PARIS --- Thanks to a batch of military orders booked last year, Dassault Aviation will further improve its turnover and operating profit in 2019, after the 60% jump in net income it registered in 2018.
The main factor in these increases is a doubling of the production rate of the Rafale fighter to over two per month. After having delivered nine Rafales to Egypt (and three to France) last year, the company now plans to deliver 26 – over twice as many -- this year to Qatar and to India. In addition, the company also plans to deliver 45 Falcon business jets – three more than in 2018.
This makes it likely that Dassault’s 2019 sales will grow by at least 50% this year, to somewhere around €7.5 billion compared to €5.08 billion last year. Dassault simply acknowledges that “2019 net sales will rise significantly.”
As of Dec 31, 2018, the Rafale backlog stood at 101 aircraft: 73 for export customers (one for Egypt, 36 for Qatar and 36 for India) and 28 for France. In addition, French Armed Forces Minister Florence Parly confirmed on Jan. 14 that the final batch of 30 Rafale for France will be ordered in 2023.
Current production plans call for all Rafale deliveries to go to Qatar and India in 2019-2021, with deliveries to the French government of the final 28 aircraft on order due to resume in 2022.
A production rate of about 24 per year means that the export backlog of 72 Rafales will disappear by the end of 2021, which implies that Dassault is counting on additional orders to take up the slack before production of the final French government order kicks in.
Several scenarios are possible, as Qatar has taken an option on 36 additional Rafales while Egypt is also due to order at least 24 more. Qatar will no doubt wait until it has put a good number of Rafales in service before taking up its option, while Egypt is waiting for its Saudi paymaster to make the funding available.
Apart from other countries where it is competing for new orders -- Switzerland and Finland, after having declined to compete in Canada – Dassault also expects more business from India, whose air force has a requirement for over 100 more fighters, as CEO Eric Trappier said Feb. 20 at the Aero India air show.
“We are going to deliver 36 aircraft. If the Government of India wants more aircraft, we will be pleased to deliver. There is also an RFI for 110 aircraft and we are in the race because we feel Rafale is the best aircraft and we have our footprint here in India. So, we feel confident here in India," he said.
In addition to the RFI for 110 fighters, the Indian Navy also issued an RFI of its own in May 2017, for 57 carrier-capable fighters, but nothing has been heard since about this project, even though the navy is known to be eager to replace its unreliable MiG-29 carrier fighters.
Nothing, however, will happen until India’s general election, due in May. Given that the Congress opposition party has tried to use the Rafale contract as a political blunt instrument against Prime Minister Narendra Modi, the man who signed the Rafale contract, there is little chance of Dassault’s winning much additional Indian business if Congress is voted into power.
If the United Arab Emirates no longer seem a prospect for Rafale sales, they are nonetheless negotiating to upgrade their Mirage 2000-9 fighters, which is likely to generate a good revenue flow for Dassault as there are as yet no indications that the actual upgrading could be carried out in the UAE.
Other military programs
Although it doesn’t cover additional aircraft, Trappier noted on Feb. 28 that Egypt is also negotiating the upgrade of its Rafale fleet “to the present standard,” the F3R. This will keep the company’s support staff engaged there, as will the coming into force of the “Maintenance in Operational Condition” contract that Egypt has also signed.
A lot of business is however coming from the company’s other military programs.
For example, Dassault is continuing to upgrade the French Air Forces Mirage 2000D strike fighters, which are due to remain in service until at least the late 2020s.
Dassault is also upgrading the French Navy’s five Falcon 50 SURMAR maritime surveillance aircraft, the first of which was redelivered I, 2018. The upgrade is limited, however, and unlikely to generate much revenue, as these aircraft are due to be replaced by the new SURMAR aircraft that Dassault is developing based on the Falcon 2000LXS platform. A study contract has been awarded, and an order for 4-5 aircraft will no doubt follow later.
This aircraft also appeals to Japan, whose coast guard has ordered a fifth Falcon 2000 SURMAR aircraft; deliveries on this contract are due to begin during the first half of 2019.
The Neuron unmanned combat air vehicle has resumed flight tests, with a new campaign focusing on stealth aspects for the French air force and navy now due to continue until 2020.
In terms of military development work, Dassault is now working to develop the F4 standard of the Rafale under a €1.9 billion contract awarded in January; once development is complete, its retrofit to the 152 Rafales already delivered to the French Air Force and Navy will generate additional revenues.
Also due this year, and thus contributing to the anticipated jump in revenues, is the delivery of the first of 18 (increased from 15) ATL2 maritime patrol/ASW aircraft, with the others to follow at regular intervals.
Similarly, the company is also working to define the Universal Electronic Warfare Capacity aircraft, for which the French Air Force has selected an as-yet unspecified Falcon business jet, with three aircraft planned.
In addition to these direct programs, Dassault is also involved in the French-German Future Combat Air System (SCAF) study with Airbus, for which they were jointly awarded a two-year architecture study on Jan. 31. The two now expect to be awarded contracts to develop technology demonstrators during the Paris Air Show in June.
The two companies are also cooperating in the EURO MALE unmanned aircraft, together with Italy’s Leonardo, and are waiting for OCCAR to issue an Invitation to Tender for the development contract.