Key Highlights

  • Orbital has entered its first Power by the Hour agreement, with American Aerospace Technologies Inc.
  • Contract revenue is US$2.6 million (A$3.7 million) over the initial term to 31 December 2027.
  • The take-or-pay commitment is 200 engine hours per aircraft per month for a fleet growing to 10 UAVs by May 2027.
  • Two previously ordered engines will be converted to the Power by the Hour fleet.

Orbital Corporation Limited (ASX:OEC) has entered its first Power by the Hour (PBH) agreement, with American Aerospace Technologies Inc. (AATI), creating a recurring revenue stream tied to AATI's AiRanger unmanned aircraft fleet. The aircraft are currently deployed in US coastal surveillance operations and use Orbital's 150HFE propulsion system.

The arrangement converts an existing propulsion supply relationship into an ongoing service agreement, and follows the PBH opportunity outlined in Orbital's 24 July 2026 ASX announcement. Contract revenue is put at US$2.6 million, equivalent to A$3.7 million, over the initial term to 31 December 2027.

How the Agreement Is Structured

Under the PBH model, Orbital retains ownership of its engines and provides maintenance, overhaul, performance support and replacement in return for an hourly service charge. This differs from an outright engine sale, where revenue is received upfront, because income is instead earned monthly through engine operations and the associated support activity.

The initial agreement covers a fleet that expands progressively to 10 aircraft by May 2027. A take-or-pay commitment of 200 engine hours per aircraft per month underpins minimum monthly engine hours and therefore the minimum revenue, with renewal options available to extend beyond 31 December 2027.

Two engines that were previously ordered and not yet delivered will now be converted to the PBH fleet. Orders for Gen II Power Management Systems sit outside the PBH contract; five units have been ordered to date for a value of US$60,000.

Orbital describes the agreement as a progression from supplying propulsion systems for aircraft development to fully supporting customer flight operations. It builds on the first flight and subsequent operational performance, including intelligence, surveillance and reconnaissance (ISR) mission durations of up to 20 hours.

Management Commentary and Customer Profile

Chief Executive Stephen Pearce said commercial UAV growth creates an opportunity to build a recurring service business alongside engine sales. He noted that PBH lowers the upfront cost for operators to deploy Orbital's engines while allowing the company to earn more revenue over their operating life, and that minimum monthly commitments provide greater revenue visibility with scope to grow as customer fleets expand.

Pearce also said the first AATI agreement puts the strategy into practice and provides a foundation for offering the model to other operators. He linked the approach to a broader focus on a more diversified customer base across commercial and defence applications, and to reducing reliance on any single program over time.

AATI is a US-based developer and operator of long-endurance unmanned aircraft and airborne sensing systems serving government and commercial customers across defence, homeland security and critical infrastructure markets. Its AiRanger platform holds commercial Beyond Visual Line of Sight (BVLOS) operating approvals in the United States. The highlights of the announcement also reference Orbital's engine history of more than 1 million hours in US maritime operations.

Expansion Potential and the US Coast Guard Context

The agreement allows for growth beyond the initial 10-aircraft fleet as AATI's operations develop, subject to extended end-user contracts and a separate Phase II agreement. AATI is positioning AiRanger for a range of government and commercial opportunities that it considers capable of producing significant fleet expansion over time.

One such opportunity is a request for information issued in April 2026 by the US Coast Guard Robotics and Autonomous Systems program executive office for contractor-owned, contractor-operated Group 2/3 medium-range UAS ISR services. The services would cover up to 35 shore-based sites across the Atlantic, Pacific and Alaska/Arctic regions. The Coast Guard intends to use a Basic Ordering Agreement with a five-year base period and one five-year option, extending to as long as 10 years, with orders competed among eligible vendors by platform or shore region. No contract has been awarded under the request to date, and AATI is already providing such ISR services to the Coast Guard.

Where the Agreement Leaves Orbital

Orbital now holds a take-or-pay service contract worth US$2.6 million (A$3.7 million) to 31 December 2027, covering up to 10 AiRanger aircraft by May 2027, with renewal options and a possible Phase II extension. The company, a Perth-based designer and manufacturer of heavy fuel propulsion systems for Group 2 and Group 3 UAVs, has pointed to the contract as the first application of a model it intends to offer to other fleet operators.