Lockheed Martin and BAE Systems Partner on Next Gen Autonomous Combat Drones

Strategic Alliance in Autonomous Warfare: Lockheed Martin Skunk Works and BAE Systems FalconWorks Pioneer Next-Generation Uncrewed Combat Systems

The defense sector reached a pivotal moment in September 2025, when Lockheed Martin’s Skunk Works and BAE Systems’ FalconWorks, two of the world’s most influential and secretive military research divisions, announced a high-profile partnership. Unveiled at the DSEI defense exhibition in London, this collaboration aims to develop a new generation of uncrewed autonomous air systems, marking a rare alliance between major U.S. and UK defense innovators. The joint initiative seeks to address the rapidly evolving demands of modern warfare by combining modular, rapidly deployable systems with enhanced electronic warfare and attack capabilities. These technologies are designed to complement and protect crewed combat aircraft, reflecting a broader trend toward integrating autonomous systems into military operations.

The significance of this partnership extends beyond the technical; it is a response to the shifting landscape of global defense, where the military drone market is expected to reach $87.63 billion by 2030, growing at a compound annual rate of 13.9%. As advanced threats proliferate and operational requirements become more complex, alliances like this are poised to shape the future of battlefield technology, doctrine, and international security relationships.

By leveraging decades of innovation, rapid prototyping, and operational experience, the Skunk Works-FalconWorks partnership positions both companies at the forefront of a technological revolution that is fundamentally transforming defense strategy and industry competition worldwide.

Strategic Partnership Formation and Announcement

The announcement of this partnership at DSEI 2025, a defense exhibition projected to be the largest in its history, underscored its strategic weight. DSEI featured a 23% increase in exhibitor space and participation from over 45 countries, making it a global stage for such a landmark collaboration. The tie-up between Lockheed Martin Skunk Works and BAE Systems FalconWorks is notable not only for its scale but also for its intent: to combine the rapid prototyping and advanced development strengths of both organizations to deliver “game-changing capabilities” for allied militaries.

OJ Sanchez, Vice President and General Manager of Skunk Works, highlighted the shift from traditional supplier-customer relationships to a true R&D collaboration: “By working together, we’re unlocking new possibilities for our customers and advancing the future of autonomous systems.” Dave Holmes, Managing Director at FalconWorks, echoed this sentiment, emphasizing the urgency and mission-driven nature of the alliance: “Through our collaboration with Lockheed Martin, we’ll deliver disruptive capabilities that can make a real difference to our military customers at pace, enabling them to confront the operational requirements of today’s battlefield.”

The partnership is structured around joint development, with both organizations contributing expertise in rapid design, prototyping, and advanced manufacturing. The focus is on creating affordable, modular systems that can be rapidly deployed to support and protect existing frontline combat platforms. This approach responds to the growing military need for distributed operations, scalable force multiplication, and hybrid crewed-uncrewed solutions.

“By working together, we’re unlocking new possibilities for our customers and advancing the future of autonomous systems.”, OJ Sanchez, Lockheed Martin Skunk Works

Company Profiles and Research Division Capabilities

Lockheed Martin’s Skunk Works is synonymous with high-impact innovation in aerospace, having developed iconic aircraft such as the U-2, SR-71 Blackbird, F-117 Nighthawk, F-22 Raptor, and F-35 Lightning II. Founded in 1943, Skunk Works established a culture of speed, secrecy, and technical excellence, delivering the XP-80 jet in just 143 days. Its recent focus includes the Common Multi-Mission Truck (CMMT) family, featuring affordable, modular drones like the CMMT-D and CMMT-X, with unit costs targeted around $150,000, an order of magnitude less than many current systems.

BAE Systems’ FalconWorks, launched more recently, is the UK’s answer to agile, advanced military research. The division builds on BAE’s legacy with programs like the Typhoon, F-35, and the Tempest sixth-generation fighter. FalconWorks is dedicated to rapid, collaborative development, integrating digital technologies such as AI, quantum sensing, and robotics. The division’s PHASA-35 program, for instance, has demonstrated record-setting high-altitude endurance.

