Fighter Competitions Could Make or Break Contractors

Dec 5, 2008
By Bill Sweetman

Within a couple of years, some aerospace companies and industries might be eliminated from fighter markets where they have competed for decades, facing, at best, a hard and uncertain road back into the business.

All eyes are on Norway, the Netherlands and Denmark, seeking a replacement for their F-16s. Norway needs 48 new aircraft, the Netherlands nominally 85, Denmark 24. Norway is moving toward a decision as early as this month. The Netherlands is expected to decide early in 2009, Denmark later in the year.

It’s remarkable that these nations are holding competitions at all. The F-16 program forged industrial and military bonds with the U.S. Air Force and Lockheed Martin, and all three countries were early partners in the F-35 Joint Strike Fighter (JSF).

JSF is driving the timing of these decisions. If this was an off-the-shelf purchase, the customers would not have to make a decision yet, since none is looking at initial operating capability (IOC) before 2016. But Lockheed Martin says it needs to ramp up production now to hit cost targets and wants to bind its partners into an early, large and contractually enforceable joint commitments to their 2012-16 buys. Before 2007, there seemed little doubt that Norway, Denmark and the Netherlands would lead the way into such a deal. Ironically, it was Eurofighter that started to change the picture in Norway, lobbying aggressively for an open competition, before pulling out of Norway and Denmark early this year.

But Sweden has taken the offensive: The Gripen Next Generation (NG), a paper concept in 2006, is now a fully funded program, including a flying prototype and major ground demonstrations, backed up by a Swedish government undertaking to buy the aircraft if export customers commit. Saab regards all the competitions as real—even in the Netherlands, regarded as the toughest nut to crack—and has offered an industrial participation (IP) program that Norway’s industry nominated as its favorite.

IP is one of the “wedge issues” in the Netherlands/Norway/Denmark theater. In 2007, a weak dollar started to make local industries wonder how they could hope to win and maintain high-tech shares in the JSF program. Saab offered a fixed share, not just a chance to compete. Saab has also been pushing the Gripen’s fuel economy—it’s half JSF’s size—and low maintenance costs, which are largely known since it combines a modified airframe with a proven engine.

The influence of U.S. politics and progress with the JSF program will be important, perhaps decisive. So far, the schedule slippages in the JSF program have not reached the point where they imperil export IOC dates, but neither has their cost impact been fully gauged. The schedule between now and mid-2012—when the U.S. Marines are supposed to hit IOC—is tight. The Air Force and U.S. Navy both face funding crunches. Lockheed Martin wanted to close a bulk-buy deal long before a new administration arrived in town, but this turned out to be impossible.

JAS 39D Gripen takes off from Emmen air base in Switzerland, armed with Amraam and IRIS-T missiles.

Whether all this will be enough for Gripen to win is an open question. Pro-JSF preference in the Netherlands is entrenched, and the U.S. has permitted Lockheed Martin to offer low fixed prices to secure its first batch of export orders. (The Pentagon itself, by law, cannot order a multiyear production batch until operational testing is completed.) While the JSF’s ability to carry four internal advanced medium-range air-to-air missiles was barely mentioned a year ago, project officials are now talking about (unproven) six- or eight-missile loadouts.

But Gripen has maneuvered JSF into a “must-win” scenario. The program could tolerate a loss in Norway or Denmark, but to lose both—or, horrors, a Dutch defection—would be a shock that would encourage opponents in Australia and elsewhere.

And Saab can lose and still win. Even if the JSF prevails, the Gripen will be the aircraft that placed second and posed the most serious competition to the big guns of the U.S. team, in three nations with respected, professional air forces. The Gripen team will continue to support the NG until several other contests are decided.

Among these are Switzerland and Brazil. The former has downselected to Gripen, Rafale and Typhoon; the latter to Gripen, Rafale and the F/A-18 Super Hornet. Switzerland has evaluated all three aircraft in-country and expects to make a decision in the third quarter of 2009.

