Dassault, exports and the next generation fighter
By Pierre Tran
Paris – Dassault Aviation has insisted on being named prime contractor and principal architect of a next-generation European fighter aircraft, and also prime contractor for the fighter’s flight control system, executive chairman Eric Trappier said on March 4.
“These are two red lines,” he said on the sidelines of a 2021 financial results press conference.
Dassault has signed a work contract on a technology demonstrator for the fighter, entrusted it to the Directorate General for Armaments, and has been waiting since September for Airbus Defense and Space to countersign it, he said.
The DGA declined to comment.
Airbus DS is the industrial partner of this fighter project, a key element of phase 1B of the development of a future European combat air system, a complex network linking the planned fighter, the teleported drones and the planes of the allied nations. The new fighter would replace the Rafale and the Eurofighter.
Dassault considers that Airbus DS seeks to share the direction of the fighter program, which the family company resists.
There should be a “best athlete” approach, with one leader, Trappier said.
Airbus DS said it had made proposals for cooperation on the new fighter and was confident a deal could be struck.
“We succeeded months ago in finding fair and balanced agreements on the other six pillars, where even under defined leadership, the skills and capacities of each partner are respected and can participate equally,” said a Airbus DS spokesperson.
“Airbus has made several proposals to also converge on the Next Generation Fighter (NGF) and we support any solution that will respect both the skills of each partner and the leading role of Dassault Aviation, leading to a fair agreement.
“We are confident that a resolution can be achieved if the rules of cooperation agreed by nations are respected in the NGF, as they are on other pillars,” the spokesperson said.
“The SCAF program is key to meeting the needs of European armed forces in the future and we are committed to it.
The hunter is the first pillar of the SCAF, Dassault being designated as leader on the hunter. The other six pillars are engine, remote operators, combat cloud for network communications, simulation labs, sensors, and stealth.
The delay has been a “very high cost”, Trappier said, as some members of the company’s design office, which numbers around 100 people, have been reassigned, with the prospect of reassigning all those staff if they don’t. there was no contract on the hunter. project.
Trappier declined to comment when asked if he had a plan B if a deal was not reached.
Red lines problem
“We were surprised how clear the issues around SCAF/FCAS have become for Dassault: the red lines are shining now,” said Sash Tusa, an analyst at equity research firm Agency Partners.
Work on the architecture and design of the flight control system was extensive, Trappier said, and Dassault’s design team worked in Saint Cloud, the capital’s suburban headquarters.
Airbus DS had design skills and its staff worked in Toulouse, in southwestern France, he said.
One analyst said the remark about Airbus DS design engineers was a particularly scathing comment, pointing to a perceived lack of specialist experience in fighter jet design. Toulouse is the headquarters of Airbus, an airliner manufacturer, while the headquarters of the defense and space unit is in Manching, in southern Germany.
It remained to be seen who would come first, Airbus DS signing the contract on the fighter project or Germany ordering the F-35 fighter, Trappier said.
On a contract signed on February 24 for a European medium-altitude, long-endurance drone, Dassault’s share of the agreement was 1.2 billion euros and consisted of the architecture of the flight control system and communications systems, he said. Thales, in which Dassault holds a 24.6% stake, will share the communication work.
The total budget for the European unmanned aerial vehicle is 7.1 billion euros, supported by France, Germany, Italy and Spain.
German Chancellor Olaf Scholz told the Bundestag parliament on February 27 that the 2022 federal budget would adopt a single fund of 100 billion euros ($109 billion) for military spending and promised an annual defense budget of more than 2% of gross domestic product. .
Germany would also build the next generation of fighters and tanks in cooperation with France and other European partners, he said, and these projects were “of the highest priority”.
The Chancellor delivered his speech, widely seen as a major policy shift, in response to Russia’s assault on Ukraine, which has triggered Western sanctions against Moscow in banking, sports, culture, aerospace, commerce and air travel.
Scholz said a contract had been signed the previous week for a European medium-altitude, long-endurance drone, underscoring the importance of German military spending and cooperation. Berlin would follow up with an order for an armed Heron drone from Israel.
There would also be a replacement for the German Tornado fighter, which carries nuclear bombs under a NATO deal, he said.
“The F-35 fighter jet has the potential to be used as a carrier aircraft,” he said, while the Eurofighter could be equipped for electronic warfare.
Cash Rich Dassault
The brakes were off for Dassault, so the cash-rich company should consider making an offer for Thales, said a stock research note from Agency Partners on Feb. 16, ahead of 2021 financial results.
“We believe a radical change in the dividend payout rate is possible, but we also suggest that Dassault could reassess its current minority stake in Thales, with the possibility of spending money to buy a majority stake and control. from Thales,” he added. says the report.
Dassault holds cash of 4.8 billion euros, a gain of 1.4 billion euros from a year ago, the company said in its financial results.
Export success and the resulting influx of cash would fund this M&A deal, according to the Agency Partners report. Winning an Indonesian contract for 42 Rafales meant the company had won export contracts for 188 fighters from five countries in the past 18 months, including two new customer countries – Croatia and Indonesia, according to the report.
This made it possible to manufacture a “bridge” of veterans and the Future Air Combat System (SCAF / FCAS), with an estimated production of three Rafale per month until the early 2030s.
This export success triggered in France an “overhaul” of the collaboration with Germany on the future combat air system, due to German concerns over arms exports and tensions over the direction of the FCAS project, according to the report.
France levies a 2% tax on arms exports, to recover a “fair share” of the cost of developing weapons ordered by the French authorities, Hervé Grandjean, spokesman for the Ministry of the Armed Forces, told reporters. December 9.
This leads to limited direct financial gain for the French government from arms exports, although prospects for overseas sales are taken into account when funds for domestic projects are established.
Rise in profits
Dassault announced an increase in adjusted net profit in 2021 to 693 million euros from 396 million euros the previous year, on sales rising to 7.2 billion euros from 5.5 billion euros.
This boosted the net profit margin to 9.63% of sales from 7.2%.
Sales for 2022 are expected to drop. The orders-to-bills ratio between orders and sales was 1.67.
Orders rose from 3.4 billion euros to 12 billion euros, helped by orders for 49 Rafales, including 37 for export, including 31 units for Egypt and six new planes for Greece. Athens also ordered 12 second-hand Rafales, which France replaced with an order of the same number.
The order book increased from 15.9 billion euros to 20.8 billion euros.
Croatia bought 12 second-hand Rafales and signed a service contract with the company.
Dassault expected to receive heavy down payments this year, based on a total of 128 Rafale orders, including an order for 80 people signed with the United Arab Emirates in December, an Indonesian order signed last month for 42 fighters and an expected Greek order. contract for six other fighters. The deal for the latter was cleared by the Greek parliament last month and a contract is expected to be signed soon.
In general, the price of a Rafale is 100 million euros per unit, with Thales accounting for around 25%, Thales chief financial officer Pascal Bouchier said on March 3 during an earnings press conference. 2021 financials of the electronics company.
Dassault, which is pursuing other export deals for the fighter, is working on an improved F4 version and will work on other upgrades, Trappier said.
The company plans to deliver 12 fighters this year, after 25 last year, shipped to India and Qatar.
France is expected to order a fifth tranche of Rafale for the French Air Force next year, the company said, potentially made up of 30 units as planned, and another 12 units to replace those sold to Croatia. France has ordered 192 Rafales to date.