2013-12-19 Shortly after the French leadership left Brazil after working hard for a Rafael deal in Brazil, the Brazilian government announced their decision: Gripen.
The F-18 became a casualty of the NSA scandal – the President of Brazil did not find it amusing having had her emails read by a young defense contractor through his access to NSA. The French suffered from higher cost than Gripen and other assorted complaints from the Brazilian side.
The press release by SAAB on December 18, 2013 announced the result as follows:
The Brazilian government today announced the selection of Gripen NG. The announcement today will be followed by negotiations with the Brazilian Air Force aiming at a procurement of 36 Gripen NG.
The offer presented to the Brazilian Government by Saab includes Gripen NG, sub-systems for Gripen NG, an extensive technology transfer package, a financing package as well as long term bi-lateral collaboration between the Brazilian and Swedish Governments.
The announcement today will be followed by negotiations with the Brazilian Air Force aiming at a procurement of 36 Gripen NG. After finalized negotiations an agreement can be reached between Saab and Brazil and an order for Gripen NG placed.
”I am extremely proud of the confidence that the Brazilian government has placed in Gripen NG. Saab regards the announcement today as a strong commitment of the Brazilian Government and we are looking forward to provide the Brazilian Air Force with the world-leading and most affordable fighter.
Furthermore, this announcement is very significant for the collaboration between Brazil and Sweden. We stand prepared to start the industrial collaboration as planned, with its positive effects for Brazilian industry”, says Saab CEO Håkan Buskhe.
If Brazil procures the Gripen system it will be joining the countries operating the Gripen System today: Sweden, South Africa, Hungary, Czech Republic, Thailand and the UK Empire Test Pilot School (ETPS). Switzerland has also selected Gripen as a future fighter jet.
During August and September 2013 both chambers of the Swiss Parliament voted yes to the procurement of Gripen. A referendum on the procurement is expected in 2014.
One analyst who was not shocked by the outcome was Francis Tusa, the editor of Defence Analysis, the London-based defense newsletter and a long-term observer of military aviation, and a visitor to the SAAB facilities in Sweden.
Tusa recently wrote an article, excerpts from which we are including below, which looked at what he considers a key market for the period ahead, namely those countries with small Air Forces but who see fighters as the key element of their Air Forces.
And in this situation, he certainly believes that Gripen is in a strong position.
And the advantages, which Gripen brings to the table, are those, which can account for the win in Brazil.
In a phone interview with Tusa, conducted the day after the announcement, he indicated what he believed are some of the key advantages of Gripen in the small Air Force market.
First, the aircraft has been designed from the ground up to be supportable.
“When Sweden wished to replace its legacy aircraft with what would become Gripen, the government insisted that it cost at least 50% less to operate than the aircraft it would replace. It has been designed to be maintainable and in difficult conditions.”
Second, the Gripen has been shaped in an environment in the post-Cold War period where interoperability with NATO and an ability to work in multinational coalitions and conditions has been highlighted.
Sweden has emphasized Gripen as a fully interoperable aircraft.
Third, the Gripen has been designed from the beginning to be a very flexible aircraft. “This plane is virtually the very definition of a multi-role fighter, and as such can be a workhorse for a small air force.”
Fourth, Sweden, unlike France, committed to build more of the fighters it was seeking to export, rather than cutting the buy. Given that the Brazilian Air Force needs fighters as quickly as possible, the ability to take the aircraft out of the inventory in Sweden and make them available to Brazil is a strong selling point.
Fifth, the aircraft is designed to work as well in a variety of packages. Thailand purchased the Gripen and then AEW SAAB aircraft and the ground control suite.
“In the case of Brazil, it is the opposite. Brazil has been operating the SAAB ERIEYE AEW and C aircraft since 2002 and has been very happy with it for their border security operations, which are very important in Brazil. This is simply extending the working relationship with SAAB to a fighter aircraft.”
(It should be noted as well that the ERIYE system has been configured to fly on Embraer 145 in Brazil, Mexico and Greece.)
Sixth, SAAB is owned by a large Swedish industrial group and this group is very good at making offset investments. Clearly, offsets are important part of this deal as well.
It is also the case that SAAB has invested in the Brazilian defense and aerospace industry as well.
In May 2012 it was announced that:
Sweden’s premier defense and security company, Saab, is strengthening its relationship with a Brazilian integrator of aero-structures. Saab, manufacturer of the Gripen jet fighter that has partnered in the past with the company Akaer, said it is now financially investing in the company.
The investment is equivalent to a 15% stake in Akaer, whose advisory board will now include the Swedish company.
“Akaer and Saab share aero-structural synergies and together we can meet the demands in aero-structures assemblies to the aerospace industry. I am certain our partnership will guarantee both quality and long-term business,” said Cesar da Silva, Akaer’s chief executive officer.
