By Pierre Tran

Paris – Dassault Aviation insisted on being appointed lead prime contractor and architect on a European next generation fighter jet, and also lead contractor on the fighter’s flight control system, executive chairman Eric Trappier said March 4.

“These are two red lines,” he said on the sidelines of a news conference on 2021 financial results.

Dassault signed a contract on work on a technology demonstrator for the fighter, handed it the French procurement office, Direction Générale de l’Armement, and has been waiting since September for Airbus Defence and Space to countersign, he said.

The DGA declined comment.

Airbus DS is industrial partner on that fighter project, a key element in phase 1B on development of a European Future Combat Air System, a complex network linking up the planned fighter, remote carrier drones, and aircraft of allied nations. The new fighter would replace the Rafale and Eurofighter.

Dassault sees Airbus DS as seeking to share lead management of the fighter program, which the family controlled company resists.

There should be a “best athlete” approach,” with a single leader, Trappier said.

Airbus DS said it had made proposals on cooperation on the new fighter and was confident agreement could be reached.

“We have managed months ago to find fair and balanced agreements on all six other pillars, where even under a defined leadership the competence and capacities of each partner are respected and can participate in an equitable manner,” an Airbus DS spokesman said.

“Airbus has made several proposals to converge also on the Next Generation Fighter (NGF) and we are supporting any solution which will respect both the skills of each partner and the lead role of Dassault Aviation, leading to a fair agreement.

“We are confident that a resolution can be achieved if the rules of the cooperation agreed by the nations are respected in the NGF, as it is the case on other pillars,” the spokesman said.

“The FCAS programme is decisive to meet the requirements of Europe’s armed forces in the future and we are committed to it.”

The fighter is the first pillar in FCAS, with Dassault designated as the lead partner on the fighter. The other six pillars are the engine, remote carriers, combat cloud for network communications, simulator labs, sensors, and stealth.

The delay has been a “very high cost,” Trappier said, as some staff in the company’s some 100-strong design office have been re-assigned, with the prospect of re-assigning all those personnel if there were no contract on the fighter project.

Trappier declined to comment when asked if he had a plan B if an agreement failed to be reached.

Red Lines Issue

“We were surprised at how clear the issues on SCAF/FCAS have become for Dassault: the red lines are now glowing,” said Sash Tusa, analyst at equity research firm Agency Partners.

Work on the architecture and design of the flight control system was important, Trappier said, and Dassault’s design staff worked in Saint Cloud, the head office in the suburbs of the capital.

Airbus DS had design skills, and its staff worked in Toulouse, southwestern France, he said.

An analyst said that remark on the Airbus DS design engineers was a particularly barbed comment, pointing up a perceived lack of specialist experience in designing fighter jets.  Toulouse is the headquarters of Airbus, an airliner manufacturer, while the head office of the defense and space unit is in Manching, southern Germany.

It remained to be seen which would come first, Airbus DS signing the contract on the fighter project or Germany ordering the F-35 fighter, Trappier said.

On a contract signed Feb. 24 on a European medium-altitude, long-endurance drone, Dassault’s share of the deal was worth €1.2 billion and consisted of architecture for the flight control system and communications systems, he said. Thales, in which Dassault holds a 24.6 percent stake, will share the communications work.

The total budget for the European unmanned aerial vehicle is €7.1 billion, backed by France, Germany, Italy, and Spain.

German chancellor Olaf Scholz said Feb. 27 told the Bundestag parliament the 2022 federal budget would adopt a one-off fund of €100 billion ($109 billion) for military spending, and pledged an annual defense budget of more than two percent of gross domestic product.

Germany would also build the next generation fighter and tank in cooperation with France and other European partners, he said, and these projects were of “utmost priority.”

The chancellor made his speech, widely seen as a major policy switch, in response to the Russian assault on Ukraine, which has sparked Western sanctions against Moscow in banking, sports, culture, aerospace, trade, and airline travel.

Scholz said there was a contract signed the previous week for a European medium-altitude, long-endurance drone, pointing up the importance of German military spending and cooperation. Berlin would press ahead with an order for an armed Heron drone from Israel.

