França – International Herald Tribune – 21/10/2009
MÉRIGNAC, France — On a recent afternoon at the sprawling Dassault Aviation plant, on the perimeter of the Bordeaux airport, the smell of kerosene hung in the air as engineers tested hydraulics and fuel systems on the combat jet Rafale.
Those planes are destined for delivery to the French military, just like the previous 70 to 80 that have rolled off the assembly line. But there is a sense of cautious optimism here that the Rafale is finally within touching distance of a long-sought goal: its first foreign sale.
A tentative deal with Brazil worth 5 billion euros ($7.46 billion), announced last month, would go some way toward offsetting the downturn at Dassault’s commercially more important Falcon business jet division. It also would help France recapture some of the glory — and export revenue — lost when the Rafale’s predecessor, the Mirage, ceased production in 2007.
With military budgets under pressure and many potential clients tied to American fighters, Dassault has been fighting for the leftovers of contracts with the French companies Thales and the European Aeronautic Defense and Space Company.
Along with market leaders like Boeing and Lockheed Martin, Dassault’s competitors include the advanced but expensive pan-European twin-engine Eurofighter, which operates in Europe and Saudi Arabia; the Saab Gripen, in Sweden, the Czech Republic, Hungary and South Africa; and the Russian Sukhoi and MIG.
“The market is shrinking, and there are too many players,” said Eugene Kogan, guest researcher at the International Institute for Liberal Policy in Vienna. “And it looks like China may soon start to move into some of the markets once dominated by Russia.”
With its modest size — the group employs 12,500 — Dassault has retained a reputation for agility not always apparent in French industry.
The Brazilians, meanwhile emboldened by their booming economy, are looking for a flexible, twin-engine combat jet to guard their offshore oil deposits and the vast Amazon rain forest. Should the deal go through, they would acquire more than just 36 planes.
The sale also includes a total transfer of technology, which would enable Brazil to assemble most of the Rafale jets itself and sell them regionally. The contract might rise to 120 aircraft.
The terms illustrate the pressures on Dassault and a handful of other military companies competing in a tightening global market.
Not only are advanced new American and European jets coming to market, but also looming on the horizon are the prospect of advanced unmanned fighters and even competition from China, using technology from Israeli and Russian jets.
Jean-Paul Hébert, a strategic expert at the School for Advanced Studies in the Social Sciences in Paris, says Dassault is facing “an appallingly hard decision” as it debates the post-Rafale era. “Long-term research costs are very heavy, and the French arms industry has not been that commercially very successful alone,” he said.
The Rafale was conceived in the mid-1980s and first test-flown in 1991 as a successor to a series of aircraft that included the Mirage, which earned its stripes during the Six-Day War in the Middle East. Some 2,800 Mirages were delivered, more than half — 57 percent — for export.
But the French military wanted new capabilities, and so Dassault turned to the Rafale. The first prototype was built in 1986, and it entered service in 2001. Its sleek twin- or single-seat jets are recognizable by their main Delta wings and mini-canard wings below the cockpit; land and sea versions have been built. Its engine is made by the French company Snecma, and Dassault expects the plane to be enhanced by an upgraded RBE2 radar from Thales, in which Dassault took a 26 percent stake this year.
Dassault has come close to exporting the Rafale before, notably to Morocco in 2007 and Singapore and South Korea previously, but those governments chose American hardware instead. The disappointments were blamed on bureaucratic problems in Paris and Washington’s greater clout.
The Brazil package would be complex. Six jets would be made in France and 30 assembled in Brazil by Embraer, in which Dassault has a stake of 0.9 percent. The contract might expand to 120 aircraft, and comes alongside sales of other French hardware to the country and planned purchases by France of Brazilian transport planes.
“It looks like technology transfer was pretty critical,” said Rebecca Grant, senior fellow at the Lexington Institute, a research body in Arlington, Va.
Mrs. Grant also said that the market would become more difficult once the Joint Strike Fighter from Lockheed Martin arrives in the next few years. Also known as the F-35, it appears to be the favored choice among NATO countries like Norway, the Netherlands and Poland, which are tempted by shared production to replace their mainstay F-16s.
The F-35, hit by delays, is now projected by the Government Accountability Office to cost Washington $300 billion for 2,440 deliveries, above 2001 estimates.
Dassault’s most important product is the Falcon business jet, which has been transporting royalty, pop stars and chief executives for decades.
Over the last five years, Falcons represented on average 60 percent of sales and 80 percent of orders; Dassault received 115 orders in 2008, down from 212 a year earlier, and expects even fewer this year.
Falcons, which cost $30 million to $50 million each, are finished in Little Rock, Ark., from parts built in France.
At Mérignac, workers were assembling a Falcon 7X for NetJets, a subsidiary of Berkshire Hathaway. Other clients like Royal Bank of Scotland and Citigroup canceled orders last year in the wake of the financial crisis.
Olivier Brochet, an analyst at Natixis Securities, said Rafale exports might help offset lower demand for the Falcon.
Analysts estimate on average that Dassault will have revenue of 3.5 billion euros in 2009, and profit of 289 million euros, down from revenue of 3.75 billion euros and profit of 373 million euros in 2008.
By MATTHEW SALTMARSH