4 DefenseNews

January 6, 2014


By ANDREW CHUTER, AARON MEHTA and PIERRE TRAN LONDON, WASHINGTON and PARIS — When Brazil selected Saab’s Gripen fighter last month for the F-X2, it underscored just how little remaining market space remains for the highly capable, but highly priced, dualengine fighters from Boeing, Eurofighter and Dassault. For countries looking to upgrade their fighter capabilities, there are seven major competitors from the Western market — the Saab Gripen, Eurofighter Typhoon, Dassault Rafale, Boeing’s F-15 Strike Eagle and F/A-18 Super Hornet, and Lockheed Martin’s F-16

Trouble for the Twin-Engine Giants?
Falcon and F-35 Joint Strike Fighter. 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.


Shrinking Opportunities: Brazil’s selection of the more affordable single-engine Gripen may signal the slim chances of a win in today’s market by twin-engine competitors like the Boeing Super Hornet, Dassault Rafale and Eurofighter Typhoon. Complicating the issue is the presence of the F-35, which looms large for many countries that might decide to wait for the fifthgeneration 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 both examples of countries considering one or more of the
See FIGHTERS, Page 5

The jet has already been sold or leased to Sweden. which isn’t exactly a major military power. 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. In early 2012. 2014 DefenseNews 5 FIGHTERS From Page 4 twin-engine fighters as well as the F-35. given the fact that the F-35 may not be available for countries there until 2025. Kuwait. “Current orders maintain F/A-18 production through 2016. Saab has already secured work for its Gripen Delays in Asia Outside of the gulf region. though. Thailand and the UK’s test pilot school. It’s been growing in the last year. the paper reported. “They came close to being an orphan aircraft. but it is part of the market that’s addressable by F-35. However. Poland.” Teal Group’s Aboulafia said. it would almost certainly choose an American alternative. including possibly leasing fighters. Canada. the fighting in Syria and conflict between Shiite and Sunni Islamic forces. Hungary. but they’ve been able to keep the line alive and reinvent the family — that’s a pretty good achievement. As to the Brazilian Air Force purchase. again helped by Le Drian’s hard work. Super Hornet production will end in 2016. offset and technology transfer issues. it takes only one significant order to change the fortunes of a fighter program. West of Malaysia lies Dassault’s major trump card. Dassault received preferred bidder status over Eurofighter on cost grounds. Le Drian said there would “soon be results” for the sale of the Rafale to India and in “the [Arabian] Gulf. and could change as regional powers such as Saudi Arabia and Qatar take into account the Western powers’ position on Iran. 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. Dassault and Eurofighter are targeting Malaysia as the main prize in what is a rapidly shrinking list of priority markets. 17 after the Dubai Airshow. 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. Nilsson said Saab saw Malaysia and Indonesia as potential customers for the Gripen. remains Saudi Arabia.” Aboulafia said. “Additional domestic and international orders could extend production and maintain the industrial base.” the specialist said. Nilsson said the only number they have seen so far is for 36. Based on current sales. The US Navy also plans to buy 135 EA-18G Growler electronic attack variants.” Boeing spokeswoman Karen Fincutter wrote in an email. rather than have a “war room” at the Elysées presidential office set up by his predecessor. amehta@defensenews. Rafale’s domestic orders end in 2016. continue to promote the idea of a mixed fleet of jets as the best solution for the South Korean military.” 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. 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. the Czech Republic. rather than a previous focus on Saudi Arabia. National elections held in May returned Najib Razak as prime minister. particularly as we know other countries have been looking at which fighter Brazil opts for. “They’re building something. 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.defensenews.” he said. and instead they’ve had a series of planes that have expanded their export market presence. French President François Hollande visited Saudi Arabia on Dec. the Middle East is the strongest export region for the European companies. however. The Koreans have recently selected the F-35 for their fighter requirement. none of which is expected to make truly massive purchases.” indicating the French fighter was back in the race. “Interest in Gripen has never been bigger. Ulf Nilsson. The likely delay is giving the contenders breathing space to look at a range of purchasing options for the customer. Boeing has since begun a massive push in Canada to lobby for the Super Hornet instead of the F-35.” 