Boeing's F/A-18F Super
Hornet Boeing
Spreading global conflicts and superpower politics are
pushing several nations to upgrade their fleets ahead of
schedule
In an average year, the global fighter jet industry does well
to ink two or three blockbuster deals, the kind in which
military groups decide to upgrade their fleet by ordering a
couple of high-powered aircraft. By these standards, 2015 looks
like it will be an above-average year after a surge in jet
orders in March and April.
Ongoing crises across the Middle East and Europe as well as
uncertainty over U.S. foreign policy toward Egypt, Iran, and
several Middle Eastern states are fueling a global fighter jet
shopping spree that has already seen tens of billions of dollars
hit the negotiating table. While these geopolitical pressures
have seen U.S. defense contractors
strike several major foreign defense deals this year, when
it comes to the recent spike in fighter jet purchases France has
emerged the clear winner.
“When you buy a plane you buy a strategic relationship,” says
Richard Aboulafia, vice president for analysis at defense and
aerospace consultants at Teal Group, about the recent spate of
fighter jet deals. “And right now the French are seen as a
better relationship to have.”
The spree started on Feb. 13, when Egypt signed a deal with
French aerospace firm Dassault for 24 of its Rafale multi-role
fighter jets, making Egypt the first foreign buyer of the
aircraft. India quickly followed that purchase with an order for
36 Rafales on April 10 (the terms of that deal are still
pending). By the end of the month, Qatar had tacked on a
$7-billion order for 24 Rafales. And, just last week, word
leaked that Kuwait will upgrade its existing fleet of
Boeing-made fleet with 28 new F/A-18 Super Hornets that includes
an option for 12 more—a deal worth roughly $3 billion to Boeing.
Meanwhile, Dassault remains in talks with the United Arab
Emirates over the sale of an undisclosed number of Rafales, and
Malaysia is reportedly discussing a purchase of 16 jets. The
surge in orders makes it a good time to be Dassault,
particularly considering the company had previously not sold a
single Rafale to a foreign military.
Several foreign Air Forces have been evaluating their air
power requirements over the past several years, with plans to
upgrade or replace aging fleets by the end of the decade or in
the early 2020s. But given the tenor of global events, Air
Forces from Finland to Qatar to Southeast Asia are moving up
their timetables, choosing to spend their money now in order to
ensure delivery of new air power assets sooner, rather than
later.
Regional events driving the demand range from the civil wars
in Syria and Libya to the rise of the Islamic State across the
Middle East and aggressive gesturing by Russian and Chinese
militaries. Other factors, like the potential sale of
sophisticated S-300 anti-aircraft missiles to Iran by Russia
create further impetus for modernizing air power. And, given
that fighter jets can take several years to build and deliver,
no air force wants to be stuck at the back of the queue awaiting
new hardware when conflict comes knocking.
The sudden spike in interest in the Rafale has as much to do
with global geopolitical uncertainty as with conflicts unfolding
on the ground, Aboulafia notes. Several Persian Gulf countries
that have long depended on U.S. companies for military
hardware—including Saudi Arabia, Qatar, and the United Arab
Emirates—are diverging over U.S. foreign policy in the region.
In particular, American policies pertaining to the newly-minted
regime in Egypt and pending nuclear deal with Iran have divided
the region. Just this week Saudi Arabia’s King Salman declined
an invitation from President Obama to talks taking place at Camp
David—a move many analysts see as a snub to Obama’s Middle East
policy.
Meanwhile the French have been very militarily active in the
area, and in some ways are more aligned with the military
thinking of those same Gulf states. These situations can make a
long-term contract for French combat jets—as well as the service
and upgrades they will require over the next two or three
decades—more attractive to states. It becomes even more
important if those countries worry the U.S. might turn away from
them in the future. Likewise, such policy uncertainty makes it
more difficult for U.S. defense contractors to ink those kind of
long-term contracts abroad.
Amid this flurry of fighter jet activity, the Kuwait deal
remains the silver lining for the U.S. defense and aerospace
industries. Boeing desperately needed such a deal in order to
extend the production line for its F/A-18 and E/A-18 aircraft.
The St. Louis assembly line that produces the F/A-18 airframe
was slated to close in 2017 if no new orders were placed. The
plant needs to produce two jets per month for production to
remain economically viable.
The U.S. Navy has asked for 12 more Super Hornets in the
fiscal 2016 budget, though Congress has not yet approved funding
for them. Regardless, the Kuwait deal should extend production
into 2019, giving Boeing a shot at landing further orders from
Belgium, Canada, or Denmark—all of which are mulling fighter
purchases later in the decade. It also gives the U.S. Navy
flexibility to buy a few more more Super Hornets or Growlers on
a year-by-year basis without having to commit to a multi-year
contract with Boeing.