Italian Eurofighter Sale to Kuwait Stumbles on Logistics Package
(Source: Defense-Aerospace.com; published Feb 24, 2016)

By Giovanni de Briganti
Despite three meetings in as many weeks, and two more that fell through, Italian Defense Minister Roberta Pinotti and her Kuwaiti opposite number, Lt. Gen. Sheikh Khaled Jarrah Al-Sabah have not closed the sale of 28 Eurofighter Typhoons. (Italian MoD photo)
PARIS --- Three meetings in three weeks between the Italian and Kuwaiti defense ministers, and two more that fell through, have failed to resolve differences and to clear the way for signature of an €8 billion contract for the sale of 28 Eurofighter Typhoon combat aircraft.

While there are no suggestions that the contract will not be signed, there are increasing signs that this may not happen as quickly as expected due to Kuwait’s last-minute doubts about the cost of the 20-year support package.

On Jan. 31, Italian Defense Minister Roberta Pinotti’s planned trip to Kuwait to sign the contract was called off at the last minute, and a subsequent trip planned for the week of Feb 15 did not take place, even though on Feb. 12 Kuwaiti Defense Minister Lt. Gen. Sheikh Khaled Jarrah Al-Sabah said contract signature would take place that week.

The two ministers had also previously met in Rome on Feb. 3 to discuss bilateral defense cooperation, and in Brussels on Feb 11, where both were attending a NATO meeting on anti-ISIL operations.

After the Jan 31 meeting was cancelled, Pinotti issued a statement on Feb 5 saying that there is no truth to media speculation that the contract had been cancelled. “During my meeting with the Kuwaiti minister of defense last Wednesday in Rome, the choice of a strategic cooperation with Italy based on Eurofighter was confirmed, and the contract will be signed as soon as possible.”

Asked when Pinotti now expects to travel to Kuwait for the contract signature, her spokesman replied in a Feb 20 e-mail that “I think we will know at the same time as you. The signature is between the Italian company and the Kuwaiti government.”

This signals a major change in the agreement, which as originally announced (in Italian—Ed.) on Sept. 10, 2015 was a government-to-government deal under which the Italian government would buy the aircraft from Finmeccanica and deliver them to Kuwait.

An official in the press office of the Kuwaiti Embassy in Rome declined Feb 29 to comment on the contract and on related negotiations.

Sources say the delay in signing the contract is due to an unsolicited bid by BAE Systems, which offered Kuwait the 20-year Typhoon support package at a lower price than the one quoted by Finmeccanica.

The support package was estimated to account for about half of the Kuwaiti contract’s value, itself valued by Italian sources at €8 billion euros for the 28 Typhoons, their weapons, spares package and training.

Asked whether it had made an unsolicited bid to Kuwait, a BAE Systems spokeswoman side-stepped the issue by saying in a Feb 02 e-mail that “we just aren't able to comment on speculation or rumour, so I am not able to provide an answer to your question,” which falls well short of a denial.

Asked by a BAE Systems employee how he was helping boost exports of the Eurofighter, British Prime Minister Cameron said: “With the Typhoon there is an alliance of countries: the Italians, Germans and ourselves. We spend a lot of time trying to work out who is best placed to win these export orders. We’ve got hopefully good news coming from Kuwait. The Italians have been doing a lot of work there,” The Guardian reported Feb 26.

Spokesmen for Finmeccanica and Eurofighter GmbH declined to comment on any aspect of the Kuwait negotiations, while the Italian Ministry of Defence did not respond to telephone and e-mail requests for an explanation of the cancellation of the Jan. 31 ceremony.

An Italian industry official who asked not to be identified said Feb. 02 that it was not plausible that one consortium member could compete against another for export business, since export territories were agreed at the beginning of the program and Kuwait was “Italian territory.”

“Finmeccanica and Eurofighter have to present cost breakdowns to the Kuwaiti State Audit Bureau before they see a signature on a deal,” Defense News reported from Dubai Feb. 2. It said “the deal has been refused by the Kuwaiti State Audit Bureau due to a lack of information on costs regarding technical support, training, spare parts and the construction of building structures” for the aircraft in Kuwait.

As BAE’s offer substantially undercuts the price offered by Italy, Kuwait appears to have decided to renegotiate the entire agreement. One source suggests that Italy may only be contracted to provide the 28 aircraft and related pilot training, with the support package going to BAE Systems unless Italy substantially lowers its price.

BAE Offers Fixed Support Costs

BAE Systems is able to provide the maintenance and support package at a much lower cost because it already has considerable experience in providing long-term sustainment contracts for the Royal Air Force’s Typhoon fighters.

BAE also provides similar services for the Typhoons it has already delivered to Saudi Arabia, and has set up a large spares inventory and infrastructure there which could also be used to support Kuwaiti Typhoons, thereby reducing costs.

Estimated to cost about €4 billion as proposed by Italy, the 20-year support package requested by Kuwait is far longer and far more expensive than is usually the case for combat aircraft.

The four Eurofighter nations agreed to a five-year combined Typhoon support package on March 30, 2012; at the time, BAE Systems said its share amounted to £446 million while Italy’s Alenia Aermacchi (as Finmeccanica’s aircraft division was known at the time) said its share was “worth more than €500 million.”

Given that Britain operates about 130 Typhoons (four times as many as Kuwait plans to buy), and that Kuwait’s support package covers 20 years (four times longer than the 5-year duration of the 2012 contract), support for 28 aircraft over 20 years could be expected to cost about £500 million, plus extras.

Support of the Typhoon’s EJ-200 engines is contracted separately from the airframes. The UK Ministry of Defence, for example, is paying an average of £86.5 million annually for engine support, under a ten-year, £865 million contracted awarded to Rolls-Royce in January 2010. A 20-year contract to support one-fourth as many engines could be expected to cost about half, or about £450 million plus extras.

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