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 — that service intends to start operating the F-35C carrier variant in 2019. “I wouldn’t say it’s a game changer. can be traced to Hollande. head of the Gripen program at Saab. La Tribune reported. which means you have to look at the last of the contests where F-35 does not play a role. But despite the selection. The initial Brazilian requirement is for 36 jets. South Africa. and it certainly gives Saab a better opportunity to look at the world market and the potential to grow strongly around our current customers. under which the growing South Asian power plans to purchase 126 fighters. 29 and 30 and met King Abdullah. Qatar and the UAE. Hollande also handed over the export drive to Defense Minister Jean-Yves Le Drian. according to industry sources who asked not to be named.com WORLD NEWS January 6. . “There is a bigger market. The Saudis are looking to add a second batch of Typhoons to the 72 jets being delivered by BAE.” With Brazil off the table. “Look at South Korea. 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. with exports needed to keep the line open to 2019. particularly in Qatar and the UAE.” he said. though. Saab’s fortunes have been transformed of late by selection of the Gripen E by Switzerland and most recently Brazil. A revised Typhoon bid for New Delhi is waiting in the wings from the Airbus Defence and Space. the Paris-based specialist said.com. That changed in late December when BAE called time on negotiations to purchase.www. The F/A-18 team hopes to compete in the Middle East as well. Multi-Role Combat Aircraft competition. leaving the Super Hornet in prime position for what could be a gamechanging purchase. but it is an important step for us. said a defense specialist in Paris. factories until 2026 on the Swedish upgrade. which is looking to purchase around 60 jets.” he said. BAE and Finmeccanica consortium in the hopes that Indian negotiations with the French fail. What that means for French hopes to sell the Rafale to the Asian nation is unclear. “When your home market implodes or terminates. Prospects for a sale of the Rafale in the Arabian Gulf. but they are underpinned by a recent Swedish government order to upgrade 60 Air Force C versions of the fighter to the latest standards. the Typhoon is a contender in a Qatari competition for up to 72 jets and a smaller requirement from Kuwait. after BAE pulled out of the UAE competition. Saab announced it had put forward leasing proposals with the Gripen. They’re not going to be the next F-16. but as with its European relatives. it’s tough to sustain the exports. 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 market has decided that the F-35 wins the countries it is entered in. Saab Aims for Growth While its twin-jet rivals scramble for orders. Gripen’s selection would have knock-on effects in other markets. Dassault Executive Chairman Eric Trappier told Les Echos at the IDEX arms trade show in Abu Dhabi in February there was a “road map. N Email: achuter@defensenews. especially since we’re talking about Sweden here. Any arms deal in the Gulf is part of a larger political picture.com. as Najib was the defense minister who approved an order for four FrancoSpanish Scorpene attack submarines. “The more you look at the history of fighter programs. Eurofighter appeared headed toward a major win in the UAE. including Dassault. The best prospect in the region. but both Eurofighter and Boeing. Boeing. as domestic orders have mostly dried up. Elsewhere around the gulf. But if Canada eventually reverses course on the F-35. India selected the Rafale for its Medium. Nilsson said. America’s northern neighbor is one of the original country partners on the F-35 and officially decided to purchase 65 jets in 2012. Any further deal. “That was a bad sign. and Boeing has a 10year deal on the table. causing the government of Prime Minister Stephen Harper to freeze the decision and look at other potential options. But a political scandal erupted over how the plane was sold to the public. Even if one platform was to win all four of the major remaining competitions. That deal drew corruption allegations during the election campaign. market options are shrinking. the trio of jets will focus mainly on four nations — Malaysia. Last year. so it remains to be seen if the Najib government will opt for the French fighter. 