Both parent companies bring significant financial strength. Lockheed Martin reported $71.04 billion in revenue in 2024, with $1.6 billion invested in R&D. BAE Systems saw revenues of $33.01 billion in 2024, with record profits and projected continued growth. This financial foundation supports the ambitious scope and rapid timelines of the joint venture.

Technical Innovation and System Design

The partnership’s technical strategy centers on modular, rapidly deployable autonomous air systems optimized for electronic warfare and suppression of enemy air defenses (SEAD). The design philosophy prioritizes adaptability, allowing the same platform to be configured for different missions, including electronic attack, reconnaissance, and strike roles. Systems will be lightweight (sub-1t), enabling multiple launch options: air-dropped from cargo aircraft, ground-launched, maritime-deployed, or released from logistics platforms.

This modularity is informed by operational lessons from recent conflicts, where the ability to “punch a hole” through complex electronic warfare environments has been crucial. Holmes explained, “What we have seen over the last three years is the need for our warfighters to be given the capability that allows them to punch a hole through complex and denied electronic warfare environments, to make sure that the conventional fighters of today can be effective.”

The technical foundation leverages Lockheed Martin’s CMMT program, which has demonstrated successful vertical pallet drops (simulating cargo aircraft deployment) and pylon-launched tests. These prototypes validate the feasibility of the multi-launch approach and the cost-effective, scalable production model. The integration of AI and autonomous navigation is a central challenge, requiring robust algorithms for real-time decision-making in contested environments.

Affordability is a key driver: with CMMT-based systems targeting unit costs below $200,000, the goal is to enable “combat mass”, large numbers of Drones that can be deployed at scale, providing distributed effects and force multiplication. Advanced manufacturing and rapid prototyping processes are critical to achieving these cost and timeline objectives.

“What we have seen over the last three years is the need for our warfighters to be given the capability that allows them to punch a hole through complex and denied electronic warfare environments, to make sure that the conventional fighters of today can be effective.”, Dave Holmes, BAE Systems FalconWorks

Market Dynamics and Financial Landscape

The military drone market is among the fastest-growing defense sectors. Grand View Research estimates the global market at $40.53 billion in 2024, projecting it to reach $87.63 billion by 2030 (CAGR of 13.9%). North America leads, with the U.S. market expected to hit $10.71 billion by 2030. Other research, such as Fortune Business Insights, values the market at $14.14 billion in 2023, growing to $47.16 billion by 2032. Despite differing methodologies, all sources agree on robust double-digit growth driven by increased adoption of autonomous and AI-enabled systems.

The drone warfare market, a subset focused on strike and electronic warfare missions, was valued at $29.2 billion in 2025 and could reach $75.8 billion by 2035. The fastest-growing segment is fully autonomous drones, reflecting the military’s desire to reduce human risk and extend operational reach in contested environments. Recent U.S. Air Force investments in F-22 cockpit modifications for drone control, and large contracts for AI-driven drone strike kits, underscore the rapid fielding of these capabilities.

International demand is also strong. Qatar’s $3 billion defense package in 2025, including $2 billion for MQ-9B Reapers, is just one example of the global appetite for advanced unmanned systems. The competitive landscape includes established players like Northrop Grumman, Raytheon, Israel Aerospace Industries, and Boeing, as well as agile Startups and technology firms. The Skunk Works-FalconWorks partnership is a strategic response to this intensifying competition, combining resources to accelerate development and reduce risk.

Military Applications and Operational Requirements

The operational focus on electronic warfare and SEAD addresses a critical gap identified in recent conflicts. The proportion of U.S. air sorties dedicated to SEAD has risen dramatically over the decades, reflecting the proliferation of sophisticated air defense networks. In Syria and Nagorno-Karabakh, Turkish drones combined with electronic warfare systems have demonstrated the effectiveness of unmanned platforms in neutralizing advanced air defenses.

The modular, multi-launch design allows these systems to support a wide range of missions, from deep-penetration reconnaissance to distributed strike and electronic attack. The concept of “combat mass” is central: affordable, numerous drones can overwhelm enemy defenses and provide persistent presence, complementing high-value crewed assets.

