By Avascent Analytics team
In a political sea change, Europe is bringing defence into the heart of its activities with the launch of a €1.5 billion-per-year European Defence Fund (EDF) to invest in next-generation technologies. If fully implemented, the reforms will impact nearly every facet of the European defence industry, from consolidation and partnership pressures, to increased R&D funding, technology risk appetite and new political dynamics. Click here for the white paper.
A quick look at the biggest stories of the week
Netherlands • Romania • Philippines • Qatar • Space
On November 30, the Dutch Ministry of Defense informed Parliament that it may cancel the purchase of the final three of 37 F-35 fighter aircraft, citing exchange rate fluctuations. The move could save the government close to $500 million. The original 2013 contract included 37 aircraft worth €4.4 billion ($5.8 billion). In the intervening years, the dollar has strengthened almost 20 percent against the Euro, making imports costlier for Eurozone countries. Reducing its F-35 buy may free up room in the Netherland’s defense budget, which Avascent estimates will begin to decline starting next year.
On November 30, Romania signed a deal with Lockheed Martin for Patriot Advanced Capability missiles. Romania agreed to buy seven PAC-3 MSE fire and control units through the Foreign Military Sales program, for up to $3.9 billion. The sale is likely motivated in part by growing unease about a resurgent Russia, which has inspired many similar acquisitions in Eastern Europe since the Russian annexation of Crimea in 2014.
On November 30, Embraer announced that the Philippines had signed a contract for six Super Tucano close air support aircraft for the Philippine Air Force. Efforts to acquire support aircraft have faced repeated delays and restarts over the past four years. The contract is worth $99 million with deliveries set to begin in 2019. The Super Tucano will replace eight aging OV-10 Broncos, which recently saw action over the city of Marawi against ISIS-linked terrorists that highlighted the need for new close air support aircraft. As part of the Armed Forces modernization program Horizon 2, the Philippine Air Force hopes to acquire 18 more close air support aircraft between 2018 and 2022. Although they are a high priority, the Department of National Defense will likely have to delay other major projects if it wants to acquire the 18 aircraft in that timeline. Other major acquisition plans slated to begin in the 2018-2022 Horizon 2 timeframe include two long range maritime patrol aircraft, 12 FA-50PH light attack/trainer aircraft, 16 utility helicopters, four anti-submarine warfare helicopters, and a yet-to-be determined number of corvettes. However, projects that may not directly address the counterinsurgency mission could potentially face delays in favor of acquisitions such as additional counterinsurgency aircraft.
In a sudden move that has rocked the fighter market, Qatar will further expand its Air Force beyond last year’s order of 36 F-15QAs by acquiring the Eurofighter Typhoon and Rafale. On November 28, Qatar reached an agreement with the United Kingdom on the purchase of 24 Eurofighters and six Hawk Trainers. The order, which took less than six weeks to negotiate, is a significant win for the British aviation industry whose future seemed uncertain as the Eurofighter production line was set to close in 2022.
On December 7, Qatar signed an agreement with France to procure up to 48 additional Rafale aircraft as part of a deal worth $14.1 billion. Initially 12 Rafale aircraft will be procured with an option for a further 36. The completion of all three fighter deals would make Qatar the only country in the world to operate three different advanced 4.5+ generation aircraft. These sales are thought to be part of an overall political strategy by Qatar to gain favor with the major Western powers during a time of strategic uncertainty in the Middle East. Qatar also agreed to procure 490 VBCI 8 x 8 wheeled armored fighting vehicles from France’s Nexter. VBCI has been in service with France since 2008, however this would be the first export sale for the platform. The rest of the agreement includes a commitment to procure 50 A321 aircraft for Qatar airlines and a deal for work on the metro and light rail transportation systems.
For more information about this Weekly Wire, contact firstname.lastname@example.org.
Analytics Users: If you’d like to see the markets discussed in any of these articles in greater depth, please visit avascentanalytics.com.