19. Qatar and the United Arab Emirates (UAE).” business daily Les Echos reported Dec. but obviously there are hopes for a second batch of Gripens. Typhoon production is secure until the end of 2017.” he said. For much of 2013. Regardless of the final number for Brazil. Saab is also competing in the market. You had several decades of production sustained by exports only. and obviously the recent selection will help further for the future. Last summer saw the successful conclusion of a deal with Oman for 12 Typhoons. 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. Brazil opens up the possibility to grow in South and Central America while Asia and Eastern Europe continue to be interesting regions for us. a critical American asset. Eurofighter officials said. that export opportunities exist for Typhoon outside the Middle East and Southeast Asia and point to Denmark. the lifespan of these jets is likely running out. “I don’t have any figure for the total number and how they might want to continue. Boeing and Eurofighter. That’s extremely unusual. said a Sea Gripen has been mentioned but not in any great detail. Aboulafia said. Bulgaria and even South Korea as potential customers.” the website reported when Le Drian visited Qatar on Nov. ptran@defensenews. the specialist said. the more you realize what freak cases the F-15s and F-16s were. according to Boeing. whose F-15K model the Korean Air Force already uses. the two sides have been trying to nail down an elusive final agreement for much of the last two years. There are some smaller opportunities for sales. The 36-aircraft deal sets Brazil up as “arguably Saab’s most important export customer. But as Saab can testify. Nicolas Sarkozy. including the recent announcement from Australia that it will purchase 12 EA-18Gs. 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. “The minister received positive messages.” Nilsson said. Both of those deals still need to signed and sealed. 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. Qatar offers a good chance for signing up for the Rafale. 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.com. and recent market trends signal that the plane that offers the highest capability will win. who wanted to boost relations with Oman.” The Super Hornet’s best hope may lie with Canada. the Arabian Gulf region remains the greatest hope for Eurofighter.

a hypersonic. a single system offers an affordable. The administration has pledged another $460 million over the next two years.5 million unit cost of existing PAC-3 missiles. Estimated funds to be spent in the US on co-produced subassemblies is $170 million. “From day one. a US-Israel government-funded and managed program in which Raytheon serves as principal subcontractor to Israel’s stateowned Rafael. developed for the David’s Sling Weapon System.com. intercepting missions now performed by Lockheed-built missiles. since the same PAC-3 battery and the same PAC-3 radar will be capable of launching two or even three kinds of interceptors. Part of Israel’s planned multilayered active defense intercepting network.” Chris King. to extend our activities for possible use by the US Army. In the coming months. along with $220 million for procurement. will trigger David’s Sling transfer to Israel Air Force operators. N Email: bopallrome@defensenews. radar-guided PAC-3 missiles produced by Bethesda. director of Rafael’s Missile Defense Systems Directorate.-based Lockheed rael.16 DefenseNews January 6. … We continue to work closely with Rafael on this important program. facility and both firms are ramping up for fullrate production. Yungman insisted the proposed US Stunner.” Under their existing agreement. which were either unwilling or unable to meet its cost and schedule requirements. the two firms are seeking Pentagon approval to integrate Stunner into a fourth-generation intercepting system that utilizes Raytheon-developed Patriot Advanced Capability-3 (PAC-3) radars. computerized three-pulse motor. Raytheon would lead a team of US subcontractors for co-production of Tamir-related components and subsystems. he said. 29. pending final approval by Israel’s Defense Ministry and the Pentagon’s Missile Defense Agency. Yungman said Raytheon-produced subassemblies of the Tamir interceptor strengthens a marketing agreement between the two firms aimed at prospective sales of the Iron Dome to the US Army. the industry partners are working with government program officials toward a final intercept test that. he said Raytheon is leading efforts to adapt the joint kinetic-kill Stunner interceptor for possible use by the US Army and allied forces. Rafael plans to adopt a new agreement on Tamir. In parallel. Md. program sources said. . In parallel. Raytheon will assume prime contractor status. It aims to defend hundreds of square kilometers of airspace against an