Integration with existing platforms and command structures is essential. Autonomous systems must operate independently in denied environments while maintaining secure communications with command and control. This requires robust AI, secure data links, and new training and doctrine to ensure effective employment.

Global Defense Industry Context and Competition

This partnership emerges amid a broader transformation of the global defense industry, driven by technological change, geopolitical tensions, and evolving operational needs. The UK’s Defence Industrial Strategy, announced alongside the partnership, aims to create up to 50,000 defense jobs by 2034/35 and includes a £250 million Defense Growth Deals fund. European defense modernization, spurred by the Ukraine conflict, has increased demand for advanced drone technology and cross-national collaboration.

The rapid evolution of drone technology is evident in the proliferation of new models: as many one-way attack drones have been introduced in the past two years as in the previous five decades. Over 120 entities in 30+ countries are developing or producing such systems, with vertical take-off and landing variants becoming increasingly common. This democratization of technology presents both opportunities and competitive challenges for established contractors.

Regulatory changes, such as the U.S. Beyond Visual Line of Sight rule, are expanding the operational envelope for both commercial and military drones. Strategic Partnerships are increasingly necessary as the complexity and pace of development outstrip the capacity of any single organization. The Skunk Works-FalconWorks collaboration is emblematic of this trend, leveraging the agility of smaller firms and the resources of major contractors.

“The answer isn’t always provided by the prime contractor… a lot of times it’s going to be the small, medium enterprises that have got the agility, from a financial and also people perspective, to rise to the challenge.”, UK military adviser

Future Implications and Strategic Outlook

The Lockheed Martin Skunk Works and BAE Systems FalconWorks partnership is more than a technical collaboration; it is a harbinger of future warfare. The modular, affordable, and rapidly deployable systems being developed offer a new paradigm for force structure, enabling distributed operations and reducing risk to personnel. This approach could become the standard for future autonomous military systems, influencing doctrine, procurement, and international collaboration.

The integration of advanced AI, rapid prototyping, and scalable manufacturing is likely to spill over into civilian applications, driving broader technological and economic benefits. At the same time, the proliferation of autonomous weapons raises complex questions about arms control, escalation, and the future of human involvement in combat. The success of this partnership may set the benchmark for future international defense cooperation and shape the competitive landscape for years to come.

Conclusion

The alliance between Lockheed Martin Skunk Works and BAE Systems FalconWorks marks a watershed in the evolution of autonomous military systems. By combining their respective legacies of innovation and agile development, these organizations are poised to deliver capabilities that address the most pressing operational challenges of modern warfare. The focus on modularity, affordability, and rapid deployment aligns with the needs of military forces facing sophisticated threats and constrained budgets.

As the global defense industry adapts to new realities, this partnership sets a precedent for cross-national collaboration, technological innovation, and strategic foresight. The systems developed under this alliance may well define the next generation of air combat and electronic warfare, shaping the trajectory of military technology and international security for decades to come.

FAQ

What is the main goal of the Lockheed Martin Skunk Works and BAE Systems FalconWorks partnership?
The partnership aims to develop modular, affordable, and rapidly deployable autonomous air systems focused on electronic warfare and suppression of enemy air defenses, complementing and protecting crewed combat aircraft.

How does this partnership differ from traditional defense industry collaborations?
Unlike typical subcontractor relationships, this is a joint research and development effort, leveraging the rapid prototyping and advanced manufacturing strengths of both organizations for maximum innovation and speed.

What market trends are driving the development of autonomous military systems?
The global military drone market is growing rapidly, projected to reach $87.63 billion by 2030, driven by advances in AI, increased operational complexity, and the need for scalable, distributed force structures in modern warfare.

What operational challenges do these new systems address?
They are designed to penetrate sophisticated electronic warfare environments, suppress advanced air defenses, and reduce the risk to human aircrew by enabling distributed and autonomous operations.

What are the broader implications of this partnership for the defense industry?
The collaboration sets a precedent for international R&D alliances, accelerates the adoption of modular and autonomous systems, and may influence future defense procurement, doctrine, and arms control discussions.

Sources: Reuters, BAE Systems, Lockheed Martin Skunk Works