The F-15 and F-16 both have long-term customer bases around the globe, some of whom are starting to look at a next-generation replacement. The Gripen, a single-engine platform, is lighter and more affordable than the competition. The single-engine F-35 is highly advanced but expensive and, for some potential customers, not yet an option from the US government.
That leaves the trio of Typhoon, Rafale and Super Hornet, all modern dual-engine, highly capable fighters, to battle over a limited market. Brazil’s late-December selection of the Gripen as its fighter replacement was just the latest blow to those competitors.
“With defense budgets tightening, Brazil’s selection of Gripen has re-emphasized there are very few nations out there who really need large, expensive, two-engine jets to meet their requirements,” said Keith Hayward, the head of research at Britain’s Royal Aeronautical Society.“They’re head to head, they’re in the same size class,” said Richard Aboulafia, vice president of analysis with the Virginia-based Teal Group. “Twin-engine heavyweights are rare. Market customers are rare. There just aren’t that many of them.
“There’s room for one very successful program, two very modest programs or three desperately flailing programs,” he said.Complicating the issue is the presence of the F-35, which looms large for many countries that might decide to wait for the fifth-generation fighter to become more affordable.Denmark, which hopes to select a fighter by mid-2015, and Canada, whose decision to purchase the F-35 has been frozen due to a political scandal, are examples of countries considering one or more of the twin-engine fighters as well as the F-35, and recent market trends signal that the plane that offers the highest capability will win, Aboulafia said.
“There is a bigger market, but it is part of the market that’s addressable by F-35,” he said. “Look at South Korea. The market has decided that the F-35 wins the countries it is entered in, which means you have to look at the last of the contests where F-35 does not play a role.”With Brazil off the table, the trio of jets will focus mainly on four nations — Malaysia, Kuwait, Qatar and the United Arab Emirates (UAE), none of which is expected to make truly massive purchases.
Even if one platform was to win all four of the major remaining competitions, the lifespan of these jets is likely running out, as domestic orders have mostly dried up. But as Saab can testify, it takes only one significant order to change the fortunes of a fighter program.Based on current sales, Super Hornet production will end in 2016. Typhoon production is secure until the end of 2017. Rafale’s domestic orders end in 2016, with exports needed to keep the line open to 2019.
“When your home market implodes or terminates, it’s tough to sustain the exports,” Aboulafia said. “The more you look at the history of fighter programs, the more you realize what freak cases the F-15s and F-16s were. You had several decades of production sustained by exports only. That’s extremely unusual.”
Fighting Over a Shrinking Market
While Boeing hopes for more US Navy orders of the Super Hornet — Boeing says the program of record is for 563 of the F/A-18E/F variants — the service intends to start operating the F-35C carrier variant in 2019. The US Navy also plans to buy 135 EA-18G Growler electronic attack variants, according to Boeing.
There are some smaller opportunities for sales, including the recent announcement from Australia that it will purchase 12 EA-18Gs, but as with its European relatives, market options are shrinking.“Current orders maintain F/A-18 production through 2016,” Boeing spokeswoman Karen Fincutter wrote in an email. “Additional domestic and international orders could extend production and maintain the industrial base, a critical American asset.”
The Super Hornet’s best hope may lie with Canada. America’s northern neighbor is one of the original country partners on the F-35 and officially decided to purchase 65 jets in 2012. But a political scandal erupted over how the plane was sold to the public, causing the government of Prime Minister Stephen Harper to freeze the decision and look at other potential options.Boeing has since begun a massive push in Canada to lobby for the Super Hornet instead of the F-35.
Underscoring how the twin-engine platforms share a market is the fact that both Dassault and Eurofighter have reportedly exchanged information with the Canadian government. But if Canada eventually reverses course on the F-35, it would almost certainly choose an American alternative, leaving the Super Hornet in prime position for what could be a game-changing purchase.The F/A-18 team hopes to compete in the Middle East as well, given the fact that the F-35 may not be available for countries there until 2025. However, the Middle East is the strongest export region for the European companies.
For much of 2013, Eurofighter appeared headed toward a major win in the UAE, which is looking to purchase around 60 jets. That changed in late December when BAE called time on negotiations to purchase, ruining the momentum Typhoon had been rebuilding in the export market following the failure the previous year to persuade India to buy the fighter and earlier decisions from 2011 involving Switzerland going for the Gripen and Japan for the F-35.
The Emirates appear to be in no hurry to conclude a deal for more fighters other than a top-up of their existing F-16 fleet numbers and are likely to revisit all potential suppliers, including Dassault, Boeing and Eurofighter.The door could still be open to the Typhoon if BAE and its partners can find common ground with the hard-bargaining Emirates on price, offset and technology transfer issues.Whether the UAE decision highlights shortcomings in the negotiating position of the British-led Eurofighter bid for the UAE requirement is hard to tell.
Gulf Opportunities
Still, the Arabian Gulf region remains the greatest hope for Eurofighter. Last summer saw the successful conclusion of a deal with Oman for 12 Typhoons.Further good news for Typhoon came last year in the shape of verbal backing from the King of Bahrain for the purchase of 12 to 18 jets during a visit to London.
Elsewhere around the gulf, the Typhoon is a contender in a Qatari competition for up to 72 jets and a smaller requirement from Kuwait.The best prospect in the region, though, remains Saudi Arabia. The Saudis are looking to add a second batch of Typhoons to the 72 jets being delivered by BAE.Any further deal, however, is dependent on BAE and the Saudis settling differences that have been rumbling on for several years over contractual pricing obligations on the first batch of aircraft.
Any arms deal in the Gulf is part of a larger political picture, said a defense specialist in Paris, and could change as regional powers such as Saudi Arabia and Qatar take into account the Western powers’ position on Iran, the fighting in Syria and conflict between Shiite and Sunni Islamic forces.
