:: May 2011 Letter ::


Dear Fellow Air Show Bystanders,

Day Four, Le Bourget. Your 2:15 just cancelled on you, leaving a one hour hole in your schedule. After getting the bumís rush from a French company chalet by a Carla Bruni-Sarkozy lookalike, you find yourself back dodging golf carts in the stream of executives racing up and down chalet row. Like sharks that need to keep swimming to breathe, everyone needs to keep moving fast to look important. Itís starting to drizzle. Youíre going nowhere in a hurry. All the cool kids went home after Day Three. What to do?

Easy. Thereís the Le Bourget air museum, just a short trip downstream. There, you can see one of the best planes never built, Dassaultís Mirage 4000. Its story helps make sense of the India fighter competition, and whatís happening to France in the fighter market today.

First, the news. Last month saw a downselect in the India Air Force (IAF) Medium Multirole Combat Aircraft (MMRCA) competition. Conspicuously absent was any US plane, particularly Boeingís F/A-18E/F, which many (including me) considered the front-runner. Dassaultís Rafale and the Eurofighter are now alone.

Both of these planes are upper middle/heavy weight twinjets. The market for beasts like these is extremely limited. Until 2000, only four current export market countries (Australia, Israel, Japan, Saudi Arabia) had purchased Western jets in this price class. Over the last decade, South Korea and Singapore have joined the club, and you can also count Austriaís small Eurofighter force. With MMRCA, India will join the high end fighter market club too.

Eurofighter didnít have a problem with this limited export market, because the home market was large enough to allow for a respectable program, and for respectable production rates (albeit at too many lines). Besides, the Saudis were a reliable customer, having purchased every high-end British plane since 1960. They were one of only two Lightning export customers. They were the only Tornado export customer. So far, other than Austria, theyíre the only Eurofighter export customer. They pay in cash, too.

Rafale is another story. The home market is small, and getting smaller. Just 180 have been ordered by France over the past 20 years, and production is running at 11 per year, a rate threatened by budget cuts (see my August 2010 letter). The export situation has been a slow-motion train wreck. France tried everything with Rafale. After well over two decades of trying, theyíve got exactly nothing. There were plenty of near-misses: UAE, Morocco, South Korea, Singapore, Brazil, etc., and some of these are still active campaigns. The low point: the Libya sales campaign. Itís very unusual for a target market to become a target for the product in question, especially in just a few short months. At least the Qaddafi regime is getting the best product demonstration imaginable. (Somewhere, thereís a desktop promotional Rafale model with Libyan Air Force markings. I want that model.)

Contrast this series of market failures with the history of previous French fighters. The Mirage III/V, Mirage F1, and Mirage 2000 all had one thing in common: they derived two-thirds of their sales from exports. These single-engine mid-sized fighters enjoy a much larger export market. Over 30 countries have purchased aircraft at this price point. But unlike the high end market, it isnít particularly glamorous, and there are fewer opportunities to get rich on one big sale.

This brings up the Mirage 4000, which will rescue you from a dismal Le Bourget moment. As the name implies, it was a much larger twinjet development of the Mirage 2000. While the 2000 was impossibly beautiful, the 4000 was, well, twice as impossibly beautiful. It was demonstrated to the Saudis, who went with F-15s and Tornados. It was demonstrated to the Shah of Iran, but that didnít go well, for obvious reasons. There were no other addressable high end export markets Ė India was still looking at Korean War surplus ads. Since the French Air Force didnít want the 4000, that prototype in the museum was pretty much the end of it.

What does the high end market look like? Not only is it small, itís also hyper-politicized. MMRCA has been around in one form or another for about a decade, and in that time President Obama, President Sarkozy, Prime Minster David Cameron, and every other head of state with a stake in this fight made one or more sales call to India. It involves fiendishly complicated negotiations over technology transfer, industrial workshares, end user certification (for the US, at least) and many other factors. The US lost, in part, because the Indians felt the US wasnít doing enough to deal with Indiaís concerns about these issues. Indiaís concerns are colored by lingering bad feelings over past US arms sanctions against India (the US Government should learn that sanctions work both ways). India also believes that the US is overly attentive to Pakistan, and overly willing to listen to Pakistanís point of view. Given the facts of the Bin Laden raid incident, India may have a point here too.

Deals like MMRCA also imply a strategic relationship, a key area where the US should have enjoyed a very strong advantage. Understandably, winning MMRCA has been a very high priority for the US, given the turmoil in South Asia. After the downselect, the US ambassador, Timothy Roemer, resigned. Ostensibly for ďpersonal and professional reasons,Ē his resignation was reminiscent of Bill Paxtonís line in Aliens, ďMaybe youíre not up on current events, but we just got our asses kicked, pal.Ē

Presidential sales calls. Ambassadorial resignations. High level strategic and economic relationships. Thatís what the high end fighter market looks like. The Mirage 4000 at Le Bourget symbolized Franceís failure to compete in that white-hot arena. Rafaleís launch a decade later meant that France gambled that it could one day compete in the high end. If Rafale doesnít win MMRCA, it means theyíve lost that gamble.

A few other MMRCA thoughts. First, itís now a close race, but Iíd give Eurofighter an edge. It offers a bigger user group and more capability. Indiaís defense and defense industry connections with the UK are stronger than with France. Yet both the UK and France will give away the store in terms of technology transfer, and either plane is a massive improvement over most of the IAFís current inventory. Some believe that MMRCA will be truncated as soon as the F-35 is available. Sure, the IAF would love F-35s. But once a production line gets started in India, itís tough to stop. These are the guys who kept building Jaguars until 2007 because nobody told them that museums and wealthy collectors were the only other customers. Jobs matter. Besides, the Indian military likes numbers too. The irrational persistence of a large MiG-21 fleet, and the LCA program, provide proof of that.

Just one month to go before the semi-annual air show/RER driversí strike. Meantime, May WMCAB reports include the annual Regional Aircraft overview, AV-8B/Harrier, 737/P-8, ATR, Hawk, T-45, T-6, CH-53, MD Explorer, P-3, E-2, and Atlantique. See you on Chalet Row.

Yours, ĎTil The Libya Provisional Liberation Council Signs For Rafales,
Richard Aboulafia

© Richard Aboulafia 1997-2006, All rights reserved.
  ~  Last updated on January 08, 2006