Argument

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Why a Franco-German Fighter Jet Is a Bad Idea

Paris would be rewarded with greater profits and fewer headaches by going it alone.

By , a managing director at AeroDynamic Advisory.
Three fighter jets are shown; one is landing.
Three fighter jets are shown; one is landing.
Rafale fighter jets land on the French aircraft carrier Charles de Gaulle off the coast of Hyères, France, on Jan. 23, 2020. Philippe Lopez/Pool/AFP via Getty Images

In December, the United Arab Emirates ordered 80 Rafale fighter jets worth $16 billion from the French manufacturer Dassault Aviation—both a record UAE arms purchase and a record French arms sale. While Abu Dhabi still hopes to purchase 50 somewhat more advanced U.S. F-35s as part of a $23 billion arms deal with the United States, it only makes sense that the UAE would want a second source for combat jets—especially from France.

Nations that import arms in conflict-fraught regions want to keep their militaries operating in the event of potential arms embargoes, and France offers two strong selling points: a valuable strategic relationship and low risk of cutting off weapons support.

But the UAE Rafale buy—and other Rafale sales, including last week’s sale to Indonesia—raises questions about a nascent plan for France’s participation in its first-ever multinational fighter jet program: the Future Combat Air System (FCAS), a joint Franco-German plan to create a next-generation advanced combat aircraft that would enter production around 2040, after the Rafale has become outdated. (The FCAS project now also includes Spain, which will play a relatively small role compared with the two founding partners.)

In December, the United Arab Emirates ordered 80 Rafale fighter jets worth $16 billion from the French manufacturer Dassault Aviation—both a record UAE arms purchase and a record French arms sale. While Abu Dhabi still hopes to purchase 50 somewhat more advanced U.S. F-35s as part of a $23 billion arms deal with the United States, it only makes sense that the UAE would want a second source for combat jets—especially from France.

Nations that import arms in conflict-fraught regions want to keep their militaries operating in the event of potential arms embargoes, and France offers two strong selling points: a valuable strategic relationship and low risk of cutting off weapons support.

But the UAE Rafale buy—and other Rafale sales, including last week’s sale to Indonesia—raises questions about a nascent plan for France’s participation in its first-ever multinational fighter jet program: the Future Combat Air System (FCAS), a joint Franco-German plan to create a next-generation advanced combat aircraft that would enter production around 2040, after the Rafale has become outdated. (The FCAS project now also includes Spain, which will play a relatively small role compared with the two founding partners.)

In the context of the UAE deal and other sales, Franco-German future fighter development looks colossally ill-advised.

Just consider the history of Persian Gulf combat aircraft purchases. The major powers in the region—home to the world’s fastest-growing arms import market—often source from different suppliers for fear of winding up like the Shah of Iran: vulnerable to potential arms cutoffs from only one supplier. (The mid-20th century Imperial Iranian Air Force flew exclusively U.S. jets, and their supply was cut just after the shah fell from power in 1979.)

Saudi Arabia has flown both U.S. and pan-European fighters since the 1960s. The UAE has used a mix of U.S. and French planes since the 1970s—currently F-16s and Mirage 2000s, respectively. Recently, more countries in the region have joined this dual-source club. Kuwait, which has a relatively small air force, started importing two types of fighters in 2016: Boeing F/A-18E/F’s and Eurofighter Typhoons. The Qatari air force is an extreme example of multiple sourcing: In recent years, Qatar signed on to be the only export operator in the world of three different twin-engine heavyweight fighter jets: the F-15, Eurofighter Typhoon, and Rafale.

The virtues of redundant sourcing were clearly illustrated by the Arab Spring—and, specifically, the two-year U.S. arms embargo on Egypt, which was lifted in 2015. Between 1982 and 2015, Egypt ordered exclusively U.S. fighter jets. But after 33 years of relying primarily on F-16s, Egypt signed the first export contract for the Rafale in 2015. It now has 54 of these on order. (The UAE helped finance Egypt’s Rafale acquisition.) Egypt has also bought Russian MiG fighters as additional insurance.

France in particular has been able to attract Gulf clients due to its unique history of going it alone. In the 1960s and 1970s, while the rest of Europe teamed up under the Panavia Tornado program, France went its own way with a series of Dassault fighters. (These decisions are made government to government, rather than by manufacturers.) In the 1980s, Europe followed the Tornado with the Eurofighter, a collaboration between Britain, Germany, Italy, and Spain. France was offered a position in this multinational program, but it felt it should have had a near-dominant role: It demanded a 46 percent share in the Eurofighter, which would have left the other four countries with just 54 percent.

France has been able to attract Gulf clients due to its unique history of going it alone.

This was a non-starter, and France went its own way, creating the Rafale program. Incidentally, the Rafale is more purely national than U.S. fighters, which often feature technologies from foreign companies such as Britain’s Rolls-Royce and BAE Systems and France’s Safran. French companies build all major components of the Rafale, including its engines, radar, and electronic warfare system. This is an all-French jet.

