apache, offering only the Yoda-esque comment that we are working with our allies to avoid learning the wrong lessons from Ukraine. Again, there was no explanation of why two of our closest regional partners thought the right lesson from Ukraine was not to double down on stranded attack helicopter assets, but we think that is a wrong lesson.

According to Defence’s budget papers, Australia will have spent $229 million on the Apache project by the end of this financial year. Walking away from that sunk cost may seem difficult, but it’s better than continuing to acquire $5 billion in stranded assets.

Note: SAA offered the Department of Defence the opportunity to explain why it considered that a $5 billion investment in Apache helicopter presented value for money. It did not provide a response.

Dr Marcus Hellyer is Head of Research at Strategic Analysis Australia.