array of threats. with final assembly and integration in Israel by Rafael. Ariz.” Yungman said. and less than 25 percent of the planned PAC-3 missile segment enhanced missiles.com MIDDLE EAST Rafael. the David’s Sling Weapon System is planned for initial deployment this year. who is Yungman’s counterpart at Raytheon Missile Systems and manages Israeli cooperative programs. Martin. It just means American users will have additional options. In a late December statement.” Raytheon is nearing the end of its first lowrate production lot at its Tucson. declined to provide details of cost and performance benefits associated with the proposed US Stunner.defensenews. The missile may be adapted for US and allied use. Raytheon Expand Active Defense Alliance By BARBARA OPALL-ROME TEL AVIV — Rafael and Raytheon are expanding their active defense alliance through coproduction of the Israeli Iron Dome and possible adaptation of the jointly developed Stunner interceptor for use by the US Army and its allies. If adapted for the US and allied markets. While Israeli defense and industry officials had hoped to retain in-country all work on the short-range intercepting system. a US Stunner adapted to Army requirements could cost less than half of the estimated $3. King said the two firms are working “seamlessly” on development. testing and production of the Stunner interceptor and are “on track” to reach operational capability in defense of Is- Low-Cost Option Industry sources claim the two-stage. Raytheon co-develops Stunner’s inertial measurement unit and other software and leads a team of more than 10 US subcontractors producing missile-firing units. dual-mode Stunner offers a low-cost option to single-stage. hit-to-kill defense against a full range of threats from the ground to the atmosphere. prime contractor Rafael and Raytheon share equally in development and production of the David Sling’s Stunner. “That doesn’t mean Stunner should replace PAC-3 interceptors. Initial funding to establish a US-based production capacity was included in the 2014 defense authorization bill passed last month. a maneuvering missile developed by Rafael for Israel’s Iron Dome intercepting batteries. we designed this as a common interceptor for the US Army. The two firms are partners on the Stunner. with 60 percent of work to be performed in the US by the Raytheon-led team.” the program source said on Jan. RAFAEL New Role? The US-Israel David’s Sling. “Raytheon is committed to defense technology alliances that lead to the delivery of affordable and reliable systems capable of guarding the United States and its allies against a range of threats. flexible. 2. is tested Nov. Under the agreement. composite canisters and rocket boosters. if successful. Israel is slated to receive $205 million (minus sequestration) in 2013 funds and another $255 million (minus sequestration) in 2015. armed with its Stunner interceptor. highly maneuverable two-stage missile designed to destroy threats through impact. “We need to make sure that the target price of missiles containing US-built content come close to the price the government of Israel pays for missiles built here by Rafael. “But after careful consideration. launchers and engagement control stations already fielded by the US Army. Rafael is responsible for core capabilities. we understood the strategic partnership that has proven itself with David’s Sling would provide the most benefit on Iron Dome and plans. He said Rafael selected Raytheon after discussions with other leading US missile firms. would enhance. 2014 R1 www.” he said. Pini Yungman. An Israeli program official said the government-to-government agreement should be concluded in coming weeks. said once the government agreement is signed. As for prospective US and allied sales..” he said. launched from existing PAC-3 Patriot infrastructure. aerodynamic dolphin-shaped design. including the Stunner’s dual-mode seeker. only a very small number of launch sites are needed to defend countries or operational areas larger than the state of Israel.” Yungman said. sources here said. “We didn’t start with Raytheon. Specifically. Based on data derived from three successful intercept tests and an extensive cost analysis by Rafael-Raytheon partners. Pentagon officials and congressional leaders have conditioned release of some $680 million (minus sequestration) in promised funding on Israel’s agreement to establish US-based production. rather than compete with. “And because of its extended range and vast coverage capabilities. provided the two governments agree to terms for US-based manufacturing. in future. “For the first time. steering control and its lightweight. Rafael would move forward with its own agreement with Raytheon.