Thus, there is zero risk of another country cutting off support for any system or weapon in a Rafale. Furthermore, of all the Western arms-exporting countries, France is well known as the least likely to impose support and sales embargoes. Human rights concerns simply aren’t a big factor in French weapons sales decisions.

The result has been sudden and growing market success—though not at first. For 30 years, Dassault failed to score a single Rafale export sale, despite multiple campaigns and competitions, while the United States, as the major post-Cold War global power, increasingly dominated the world combat aircraft market. But since the 2015 Egypt sale, as dual-sourcing strategies have grown in key export markets—including the Middle East and India—Dassault has sold more than 200 export Rafales, with more being negotiated, in deals worth around $40 billion, according to the manufacturers and AeroDynamic Advisory research.

Yet the past five years have also seen a strange realignment of European combat aircraft industrial relationships.

Seeking to establish its role as an independent power in the aftermath of Brexit, Britain has launched a unilateral new fighter program, the Tempest. While other countries are welcome to join as partners—and Italy and Sweden have already—it remains a U.K.-led program. If nothing else, the government of Prime Minister Boris Johnson can point to the Tempest as an example of greater defense sovereignty post-Brexit.

Meanwhile, Germany was reluctant to work with a non-European Union country on a new fighter program. The result was a deal with France. After all, there would be fewer trade, technology, and personnel barriers working with a fellow EU country, and a Franco-German fighter would also align with broader pan-EU defense goals. The FCAS was launched in 2019 with a 65 million euro (about $74 million) contract covering the first two years of development.

This new European fighter realignment sounds like a reasonable response to Brexit, but in reality, there’s a big problem: The key to France’s success as an arms exporter in recent years has been that customers know they’ll never have to ask for the keys to their new purchase.

By contrast, Germany’s willingness to restrict arms sales and support for political reasons has increased in recent years. Berlin has blocked sales of numerous products from the European multinational Airbus—including the A330 MRTT refueling tanker, C-295 military transport, and H145 helicopter—to Saudi Arabia, among other places. In 2019, then-Airbus CEO Thomas Enders told Reuters: “It has been driving us crazy at Airbus for years that when there is even just a tiny German part involved in, for example, helicopters, the German side gives itself the right to, for example, block the sale of a French helicopter.”

In 2018, Britain’s BAE Systems announced that a second Eurofighter sale to Saudi Arabia was at risk because of a German arms embargo, imposed due to the Saudi war in Yemen, resulting in a significant hit to BAE’s share price. This long-awaited deal is still at risk, with discussions taking far longer than expected.

The historical pattern of French fighter export sales also implies there may be serious future disputes with a German partner. The biggest single Mirage F1 customer was Saddam Hussein’s Iraq. Apartheid-era South Africa and Muammar al-Qaddafi’s Libya were also notable F1 customers. And of course, post-Arab Spring Egypt, with President Abdel Fattah al-Sisi’s military government, was the first to import the Rafale. It is unlikely that Germany today would sign off on arms exports to any of these governments.

For France, there’s a great deal at stake financially. Prior to the Rafale, Dassault fighters had typically seen 65 to 70 percent of all sales from export orders. That was true of the Mirage III V, Mirage F1, and Mirage 2000. It is quickly becoming true for the Rafale, too—exports make up 50 percent of its orders today. By contrast, just 11 percent of Europe’s Tornado sales were exports, while so far, 23 percent of Eurofighter sales have been exports. For German industry, having its hands tied on the export front by political considerations isn’t the end of the world; for French industry, it would be the death of its business model.

A Franco-German fighter isn’t just a bad idea because of asymmetric weapons export policies. The industrial arrangements themselves are problematic. Ostensibly, the FCAS is a joint program, but the partners have agreed to make Dassault prime contractor on the aircraft, and there are few doubts that Safran will be prime contractor on the engine and the French company Thales on the radar and electronic warfare systems.

That’s understandable, since these are the companies best suited to produce this equipment in the EU. However, it probably isn’t long before German politicians begin to see the FCAS as yet another program that fits the German stereotype of an EU project: Germany pays half the bill, and French industry gets the vast majority of the technology, workshare, and economic benefits.

The FCAS is best viewed as a knee-jerk response to Brexit. Once the dust settles over Brexit in a few years, the aviation industry will resume its normal course. Germany can then join Britain and BAE Systems on its Tempest fighter, perhaps with legal provisions that prevent a minority partner from vetoing export sales. (As a 50 percent partner with the FCAS, Germany likely wouldn’t accept those kinds of stipulations.)

As for France, it has historically done well by going its own way. The UAE Rafale order proves that yet again and also implies that another purely French program would be richly rewarded. Expect France to act accordingly—and go its own way again.

Richard Aboulafia is a managing director at AeroDynamic Advisory, an aerospace and defense industry management consultancy. He has followed the industry as an analyst and consultant since 1988.

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