French President François Hollande visited Saudi Arabia on Dec. 29 and 30 and met King Abdullah. But Hollande left the desert kingdom without an announcement on a multi-billion euro contract to upgrade the Thales short-range air defense missile to a Mark 3 version. “That was a bad sign,” the specialist said.
Prospects for a sale of the Rafale in the Arabian Gulf, particularly in Qatar and the UAE, can be traced to Hollande, who wanted to boost relations with Oman, Qatar and the UAE, rather than a previous focus on Saudi Arabia, the specialist said.
Hollande also handed over the export drive to Defense Minister Jean-Yves Le Drian, rather than have a “war room” at the Elysées presidential office set up by his predecessor, Nicolas Sarkozy.Le Drian said there would “soon be results” for the sale of the Rafale to India and in “the [Arabian] Gulf,” business daily Les Echos reported Dec. 19, after BAE pulled out of the UAE competition. Le Drian is seen by the French press as having rebuilt bilateral ties between Paris and Abu Dhabi after a couple of years of chilled relations.
Dassault Executive Chairman Eric Trappier told Les Echos at the IDEX arms trade show in Abu Dhabi in February there was a “road map,” indicating the French fighter was back in the race, the paper reported.Qatar offers a good chance for signing up for the Rafale, again helped by Le Drian’s hard work, La Tribune reported. “The minister received positive messages,” the website reported when Le Drian visited Qatar on Nov. 17 after the Dubai Airshow.
Delays in Asia
Outside of the gulf region, Boeing, Dassault and Eurofighter are targeting Malaysia as the main prize in what is a rapidly shrinking list of priority markets. Saab is also competing in the market.But the fighter program for the Southeast Asian nation is pretty much on ice for the next couple of years due mainly to economic and political factors.
National elections held in May returned Najib Razak as prime minister. What that means for French hopes to sell the Rafale to the Asian nation is unclear, as Najib was the defense minister who approved an order for four Franco-Spanish Scorpene attack submarines. That deal drew corruption allegations during the election campaign, so it remains to be seen if the Najib government will opt for the French fighter, the Paris-based specialist said.The likely delay is giving the contenders breathing space to look at a range of purchasing options for the customer, including possibly leasing fighters.
Last year, Saab announced it had put forward leasing proposals with the Gripen, and Boeing has a 10-year deal on the table, according to industry sources who asked not to be named.West of Malaysia lies Dassault’s major trump card. In early 2012, India selected the Rafale for its Medium, Multi-Role Combat Aircraft competition, under which the growing South Asian power plans to purchase 126 fighters.
Dassault received preferred bidder status over Eurofighter on cost grounds. But despite the selection, the two sides have been trying to nail down an elusive final agreement for much of the past two years.A revised Typhoon bid for New Delhi is waiting in the wings from the Airbus Defence and Space, BAE and Finmeccanica consortium in the hopes that Indian negotiations with the French fail.
Eurofighter officials said, though, that export opportunities exist for Typhoon outside the Middle East and Southeast Asia and point to Denmark, Canada, Poland, Bulgaria and even South Korea as potential customers.
The Koreans have recently selected the F-35 for their fighter requirement, but Eurofighter and Boeing, whose F-15K model the Korean Air Force already uses, continue to promote the idea of a mixed fleet of jets as the best solution for the South Korean military.
Saab Aims for Growth
While its twin-jet rivals scramble for orders, Saab’s fortunes have been transformed of late by selection of the Gripen E by Switzerland and most recently Brazil.Both of those deals still need to signed and sealed, but they are underpinned by a recent Swedish government order to upgrade 60 Air Force C versions of the fighter to the latest standards. Saab has already secured work for its Gripen factories until 2026 on the Swedish upgrade.
The 36-aircraft deal sets Brazil up as “arguably Saab’s most important export customer,” Teal Group’s Aboulafia said.They came close to being an orphan aircraft, and instead they’ve had a series of planes that have expanded their export market presence,” he said. “They’re building something. They’re not going to be the next F-16, but they’ve been able to keep the line alive and reinvent the family — that’s a pretty good achievement, especially since we’re talking about Sweden here, which isn’t exactly a major military power.”
The 22 Gripens earmarked for the Swiss will take new build work out to 2022 and possibly further once Brazil and other potential customer orders are taken into account.The initial Brazilian requirement is for 36 jets, but the expectation is that number could grow to around 100 or even more if a Sea Gripen version is developed to meet Brazilian Navy aircraft carrier ambitions.
Ulf Nilsson, head of the Gripen program at Saab, said a Sea Gripen has been mentioned but not in any great detail. As to the Brazilian Air Force purchase, Nilsson said the only number they have seen so far is for 36.“I don’t have any figure for the total number and how they might want to continue, but obviously there are hopes for a second batch of Gripens,” he said.
Regardless of the final number for Brazil, Gripen’s selection would have knock-on effects in other markets, Nilsson said.“I wouldn’t say it’s a game changer, but it is an important step for us, and it certainly gives Saab a better opportunity to look at the world market and the potential to grow strongly around our current customers. Brazil opens up the possibility to grow in South and Central America while Asia and Eastern Europe continue to be interesting regions for us,” he said.The jet has already been sold or leased to Sweden, the Czech Republic, Hungary, South Africa, Thailand and the UK’s test pilot school.
Nilsson said Saab saw Malaysia and Indonesia as potential customers for the Gripen.“Interest in Gripen has never been bigger. It’s been growing in the last year, and obviously the recent selection will help further for the future, particularly as we know other countries have been looking at which fighter Brazil opts for,” Nilsson said. ■By ANDREW CHUTER, AARON MEHTA and PIERRE TRAN http://www.defensenews.com
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