There would also be a replacement of the German Tornado fighter, which carries nuclear bombs under a Nato agreement, he said.

“The F-35 fighter jet has the potential to be used as a carrier aircraft,” he said, while the Eurofighter could be equipped for electronic warfare.

Cash Rich Dassault

The brakes were off for Dassault, such that the cash rich company should consider making an offer for Thales, a stock market research note from Agency Partners said Feb. 16, ahead of the 2021 financial results.

“We think a step change in the dividend payout ratio is possible, but we also suggest that Dassault could reassess its current minority shareholding in Thales, with the possibility of spending cash to buy a majority stake in, and control of, Thales,” the report said.

Dassault holds cash of €4.8 billion, a gain of €1.4 billion from a year ago, the company said in its financial results.

Success in exports and the resulting inflow of cash would fund that M&A deal, the Agency Partners report said. Winning an Indonesian contract for 42 Rafales meant the company had won export contracts for 188 fighters from five nations over the last 18 months, including two new client nations – Croatia and Indonesia, the report said.

That allowed a manufacturing “bridge” of legacy fighters and the Système de Combat Aérien du Futur (SCAF/FCAS), with an estimated production of three Rafale per month into the early 2030s.

That export success has sparked a “re-think” in France of working with Germany on the future combat air system, due to German concerns on arms exports and tension over leadership of the FCAS project, the report said.

France levies a tax of two percent on arms exports, to recover a “fair portion” of  the development cost of weapons ordered by the French authorities, Hervé Grandjean, spokesman for the armed forces ministry, told journalists Dec. 9.

That leads to limited direct financial gain for the French government from arms export, although prospects for overseas sales are factored in when funds for domestic projects are drawn up.

Profit Rise

Dassault reported a rise in 2021 adjusted net profit to €693 million from €396 million in the previous year, on sales rising to €7.2 billion from €5.5 billion.

That boosted net profit margin to 9.63 percent of sales from 7.2 percent.

Sales for 2022 were expected to fall. The book-to-bill ratio of orders to sales was 1.67.

Orders rose to €12 billion from €3.4 billion, helped by orders for 49 Rafales, of which 37 were export deals, including 31 units for Egypt and six new aircraft  for Greece. Athens also ordered 12 second-hand Rafales, which France replaced with an order for the same number.

The order book rose to €20.8 billion from €15.9 billion.

Croatia bought 12 second-hand Rafales and signed a service contract with the company.

Dassault was expecting to receive hefty down payments this year, based on a total of 128 Rafale orders, consisting of an 80-strong order signed with the United Arab Emirates in December , an Indonesian order signed last month for 42 fighters, and an expected Greek contract for six more fighters. The deal for the latter was authorized by the Greek parliament last month and a contract is expected to be signed shortly.

In general, the price tag for a Rafale is €100 million per unit, with Thales accounting for some 25 percent, Thales chief financial director Pascal Bouchier told March 3 a news conference on the 2021 financial results of the electronics company.

Dassault, which is pursuing other export deals for the fighter, is working on an upgraded F4 version and will work on further upgrades, Trappier said.

The company expects to deliver 12 fighters this year, after 25 last year, shipped to India and Qatar.

France is expected to order next year a fifth tranche of Rafales for the French air force, the company said, potentially consisting of 30 units as planned, and a further 12 units to replace those sold to Croatia. France has ordered 192 Rafales, so far.

 

By Pierre Tran

Paris – OCCAR, a European procurement agency, signed Feb. 24, 2022 a contract worth €7.1 billion ($8 billion) with Airbus Defence and Space as prime contractor for a medium-altitude, long-endurance drone, marking a step in the European pursuit of military, industrial, and political independence.

“The Eurodrone program aims to deliver a sovereign capability in intelligence, surveillance and reconnaissance, support for ground forces in a theater of operation and attack, having capability to fire missiles and guided bombs,” the French armed forces ministry said Feb. 25 in a statement.

The launch of the program “marks a key step in the strengthening of European cooperation,” the ministry said. The order, worth €7.1 billion, covered developing and building 60 drones, with 12 for France, and five years of service.

