Typhoon hits tough markets

Last week’s renaming of the Eurofighter as the Typhoon for the export market was intended to boost the aircraft’s sales chances outside Europe. The Munich-based Eurofighter consortium and its four partner companies (British Aerospace, Germany’s Dasa, Italy’s Alenia and Spain’s Casa) has since spelled out its sales strategy and the share of the market it […]

Last week’s renaming of the Eurofighter as the Typhoon for the export market was intended to boost the aircraft’s sales chances outside Europe. The Munich-based Eurofighter consortium and its four partner companies (British Aerospace, Germany’s Dasa, Italy’s Alenia and Spain’s Casa) has since spelled out its sales strategy and the share of the market it hopes to achieve.

Each of the partner companies is taking the lead for the consortium in different global markets. The consortium foresees an available global market over the next three decades of over 800 combat aircraft, worth £70bn. Eurofighter is aiming to capture about 50% of this market, or 400 planes, although the first planes will not be ready until 2004 5 according to Kevin Smith, BAe group managing director for new business.

This export drive follows the long- delayed signature earlier this year of the production investment, production and support contract for 620 aircraft for the Royal Air Force and the German, Italian and Spanish air forces. This will be worth £42bn to the four countries’ industries and to 400 companies employing around 150,000 people across Europe.

Confusingly, all four air forces will continue to use the name Eurofighter to describe their fighters within Europe. The arrangement was a compromise intended to mollify earlier German objections to the use of the name Typhoon also the name of a famous Second World War British fighter-bomber. BAe chief executive John Weston said Germany was ‘delighted’ with the new name.

Brian Phillips, Eurofighter’s managing director, is bullish about the Typhoon’s export chances: ‘We have the right product which will be coming onto the market at the right time. We are in a superb position to meet emerging customer requirements around the world.’

The technical thrust of the Typhoon sales pitch is that this Mach 2 aircraft will be superior in air combat to almost any other fighter. It is bettered only by the Lockheed Martin F-22, but the F-22 is far more expensive than the $50m Typhoon.

The Typhoon’s agility and specification represent a quantum leap over in-service fighters. It has ‘fly-by-wire’ handling which relies on voice commands and high-tech cockpit displays which use data and sensor fusion to present all the information the pilot needs to see.

In marketing the Typhoon in their allotted global markets, the consortium’s four companies will be responsible for ‘making sure contacts, skills and resources are exploited to their full potential’, a Eurofighter spokesman said.

Global marketing areas

Alenia will market the Typhoon to Brazil, the Philippines and South Africa. BAe will lead the sales effort in Canada, Australia, Malaysia, Singapore, Bahrain, Kuwait, Saudi Arabia and UAE. Casa will take the lead in Turkey, South Korea, Thailand and Chile. Dasa will cover Belgium, Denmark, the Netherlands, Norway and Greece, and the three new NATO entrants the Czech Republic, Hungary and Poland.

The export drive is supported by a multi-national Eurofighter sales support team. While one company will be taking the lead in various countries, the sales effort will still have a distinctly pan-European feel.

The consortium’s partners face difficult sales challenges around the world.

The Philippines, in Alenia’s territory, has just capped its $15bn defence modernisation programme. The programme includes a prospective fighter purchase, but the Asian economic crisis will rule out any early procurement. And when the Philippines does buy, it is likely to pick either second-hand or cheaper aircraft.

Both Brazil and South Africa offer Alenia more realistic possibilities. The former could provide a long- term prospect, building on the Italian company’s collaboration with Brazilian aircraft firm Embraer for the AMX fighter-bomber.

As for South Africa, cheaper new aircraft again pose a real threat to the Typhoon’s chances. In any case, BAe and its partner Saab have been jointly marketing the Swedish Gripen fighter to meet South Africa’s immediate needs.

Both Australia and Canada will one day need successors to their F-18s, but the US will present tough competition, offering further F-18 upgrades (the F-18E/F), an export F-22 or the Joint Strike Fighter.

The Middle East is perhaps most likely to buy the Typhoon through BAe, but the company’s chances here are also more limited than initial appearances suggest.

The United Arab Emirates has just chosen the Lockheed Martin F-16 as its next fighter. Besides which, it has a reputation for striking the hardest of bargains and is probably out of the running as a customer for many years.

Better bets in the Middle East

Bahrain, Kuwait and Saudi Arabia are better bets because of the UK’s sales edge in the region, built through its close political relationships. But the first two countries would not need many aircraft.

If BAe could repeat its success in selling the Tornado to Saudi Arabia, this would be a great prize, though Riyadh is having problems paying, through oil, for its existing UK procurements.

Meanwhile, Malaysia and Singapore are in the economic doldrums and could take years to recover.

Casa’s territory is interesting, but again the realistic opportunities are limited. Chile has just put its fighter procurement plans on hold, disappointing the BAe-Saab team which was pushing the Gripen. But Casa has sold its C-101 armed jet trainer to Chile and knows the territory.

Thailand is still in a deep economic crisis and has tried to reverse an F-18 fighter purchase from the US. South Korea is also in severe economic difficulties and is unlikely to be an early buyer. Turkey is likely to be a better bet, though German human rights objections could block any prospective sale to Ankara.

In Dasa’s target area, Norway was due to replace its F-5s and Eurofighter’s inclusion as a late entrant in its fighter competition was a coup for the consortium. However, Oslo has now delayed its planned fighter procurement, putting Dasa’s hopes on ice.

The other west European countries in Dasa’s sales territory are all F-16 operators. The real battle here will be, again, with Lockheed Martin, which will be touting its latest model F-16 Block 60s, probably for around $30m each.

Suprisingly, Greece is a potential buyer, as Athens may want to diversify its arms sources. A collaboration involving Hellenic Aerospace Industries would give it a valuable source of technology and jobs.

The former Warsaw Pact countries which will join NATO next year are very long shots for financial reasons. Both Poland and Hungary have now delayed their procurements of new fighters. They and the Czechs are only now allowed to have basic technical briefings on Typhoon, not yet at the full classified level.

Any sale of Eurofighter will be a great result for BAe, which has a 37.5% stake in the Eurofighter consortium. It is also to build the forward fuselage, the canard wings, the first stage of the aft fuselage and other parts at its Salmesbury plant in Lancashire, and will assemble RAF Eurofighters at nearby Warton.

But BAe cannot rest easy waiting for sales to come in and would rather pursue a safer, more secure future as a key part of a single, large European aerospace and defence company.

The price of failure in marketing the Typhoon might, some BAe sources suggest, be 16,000 job losses in Europe, with thousands coming from Britain. But if just one country in BAe’s sales area places a big Typhoon order say 50 or more aircraft that prospect could be delayed for years to come.