While Boeing’s lost bid in Brazil is a major setback for the company. But defense export is a peculiar case as it goes to the very core of national sovereignty issues. Clearly. But also it has cost Boeing billions of dollars in Brazil. even among America’s traditional friends and allies. Brazil’s reaction has been especially vocal. The current review of NSA by the White House is therefore an opportune moment to address NSA practices and put in place stricter guidelines. For these reasons. If so. and with a strong research and development (R&D) and hightech base. Of course. Boeing’s Loss: Brazil announced it will purchase the Swedish-made Gripen for its fighter fleet. also attributed to the Snowden scandal. A guiding principle must be that intelligence efforts. overseas exports will become all the more important for US defense companies. Mutual trust is an important element in defense trade. the US needs to take swift. Clearly. The Snowden documents allegedly revealing unprecedented US spying programs overseas have caused an NSA Scandal Hurts US Exports Underscored by Brazilian Fighter Bid Loss enormous backlash around the world. the still unfolding NSA scandal has become a huge liability for US defense companies seeking to sell their products and systems to other countries. But it is also the latest example of the negative fallout from the Edward Snowden revelations on the By Erik Brattberg. US defense resident fellow at the industry. Brazilian officials have publicly discussed the need for local Internet data storage for American tech companies like Google and Facebook to keep information safe from the NSA’s snooping. As the world’s leading producer and exporter of defense products. maintenance costs and the potential for technology transfer. Of course. the spying crisis will continue to hurt America’s defense industry abroad. the US cannot afford to see its defense exports take a heavy toll as a result of the political and diplomatic crisis that the Snowden scandal has triggered. 2014 DefenseNews 21 T o assess the impact of the National Security Agency scandal on US defense sales abroad. Exporting American defense systems also gives the United States strategic leverage and eases military interoperability between US and foreign militaries. this would be detrimental for the US defense industry. Earlier in 2013. including price. President Dilma Rousseff (whose personal email account and phone were allegedly tapped by the NSA) decided to cancel her planned trip to Washington in what can only be seen as a personal snub to President Barack Obama. No one should be surprised if other nations decide to follow suit with the same rationale that left Boeing empty-handed in Brazil. Merely reassuring words from Obama are not going to cut it this time to allay allies’ fears. As the Pentagon’s budget is projected to shrink over the coming decade. No surprise here. one need not look any further than Brazil. Brazilian officials did not hide the fact that the NSA scandal also played a key role. pen plane instead of the American F/A-18 was based on several factors. take place only when they are merited by the presence of a significant national security threat. And it is trust that the NSA scandal has undermined and which must be restored abroad. defense exports are not the only ones hurt by the NSA scandal — other sectors are affected as well.www. it is merely the latest example of how the Snowden revelations are hurting US strategic interests abroad. Let’s therefore quickly get past the current mess and move on. In another example. such as tapping foreign leaders’ personal communications. the NSA scandal has been costly to the American reputation abroad. This would be very unfortunate as a strong defense industrial base is crucial to US global leadership over the coming decades. If left unaddressed.defensenews. The Chinese reluctance in this case was STEFAN KALM/SAAB Saab’s Win. the US has plenty to offer to the rest of the world. bold action. US tech exports by companies such as Cisco and IBM experienced difficulties selling in China. over the Boeing F/A-18 Hornet and Dassault Rafale. Moreover. In response to the NSA scandal. Brent Scowcroft the Brazilian Center on International Security at the decision to purchase the Atlantic Council in Swedish GriWashington.com January 6. Stronger judicial oversight of the NSA’s intelligence-gathering activities is a starting point. Still. N . The December announcement that Boeing lost a multibillion-dollar bid to supply the Brazilian military with its next fighter jet fleet to Swedish defense company Saab is clearly a major setback for the American manufacturer.

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