Akaer is an engineering company that specializes in the development of aero-structures and management of turnkey aerospace and defense projects. In 2009, Saab contracted it to design components for its Gripen fighter, a lightweight, single-engine fighter jet flown by six countries. Akaer’s work on the Gripen focused on the aircraft’s rear fuselage, mid- fuselage and wing, including main landing gear doors.
Engineers from Akaer were sent to Sweden for on-the-job training. In 2010, Akaer facilities in Brazil were prepared and certified for work related to the Gripen.
As an aside, the aircraft has had maintenance problems operations in South Africa, but according to Tusa, this has been the responsibility of the South African government for not supporting the aircraft properly.
His point was underscored by our partner defenceWeb in a recent article by Guy Martin on the impact of funding problems on the South African Air Force.
Coincidentally, while the interview was under way SAAB announced a new agreement with South Africa to solve this problem!
Defence and security company Saab receives steady state support contract for South African Gripen. The order has a total value of SEK 180 million over the years 2013-2016. The South African Air Force has been operating the Gripen fighter system since 2008 when the first Gripen was delivered.
The operations of the Gripen fighter system in South Africa have previously been supported by Saab through short-term interim support contracts.The steady state support contract that is now signed between Saab and Armscor enables Saab to conduct support operations in a sustainable manner with a long-term horizon, with high efficiency and availability.
Through the steady state support contract typical support services like engineering support, maintenance, repair and overhaul and spares replenishment will be carried out. The contract also includes technical publications amendment services. The total value of the contract is SEK 180 million over the years 2013-2016.
“Signing of the steady state support contract marks the start of a deeper and extended relationship between Saab, Armscor and the South African Air Force. The Gripen operation climbs out of testing and delivery phase with ad hoc, short-term support efforts into a real sustained South African Fighting Force, constantly ready and supported by Saab,” says Magnus Lewis-Olsson, head of Saab’s market area Sub-Saharan Africa.
In short, the Gripen can fit in quite well with Brazilian needs for a fighter aircraft delivered rapidly, at a good price, with an upgradeability capability, with interoperability highlighted, able to work with other SAAB aerospace capabilities already operational in country and a highly maintainable aircraft operating in challenging conditions.
Editor’s Note: Below are excerpts from Tusa’s look at the market of smaller air forces and the role of SAAB within those markets.
Combat Aircraft Sales
“The Two Dozen Club”: The Perfect Air Force …?
by Francis Tusa
Defence Analysis
November 2013
(Excerpt):
“Swedish fighter jet maker Saab is raising its long-term sales forecast by as much as 50 percent to 450 jets, driven by demand for its low-cost Gripen warplane from cash-strapped governments, its chief executive told Reuters.
“The increase suggests a potential windfall for second-tier suppliers as regional powers from Africa to Asia move to arm themselves cheaply against new threats and top Western projects like the U.S. Joint Strike Fighter struggle to contain costs.
“With its $2.1 billion market capitalization, Saab is a minnow in the global aerospace and defense sector, but it survives by making cheaper jets that focus on regional defense.
“‘Gripen is not designed to go and drop a nuclear bomb 5,000 kilometres away, but to defend itself and its airspace, that is the Swedish military doctrine,’ said chief executive Hakan Buskhe.
“Saab says its single-engine Gripen is cheaper to buy and run than European twin-engine rivals such as Dassault Aviation’s Rafale and the Eurofighter Typhoon, a point echoed by Switzerland this week as it closed in on a $3.4 billion deal to buy 22 Gripens.
“Saab is lifting its projection of how many planes it can sell following positive feedback from Asia, and with growing interest from Europe, sub- Saharan Africa and South America, Buskhe said in an interview ….”
So what …?
Well, excluding bombast on the part of Saab’s CEO, it is pretty gutsy to raise ones sales estimate by close to 50% at a time when many budgets are on a downward trend, even in Latin America and Asia, let alone Africa. The key issues for Saab seem to be:
Practically everyone is cost conscious – look even at South Korea, where the key issue about its FX-II program is/was a budget ceiling;
The “Leader of the Pack” as regards combat aircraft is JSF, but this is, for the moment, horrendously compromised by its price – on current forecasts, this won’t get to a sub-$100-million (in real terms, not make-believe US ones …) until well into the 2020s, and even then, many countries won’t be allowed to buy it;
Not everyone wants to undertake long-range, high threat strike missions – air defence and territorial integrity can be the right missions for many countries;
The combination of all of these trends might now be tilting the market towards Saab.
But this press article had another thing that got Defence Analysis thinking ….
Look at the Swiss deal for 22 Gripens: why do so many air forces buy in batches of, basically, two dozen?
There is – obviously – something about this number that is almost a constant in air forces. Taking this further, is the “ideal” number of aircraft for a smaller country, actually, 24?
Is the real advantage of Gripen that it can provide capability, at an excellent cost, for as few as 24 aircraft?
Is Two Dozen a level where Saab can provide a coherent, well- established, and supportable combat aircraft air force?
So, is Saab’s ales forecast based on the worldwide “Two Dozen Club”?
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