OCCAR signed on behalf of the four partner nations – France, Germany, Italy and Spain – for Airbus DS to develop, build and maintain an unmanned aerial vehicle.

The UAV was expected to be certified to operate in civilian airspace in Europe and fly as part of the European Future Combat Air System, a complex network with a new generation fighter and remote carrier drones.

“This is important,” said François Lureau, “as it is the precondition for FCAS. It is a European program led by Germany. Lureau is head of consultancy EuroFLconsult and a former head of the French procurement office.

The political significance of the program could be seen in the German chancellor referring to the drone contract in a Feb. 27 keynote speech, in which Olaf Schulz said Berlin would commit €100 billion to the German defense budget this year, up from €47 billion in 2021, and pledged to spend two percent of gross domestic product on the military by 2024.

That speech marked a sharp change in German policy in the light of the Russian invasion of Ukraine, with Berlin pledging to send 1,000 anti-tank weapons and 500 Stinger anti-aircraft missiles to the Ukraine forces.

Europe Seeks To Catch Up

The drone program would allow Europe to break a dependence on Israel and the U.S., allowing European industry to learn how to build a MALE UAV from scratch, an industry executive said. Although the first aircraft will likely be less capable than the Reaper, the foundations would be laid for a long term industrial capability for future European drones.

A second executive said the Ukraine crisis showed the prospect of “long term tension in Europe,” leading to the launch of an arms drive in Western Europe.

France needed to equip its forces for a “high intensity” conflict in Europe, as the army, apart from the Tiger attack helicopter and VBCI armored personnel carrier, was largely armed for overseas deployments in Africa, with wheeled armored vehicles rather than heavy tanks.

“There has been a change of software,” the second executive said.

On the military aspect, German forces launched attacks which led to the killing of civilians in the war in ex-Yugoslavia, the first executive said. Those slayings stemmed from the German forces relying on summaries of US intelligence rather than access to raw intelligence data and making their assessment. That led to Berlin launching the SAR-Lupe radar spy satellite program to cut that dependence.

Allied nations share summaries of intelligence, not the raw intelligence data, which pointed up the importance of gathering the data, assessing and then deciding the operations, the executive said.  Cooperation among allies with independent ISR systems offered a “complementarity” of threat assessment.

France is updating its intelligence gathering capability with a three-strong fleet of new generation optical spy satellites, dubbed Composante Spatiale Optique. A second CSO satellite was put into orbit Dec. 29 2020, at a height of 480 km, to give sharp resolution. Belgium, Italy, Germany and Sweden signed bilateral agreements for access to CSO.

CSO replaces the French Helios spy satellite, intended to cut reliance on the U.S.

In the first war with Iraq, the Helios system may have lacked the sharpness of the then six-strong American fleet of satellites, but France had an independent capability which led them to disagree with the U.S. assessment of the strength of the Iraqi army, afternoon daily Le Monde reported in 1996.

Spain and Greece are partners on the Helios program.

France Gradually To Retire Reapers

On the European drone, France has ordered four systems, with options for two more, the ministry said. A system consists of three drones and two ground stations. The new drones will gradually replace the fleet of Reapers, which will start to be retired from service after 2030.

Building the first prototype was due to start in 2024, the ministry said.

Development was due to run for four years, a third industry source said, with first flight due in 2026, and first delivery toward the end of 2028.

The UAV project took time to win governmental approval, as the lead contractor Airbus had made an initial budget estimate of some €10 billion and had to cut the price to an amount seen as acceptable.

Dassault Aviation and Leonardo are subcontractors on the program.

“This signature kicks off the development of one of the most ambitious European defense programs,” Mike Schoellhorn, chief executive of Airbus Defence and Space, said in a statement.

Eric Trappier, chief executive of Dassault, said, “This contract marks the determination of the European nations and industrial partners to achieve the political goals and to meet the technological challenges leading to European defense sovereignty.”

“Today’s announcement marks an important milestone for the European nations which confirms the determination and achievements of the industrial partners in meeting the challenges that accompany the development of a complex and strategic European defense and security program, said Lucio Valerio Cioffi, general manager of Leonardo.