By Avascent Analytics team
A quick look at the biggest stories of the week. Israel and the U.S. signed a record military deal; South Korea will exercise an option to purchase more F-35A fighters; India and Russia have agreed to proceed with the Fifth-Generation Fighter Aircraft (FGFA) program; India may finally be poised to sign a deal for Rafale fighter aircraft; Sweden will not seek NATO membership; and Poland will publish its RFP for new attack helicopters.
On September 14th, Israel and the US signed a record military aid deal worth $38 billion over ten years beginning in 2019. The agreement, the largest ever signed between the two countries, allocates $500 million a year to developing missile defense systems, but also commits Israel to not approach Congress for additional money for missile defense systems. The deal’s greatest impact, however, will likely come from the agreement to gradually phase out an arrangement that has allowed Israel to spend 26% of its American aid on local procurement. While it will deal Israel’s defense industry a major blow, the US defense industry stands to benefit.
Following North Korea’s successful nuclear test recently, South Korea may purchase 20 more F-35A fighters in order to bolster its defensive capabilities. South Korea has already purchased 40 F-35A fighters, but it had the option to purchase 20 more as needed. The planes are valuable to South Korea due to their stealth capability, which allows them to operate effectively in contested environments. Prior to buying the F-35A, South Korea had acquired 60 F-15K Super Eagles as well, so the fighter aircraft market in South Korea is effectively saturated. Avascent Analytics estimates that less than 3% of that market is still comprised of open opportunities, and that it is shrinking at a rate of 13.4%.
India and Russia have finally come to an agreement to proceed with the troubled Fifth-Generation Fighter Aircraft (FGFA) program, following three years of impasse over work-share distribution and platform specifications. India’s Hindustan Aeronautics Ltd. (HAL) and Russia’s Sukhoi Co. first agreed to jointly develop a fifth-generation fighter aircraft in 2007 that could potentially rival the F-22 Raptor in capability. The two organizations signed a $295 million agreement in 2010 for the preliminary design phase (PDP) which expired at the conclusion of 2013, but a formal follow-on R&D contract agreement totaling upwards of $11 billion has remained elusive. In the meantime, Russia has proceeded with the development of the aircraft on its own, eventually dubbed the T-50 PAK-FA and unveiled for the first time in 2015. Final signatures to continue joint development of the aircraft could come as early as October this year, prior to Indo-Russian summit talks in Goa. The Indian Air Force has stated its intention to procure 144 of these high-end aircraft beginning in 2022.
India may finally sign deal worth EUR 7.87 billion with France’s Dassault Aviation SA for 36 Rafale fighter aircraft. Spares and weaponry, including the MBDA Meteor, are contained within the deal expected on 23 September. Half of the total contract value will be covered under offset, with the possibility of a follow-on order with a 10% cost escalation. India originally selected the Rafale as the L1 bidder of the now-defunct 2009 Medium Multi-Role Combat Aircraft (M-MRCA) competition, which would have inducted 126 aircraft into the Indian Air Force beginning in 2018. With the cancellation of the competition in 2015 following three years of failed contract negotiations, India currently faces a significant shortfall in aircraft fleet strength. The IAF has a stated need for up to 45 squadrons of fighters, but currently only operates 32.
Sweden has announced that it will not seek NATO membership, citing the drastic destabilizing effects such a military realignment could have on overall European security. Ambassador Krister Bringéus stated that a clear message of U.S.-European unity and strength – which Sweden’s NATO application would demonstrate – could trigger a larger diplomatic crisis in Russia. In April 2015, the Swedish government approved a new SEK 10.2 billion ($1.09 billion) defense budget expansion in response to Russian assertiveness, successively increasing defense spending over the next five years by 11%. The extra funds will be spent on a renewed regional focus, with emphasis on anti-tank weapons, Carl-Gustaf weapons systems, Archer artillery systems, and a renewed military presence on Gotland Island, among other priorities.
Poland is preparing to publish a request for proposals for new attack helicopters, which will replace the 17 Mil Mi-24s that are currently in service. High profile contenders for the contract include Bell Helicopter’s Ah-1Z Viper, Boeing’s AH-64E Apache, Airbus Helicopter’s Tiger, and the TAI T-129. While not the first time this deal has been considered and revised, it still represents a substantial opportunity: Avascent Analytics estimates that the market for attack helicopters in Poland will have an annual value of $106 million over the next six years – all of which is represented by this requirement.
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