Saturday, October 1, 2011

The end is near

The next few years are very decisive for Swedish aircraft manufacturer Saab AB. The Gripen assembly line will soon be closed due to lack of customers. The only aircraft left to build is Thai Air Force batch 2 (6 aircraft), a few of the South African (most of the 26 on order has been delivered) and a few of the Swedish A2C updated Gripen (31 on order). Most likely this will finished in a few years time. This lack of future sales is however a common problem for all three major European military aircraft manufacturers.

What will happen after this?

- Thai Air Force will most likely buy some more aircraft. 12 Gripen is not a lot to build the future of their air defence capability on. At least 6 to complete one squadron of strength. If the introduction of the Gripen goes well it is likely that they will order another 18 to replace all their F-5. Somewhere in the future it will be a need to replace their F-16. But who knows what the political situation in Thailand will be then? The old king Bhumibol will not live forever and there is no heir that is as accepted as the king. The new prime minister Yingluck Shinawatra will most probably give her brother Thaksin amnesty in the future. What kind of political unrest this ould lead to is hard to predict, but it will not make it easier to sell any more aircraft to Thailand.

- Two of the existing customers have troubles. Tho global financial problems have affected South Africa and Hungary and resulted in lack of money to operate their new aircraft. Of course this will be used by other companies to market their products. But it will be very difficult for them to show that their products are less costly to operate than the Gripen. The choice is between Gripen aor no fighter at all in the future. The outcome of such an campaign could be that there will be no fast jets at all operated in the future in these countries. Rumours say that USA is trying to convince Hungary to focus on helicopters instead of fighters.

- The Czech Air Force leasing contract ends in 2015. What will happen after this is still unknown. The pilots are very happy with their existing aircraft, but pilots don´t decide the future of their air forces, politicians do. Most likely USA and Lockheed Martin are doing their best to offer a "cheap" F-16 solutions in a similar way as for Poland. The F-16 is an older and less capable aircraft than the Gripen, but maybe closer ties to USA and NATO are more important for Czech politicians than the aircraft initself?

The new contracts are still to be decided. But new development in some countries might lead to fast decisions.

- The Swedish minister of defence is publicly stating thet if Brazil buys the Gripen E/F, then the Swedish Air Force will also by at least 10 Gripen E/F. Why he goes out with this message is unclear, but most likely it indicates that the Brazilian government is close to making a deal. The previous president Lula had close ties to France (Rafale), but president Dilma seems it is more important to have close ies to USA (F-18). Unfortunately Sweden is a small player on the global political arena and this might result in a second place in the competition.

- In India the Gripen is not in the MMRCA-competition any more. But there are other business deals in India that might be more attractive to Saab. The MRMR competitin is still ongoing.

Swedish defense and aerospace company SAAB is planning to offer its SAAB 2000 aircraft to the Indian Navy when it issues a Request For Proposal (RFP) for Medium Range Maritime Reconnaissance (MRMR) aircraft in the next few months.

While the SAAB 2000 is being offered with the RBS-15 Anti Ship Missile and a fifth generation Selex AESA radar, what is also interesting is that SAAB is offering re-manufactured aircraft, since the company ceased production of the aircraft in 1999.

“We will take an existing SAAB 2000. We will re-manufacture it and build it up. So it will be ground zero flying hours. We will have all the warranties. We will have 35,000 flying hours. It will have 25 years of support,” said Tommy Hultin, SAAB’s Business Development Director for the program.

That is one reason to why Saab still focusing on India.

This centre is a part of Saab's future offer for the world market. The aim of the research and development centre is to transfer to India continuously, already identified concrete programmes and technologies. The centre will form a bridge between India and Sweden, and together with an initial base of 100-300 skilled Indian engineers, form the backbone of the centre. It will stimulate innovation all around India, said Saab president and CEO Hekan Bushke.

The areas of focus would cover aerospace, defence and urban innovation, including civil security. The centre will be established in cooperation with Indian partners and universities, and will create new innovations, new technology and exporting opportunities for Indian governmental, academic and industry entities.

There are also other interesting Saab products for India. The RBS 70 NG has lately been offered.

The Swedish defense company, Saab, has offered the RBS 70 NG for the Indian tri-service tender for Very Short Range Air Defense (VSHORAD) systems. The tender is for an initial order estimated to be worth INR 27,000 crore (USD 5.4 billion) for over 800 launchers and over 5,000 missiles. Saab says it has sold more than 1600 systems and 17,000 missiles to 18 countries. This could be its single largest order if it works out for them.

- Switzerland has been evaluating fighters for many years to replace their F-5. The evaluation has been stopped more than once in order for the government to find political approval from the the voters. But now they have decided to go ahead with the evaluation again.

Parliament has approved an annual budget of SFr5 billion ($5.6 billion) for Switzerland’s armed forces, including the purchase of fighter jets.

The Senate on Wednesday followed the House of Representatives in agreeing to pay for the new aircraft, despite opposition by the centre-left which is concerned about costs in other areas. Critics also pointed out that the bill could not be challenged to a referendum.

It is not clear if the Suiss Air Force will go for the Gripen E/F or if the budget will only allow them to focus on the Gripen C/D. After all Switzerland is not a big country and the extra range of the Gripen E/F might not be a decisive capability.

I personally believe that Saab´s main focus should be to sell the cost effective Gripen C/D to countries with a low budget instead of competing with the Gripen E/F against the more expensive Rafale, Eurofighter, F-35 and PAK-FA T-50. Unfortunately the countries interested in an inexpensive capable fighter as the Gripen C/D (Croatia, Bulgaria, Rumania etc.) has almost no money at all. There is a need for a deal that gives something in return for these countries. But EU rules today forbid so called offset affairs (if you buy something from me, then I buy something from you).

What will the Swedish government do? They have officially declared that Gripen will be the backbone of he Swedish Air Force until at least 2040. But in order to do so Saab must survive as a manufacturer of aircraft to be able to support the future operational usage of Gripen. Maybe the Swedish government must support Saab in the same way as France supports Rafale? This was the way it was done during the development of the earlier Saab Viggen. A very close cooperation between the Swedish Defence Material Administration, FMV and Saab. In this way the price of export Gripen could further be lowered on the global market. The only thing that might stop this is EU rules, forbidding governments to support and favor their local industry. But when it comes to national security these rules can always be overruled.

Maybe this is a reason to why Sweden has started a governmental organisation FXM to coordinate the government and industry when it comes to large sales on the international market. After all the Swedish government can offer financial support connected to the state bank, offset affairs when it comes to buy military equipment from this specific country instead of others and the Swedish industry can offer offset affairs when it comes to development of sub-systems in the Gripen and maybe in some cases local assembly of the complete aircraft.

Dassault and Lockheed Martin has a lot of support from their governments. It would be very naive of the Swedish government to believe that Saab could survive on the international market without their support. It would also be very naive of Saab to believe that they can do this on their own and that they do not need their Swedish customer.