U.S. Fighter Aircraft Pricing Themselves Out of the Export Market

Discussion in 'Military Aviation' started by Ash, Oct 30, 2013.

  1. Ash

    Ash Regular Member

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    At a time when U.S. arms manufacturers are turning to overseas markets to help make up for declining sales to Pentagon, analysts warn that the high prices of American fighter jets could place U.S. firms at a competitive disadvantage.

    The arrival of the F-35 Joint Strike Fighter gives manufacturer Lockheed Martin Corp. an opportunity to sell the world’s most technologically advanced aircraft. But its price tag, in excess of $100 million per airplane, will make it unattainable for most non-U.S. buyers, according to new analysis by The Teal Group, a market research firm. Other perennial contenders in international competitions, Boeing’s F/A-18E/F Super Hornet and F-15 Eagle, also are becoming out of reach for many nations.

    “We've jacked up the price of fighters,” says Teal Group Vice President Richard Aboulafia. “The export market’s reaction? ‘No, thank you,’” he tells industry executives at a meeting hosted by the Air Force Association, in Arlington, Va.

    Although the average unit price of fighters sold internationally today is $65 million — about the cost of a Super hornet — the bulk of the export market increasingly wants F-16 prices, which is about one-third less, says Aboulafia.

    Of 52 countries that buy fighters worldwide, 30 are in the $35 million to $50 million price range, he says.

    American firms face a “ real issue” trying to sell higher end machines, Aboulafia says. There are currently just five F-15 users after 40 years of trying to sell it internationally, and one non-U.S. user of the Super Hornet after 15 years of competitions, he says. “That's not good.”

    As the manufacturer of the F-16, Lockheed effectively owns the keys to the kingdom of export fighters, says Aboulafia. The problem is that the company is focusing its marketing efforts on the F-35 as it courts international buyers, and only a handful of countries can afford it.

    “It's very telling when you go to [Lockheed’s plant in] Fort Worth, Texas, that the F-16 line is treated like the red-headed stepchild,” he says. “I don't think it's necessarily in their interest to keep it going. … But it is concerning because, in terms of the export market, the F-16 line is extremely relevant and necessary.”

    The majority of buyers over the coming decades will shop for fighters in the price range of the F-16 or the Mirage 2000, made by France’s Dassault Aviation, Aboulafia says. “And that is the market that we're in danger of abandoning.”

    It is estimated that only seven countries could afford the Super Hornet and another seven might be candidates for the F-35, including Singapore, Japan, Israel and South Korea.

    That is a very small pool of buyers, says Aboulafia. For most countries, “a buck and a quarter isn't going to cut it,” he says, referring to the current price of the F-35. “If prices don't go down, the U.S. risks losing a considerable chunk of the world export fighter market which isn't only important from an economic standpoint, but also for strategic relations and keeping allies happy.”

    The United States already riled key allies when the Air Force decided to end production of Lockheed’s F-22 air-superiority fighter at 187 airplanes, before it could be sold internationally. “It is bad enough we killed the F-22 before satisfying Japan and Australia," Aboulafia says. The F-35 is now the only high-end fighter in a position to compete for a small number of wealthy nations’ business, he adds. “Having a one-size-fits-all $100 million fighter is just as dangerous in a lot of ways. The market might not grow to pay that price.”

    A shrinking pool of buyers is simply the result of global economic trends.

    A group of countries that used to buy lower end fighters bifurcated into haves and have nots. The haves, such as South Korea, moved up into the F-15 or F-35 market. The majority of the have-not countries — including Kenya, Bolivia and Argentina — no longer buy anything except used planes, says Aboulafia. “The market either migrated up or down.”

    This puts the United States in a tough spot trying to compete in the developing world as U.S. manufacturers struggle to keep their production lines going. “The last F-15 gets delivered in 2018 or 2019 to Saudi Arabia. … The last F/A-18 E/F exports deliver in 2015 or 2016 unless we win Brazil or Kuwait,” says Aboulafia. Current orders for F-16s would extend production until 2017. “This is worrying.”