Other than India, they are the only near-term contests where the European twins are engaged. Also, Brazil included the Super Hornet in its downselect, while the fighter was pulled out of Switzerland—even though it is a current Hornet operator, and Boeing’s only Super Hornet export so far was based on the ease and low cost of transition from the “classic” to the new aircraft.

The Swiss air force has placed a priority on short takeoff and landing, maneuverability and good performance in the intercept role; all three contenders are better at high Mach than the Super Hornet. Brazil showed some interest in the Sukhoi Su-35, but eliminated it (according to Russian sources, because Russian industry could not compete on IP), and is showing political balance: its choices are the Rafale, which is free of U.S. content, Gripen—with a lot of important parts from the U.S.—and the all-U.S. Super Hornet. All, however, have potentially powerful offset programs, and there is a possibility that a Rafale order could be linked to the transfer of French nuclear submarine technology.

After Switzerland and Brazil are decided, the Rafale is down to India. Typhoon is in play there, with longer-shot prospects in Korea and Japan. So far, however, the market seems to be taking its cues from the fighters’ sponsors in the U.K., Italy and France and their tepid support for both programs. The advantage in that respect belongs to Rafale, which has not been hampered by endless negotiations over every production batch of aircraft, and should benefit from a French government decision next year to buy 60 more aircraft and integrate active electronically scanned array (AESA) radar.

Both European twins suffer from high price tags, being more expensive than the projected price of JSF and more costly than the Super Hornet. And although fighters are Dassault’s heritage, it’s easy to forget that the company’s main business is selling corporate jets. The company has no incentive to give the Rafale away.

Boeing, as a competitor in Brazil, is working to eke out the Super Hornet line, which is supposed to close in 2014 as the Navy ends production in favor of the F-35C. But Boeing has taken advantage of a stable Navy production program to turn the Super Hornet into a model of efficient production.

A Luftwaffe Typhoon taxies at Emmen during recent Swiss evaluation flights.

Within the Navy, the Super Hornet program office has been known to talk up the idea of extending orders by two or three years, which invariably means a corresponding delay in the start of F-35 production. It is an appealing idea to the black-shoe Navy—the surface fleet—since the deferred cost of introducing the F-35C in those years can be transferred into the cash-strapped shipbuilding program. It has reached the point where Congress has cut two early F-35Cs from low-rate initial production, and Pentagon leaders are warning that the move could result in a separate, later test program for the Navy. The same game is playing out in Australia, where Boeing is proposing another 24 Super Hornets—or even a Super Hornet/Growler mix—in the event that JSF is delayed.

Results in these near-term competitions will influence future contests. If Switzerland and Brazil don’t yield a win for Rafale, Typhoon or the Super Hornet, it is hard to see why they would emerge better placed in India, for example; and in Japan and Korea—possible Typhoon targets—the question is always whether the interest is serious, or whether the Europeans are being kept in play to keep competitive pressure on the U.S.

A Gripen win in either, though, would add to its strength in India, and boost its already strong position against the F-16 in the new NATO countries, where Vladimir Putin is emerging as the best marketing representative for Western fighters since the end of the Cold War. The biggest potential win is in Romania, which is looking for 48 aircraft; Croatia is looking for 12 fighters, and the Slovak Republic 14, with Bulgaria, Estonia, Latvia and Lithuania also in prospect.

Whether it was Niels Bohr or Yogi Berra who said, “Prediction is very difficult, especially about the future,” some outcomes from this complex picture seem more likely than others. Barring catastrophe in the JSF program, it will still be an upset if Gripen wins Norway or Denmark, and an earthquake if the Swedes win in Holland. That said, it seems likely that Gripen will score more successes, like Switzerland and Romania. And that means, in turn, that the Typhoon, Super Hornet and Rafale are in contention for the remaining market, which may be big enough for two, but not for three.

Aviation Week

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