Dassault Sees More Rafale Opportunities As Indian Deal Nears
 
(Source: Defense-Aerospace.com; published Mar 14, 2014)
 
By Giovanni de Briganti
 
 
SAINT CLOUD, France --- Dassault Aviation is making a serious effort to compete in a possible Canadian fighter competition, company CEO Eric Trappier said here March 13, but does not believe any other country is likely to drop plans to buy the Lockheed-Martin F-35.

Meanwhile, having made substantial progress in its negotiations to sell its Rafale fighter to India, the also company “believes in our chances” in other countries in the Middle East, in Malaysia and elsewhere, Trappier added. He did not further identify the countries, but Qatar has long been identified as a potential buyer, while France also has resumed Rafale talks with the United Arab Emirates, which BAE Systems said December 19 had abruptly terminated talks over a possible Eurofighter buy.

Except in Canada, Dassault does not see any realistic chance of selling the Rafale as an alternative to the troubled F-35 because most countries involved simply “want to buy American, at whatever price and whatever [its] problems,” Trappier said. He specifically mentioned the Netherlands, where Dassault had made a binding offer for 85 Rafales at a price then slightly higher than that of the F-35. However, the F-35’s price has since increased so much that the Dutch can now only afford to buy 37 F-35s for the same budget, but they have no intention of switching to another fighter.

The situation is different in Canada, he said, where “they are really considering whether to pull out of the F-35 program….if they decide to have a competition, we think Rafale has a good chance of winning.” Dassault would provide a large technology transfer package as well as direct offsets to Canadian industry, including local assembly, Trappier said.

In fact, Dassault stands to make more money by licensing final assembly to export customers than by doing the work itself. It has fine-tuned its own Rafale assembly line for maximum efficiency at a reduced rate of 11 Rafales per year. Increasing this rate would upset the current balance, and increase costs, whereas outsourcing final assembly, which accounts for about 10% of total production costs, actually increases Dassault’s operating margin thanks to the various royalty and technical assistance payments it would receive, not to mention the lower prices it would negotiate from its supply chain. The company has thus been able to turn what is generally regarded as a source of cost into a potential source of profit, although this remains to be tested in real life.

This is one reason why the 18 Rafales that Dassault would supply in “fly-away” condition to India would replace aircraft ordered by France on the assembly line, leaving the production rate unchanged.

Regarding negotiations with India, Trappier said they were progressing well, and confirmed that an agreement had been reached with India’s state-owned Hindustan Aerospace Ltd. (HAL) on work-sharing. “We have passed a decisive milestone with HAL, which has finalized its supply chain, and our supply chains will now work together in a clearly defined industrial organization” for production, he added.

Most importantly, it has now been agreed that “HAL is responsible for what it does,” a condition that Dassault was insisting on as it refused to accept contractual responsibility for work over which it had no control.

Given that work-share and production issues have delayed contract signature for the past two years, the implication is that the final obstacle has now been lifted, although Dassault officials did not say so outright.

Other points made at the March 13 press conference at which Dassault announced its 2013 financial results are:

- Six of the 11 Rafales delivered in 2013 were equipped with an AESA radar;

- France’s decision that it will operate 225 combat aircraft means that Dassault will receive a final order for 45 additional Rafales, as 180 have been ordered to date.

- “The euro is a true constraint for European exporters”;

- “The United States are a low-cost country, but with a technological edge.”

- Dassault Aviation has cash reserves of 3.7 billion euros.

- The Neuron UCAV demonstrator has flown about 20 sorties since it resumed flight testing in October. Earlier “ground tests of its radar cross-section confirmed that we have mastered stealth technologies,” Trappier said.

- Dassault’s Rafale offer to Canada would include in-country final assembly, production of certain parts and components, the transfer of all maintenance and upgrade work to Canada, as well as intellectual property rights and all technology transfers approved by the French government, Dassault Vice-President Yves Robins told Radio Canada during a March 13 interview (French only—Ed.) in Montreal.

- The company continues to divide its profits among all stakeholders. Its net profit of €336 million will produce dividends of €90 million for shareholders and profit-sharing of €109 million for its 8,000 employees, while the balance will be re-invested, notably to finance the company’s own research and development.

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