    The biggest pot of future fighter business, which he calls the "undetermined" sector of the market, is in developing countries that demand lower prices and more technology transfer. “If you want to survive in the fighter market and you're not Lockheed or [Russian manufacturer] Sukhoi, this is what you have to access before the next decade.”

    The United States blew a major opportunity in India last year, where Lockheed and Boeing lost to Dassault’s Rafale, he says. “It's pretty clear we did a bad job of promoting U.S. products and make sure that everybody in Treasury, State and Defense were on the same page in terms of technology transfer and offset issues.”

    U.S. firms should worry about Sukhoi’s T-50 fighter, he says. “Russia fell from grace, but they've done a good job reinventing their industries,” Aboulafia says. “The T-50 looks real to me, although it's going to happen slower than expected.”

    There are only four remaining fighter competitions — in Brazil, Malaysia, Kuwait and Qatar — where the F-35 is not participating and the stakes are huge for the F/A-18, F-15 and F-16, he says. For U.S. industry, winning these deals could be a matter of survival, he says. “If you want more than one fighter line, you have to start accessing the undetermined market. ... That is why it was such a disaster when the F/A-18 lost India.”

    That Lockheed has kept the F-16 line going on exports alone is "extraordinary,” he says. Nearly 4,600 have been sold since 1970. “The F/A-18 is not going to have this future if the U.S. Navy stops buying them. It doesn't enjoy a decade thriving on exports.” The Super Hornet is “good value for money, but it's not in a sweet spot. It's not really high end, and not really 'great' value like the F-16 is.”

    Lockheed Martin spokesman Ken Ross says the company does not see the F-35 limiting its opportunities in the international market. The F-35 and the F-16 are “complementary” products, he says. The F-35 is for those countries that are looking ahead to the “next level of capability,” Ross says. “We provide options.”

    U.S. Fighter Aircraft Pricing Themselves Out of the Export Market - Blog
     
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  3. Ash

    Ash Regular Member

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    I guess this can happen when you loose touch with the markert/ customer needs. The trend these days seem to be customers needing ToT and not over engineered products at exhobitant prices.
     
  4. debasree

    debasree Regular Member

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    it will be better for us companies if they go for joint venture with indian companies to build millitary ind complex in our country
     
  5. Defcon 1

    Defcon 1 Senior Member Senior Member

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    Good news for Gripen
     
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  6. lookieloo

    lookieloo Regular Member

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    Gripen-NG is already expected to cost as much. More like good news for Tejas, FA-50, and JF-17 (maybe). That said, I'm not particularly upset about the list of countries unable to afford F-35s (lot of mohamedians on that list).
     
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  7. sayareakd

    sayareakd Moderator Moderator

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    I think they should make a successful product at least for export market, no point in having a product which no one buys.

    US ofcourse wants to have complete domination of sky so they can afford what ever is beyond the means of others.
     
  8. lookieloo

    lookieloo Regular Member

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    We tried that already.
    [​IMG]
    Turned out that very few were willing to settle for our second-best.
     
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  9. sayareakd

    sayareakd Moderator Moderator

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    first best they cant afford and second best they dont want..................:rofl:
     
  10. Defcon 1

    Defcon 1 Senior Member Senior Member

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    I was talking about Gripen C. Tejas won't be on export card before 2022-25. JF17 is still under testing, and I don't believe FA-50 has proper A2A capability, although I don't know much about it. Advantages of JF17 include higher range, wide range of weapons it is being tested with, and in flight refueling. Although I understand what use will these features find in the airforces of the country which is the target market of JF17. Gripen is the most sensible choice.
     
