Win-win position puts Euro noses out of joint

Once JSF revenues start to build, their muscular effect on the UK aerospace industry will be considerable. No wonder those continentals look nervous.

Towards the end of last year, when UK and US government negotiators were finalising details of Britain’s role in the development phase of the Joint Strike Fighter, continental Europeans began complaining about the effect this would have on Europe’s aerospace industry.

The European Aeronautics Defence and Space company, in particular, could not begin to see how BAE Systems could manage two combat aircraft, the JSF and the Eurofighter Typhoon, in its portfolio of products. ‘We want to develop a system that will compete with JSF,’ one vexed EADS senior executive said. ‘How can BAE contribute to this aim when JSF is one of the horses in its stable?’

Big bucks, big deal

On 26 October, the US and UK governments chose Lockheed Martin over Boeing for the $19bn JSF system development and demonstration phase. Work will begin almost immediately, leading to a first flight in 2007, production deliveries in 2008 and operational capability with the US Marine Corps in 2010.

The other JSF customers will be the US Air Force and Navy and the RAF and Royal Navy. The two countries anticipate orders for an initial 3,000 aircraft, 150 of them coming from the UK. Worth billions of dollars over the lifetime of the programme, once spares support has been thrown in, JSF is the biggest fighter project the world has ever seen.

Small wonder, then, that the UK, which will reap around 10% of the programme’s overall worth, is happy to be involved. In addition to BAE involvement in the airframe and avionics and Rolls-Royce in the engines, JSF will reach down into every level of the UK aerospace industrial base. Smiths Aerospace, TRW-Lucas, Cobham, Martin Baker and Bombardier Shorts are just some of the suppliers involved in the Lockheed Martin team.

They, in turn, are supported by a vast supply-chain network involving hundreds of small and medium UK companies. It is estimated that JSF will bring in more than £50bn to the UK aerospace industry during the development and production phases – a figure that includes exports, but not spares support. With the latter, JSF’s contribution to the UK economy could top £100bn over the next four decades.

Seen in this light, it is hardly surprising the Franco-German-Spanish EADS giant is so alarmed by BAE scooping the JSF jackpot. In the early 1990s, when British Aerospace (as it was then) was formulating its strategy for the turn of the century, JSF did not exist. There was something called the Advanced Short Take-Off and Vertical Landing (ASTOVL) programme, a transatlantic Harrier replacement, but this covered less than a thousand airframes. It was only when ASTOVL merged with the US’s Multi-Role Fighter and AX attack aircraft projects in the mid-1990s that JSF was born.

With it came a requirement for 3,000 US and UK aircraft and estimates for a further 3,000 platforms in the export market. Ten years ago, BAE and its partners had set their sights on attacking the export market with the Eurofighter, in which the UK has a 37% industrial share. Today, BAE finds itself in a win-win position: if it fails to sell the Eurofighter it will still pick up 10% of the work on the Typhoon’s great export rival, the JSF.

It is worth considering, too, what effect this extraordinary win-win position will have on the fortunes of the UK aerospace industry at a time when the global aerospace sector, post-September 11, is looking especially vulnerable.

Spreading the risk

UK companies have mitigated their risk by maintaining a balanced portfolio of commercial and military activities. This is less true on the continent, where companies have invested much more heavily in the civil sector. Given the need to remain on good terms with its European partners, the UK aerospace industry is unlikely to start crowing about its rosy financial outlook.

But once JSF revenues start to build, their muscular effect on the UK aerospace industry will be considerable. No wonder those continentals look nervous. Nick Cook is aerospace consultant for Jane’s Defence Weekly and industry/military editor of Interavia Business and Technology.