  11. lookieloo

    lookieloo Regular Member

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    And how much longer is Gripen-C to remain in production? Saab seems every bit as focused on NG as Lockheed is on the F-35. As for the FA-50, it looks to be a decent little plane with a wide range of radar options, from basic pulse-doppler (adequate to make good use of AMRAAM) to multiple AESA types.

    However, if one looks at light-fighter customers over the past few decades, most appear to have gone in one of two directions: Either they've moved on to high-end platforms, or they've ceased to bother with TACAIR at all (or are in the process thereof).
     
  12. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    You guys are confusing the issue. F-20 is simply something like a F-5Mk2. F-5 was very successful on the export market.

    There were major political reasons for the failure of the F-20. And that's because the F-16 was cleared for export at the same time, something that the Carter administration had considered banning or degrading the F-16 to a much lower capability which the Regan administration changed overnight.

    All export markets jumped on the F-16 bandwagon.

    F-20 is like China's JF-17 project, for the export market. Such systems don't do particularly well unless decent numbers are purchased.
     
  13. lookieloo

    lookieloo Regular Member

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    I'm aware of the F-20's political issues, but the fact remains that it failed because customers suddenly had access to what the USAF was flying; and no one likes being told they belong in the kiddie-pool. As for the F-5's customer-base, it basically divided in two: those moving forward in higher capability platforms... and those no longer able to afford a real airforce. This is why the market for light fighters is so small today.
     
  14. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    This was the case earlier.

    What the author is saying now is that most countries cannot afford the first best. So, a second best should also be made available so US retains such markets. Meaning, it is time to develop a new F-20 for the new markets.

    The earlier model failed because there was no incentive to choose the F-20. It shouldn't have to be the same this time.

    Obviously a new project is impossible. LM can instead focus on making a more simplified version of the F-35 that will come at a cheaper rate instead and make it available post 2025 when the main assembly line delivers at lower costs than today. Europe cannot deliver a cheap aircraft, so the ball is in the American court before current US clients decide to change vendors that the US does not control. This actually justifies JF-17's potential 500 export orders.
     
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  15. lookieloo

    lookieloo Regular Member

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    The case remains the same. Who the hell going to pay for development of a downgraded F-35? In the meantime, F-16 production is set to continue until 2016... unless more orders come in. It's not our responsibility to keep lines open for planes we're no longer purchasing. FYI, the new F-16s actually cost more than $70 million per-copy; and depending on the details of each purchase, that can go well north of $100 million.
    Sticker Shock: Iraqi F-16s $165 Million Each | TIME.com
     
  16. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    The same people who bought or are still buying used F-16A/Bs with block upgrade kits.

    Ok.

    You are not manufacturing enough F-16s to keep the prices low for obvious reasons. But the F-35s will be coming in at over 300 a year.

    Plenty enough to make a downgraded export version of the same with less expensive RAM coatings, less expensive electronics etc and providing cheaper servicing agreements along with less capable weapons systems. The Russians already do that, the Americans can follow suit. Ultimately, the point is to retain markets that cannot afford a full config F-35 even in 2025 when prices have stabilized.
     
  17. lookieloo

    lookieloo Regular Member

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    :facepalm:
    If someone's too broke-a$$ to afford the F-35, they will certainly not be able to finance development of a specialized dumbed-down variant.
     
  18. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    :facepalm:

    We are talking about periods after 2030 or even higher when deliveries are happening. No one's talking about re-making the entire aircraft.

    Why else do you think poor countries could afford so many different types of Flankers, especially Su-30s? The Russians made that many at very low costs that even selling a dozen jets saved them the costs and provided profits. All because the Su-30 simply had a huge and stable order from larger countries.

    There is no order today bigger than the F-35. If LM can't sell a low config F-35 to a client that cannot really afford a high config F-35, then they are the losers, especially when Sukhoi can find poor clients at less than 1/4th the orders that too for an entirely different class of aircraft.
     
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  19. lookieloo

    lookieloo Regular Member

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    :rolleyes: Utterly pointless.
     

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