Know Your 'Rafale'

[JAISWAL]

The $20 Billion Dogfight for an Indian Air Force Contract | idrw.org
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The $20 Billion Dogfight for an Indian Air Force Contract
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SOURCE : WALL STREET DAILY
It flies at over 1,500 miles per hour and has been called the complete combat aircraft. But India doesn't want it.
The consortium behind the Eurofighter, Typhoon, was ready for take off last month on an air defense contract worth $20 billion.
That was until French company, Dassault, swooped in and beat them to it, winning the chance to sell 126 of their Rafale aircrafts.
But the consortium – made up of the German and Spanish branches of EADS, Britain's BAE Systems, and Italy's Finmeccanica – haven't yet had their hopes grounded.
This week, BAE's CEO, Ian King, said "all options are still on the table," suggesting the price for the Eurofighter contract may come down.
IHS Jane's consultant, Endre Lunde, says France may still have the edge, with the transfer of nuclear technology between them and India perhaps the most crucial part of the deal: "France, with its experience in this field, could be very important to them in terms of helping to develop that technology, developing that capability and not least building this in India. So both on a civilian side and a defense side, I think there's significant potential to develop the relationship between India and France further."
Precedent is not on the French side however.
The Rafale has lost a series of contests to U.S. competition, while in 2009 French President
Nicolas Sarkozy prematurely announced that a sale of Rafales to Brazil was imminent, only to see talks drag on for another two years. Lunde says: France has been close before and it hasn't turned out in the end, one example being the UAE, which was predicted to be a customer of the Rafale. That fell through and it's now in negotiations with the Eurofighter."
So although the French may have India's fighter
contract in its sights, the dogfight over who will
ultimately prevail could produce more twists.

 

[p2prada]

The difference is too high for EF to squeeze through. That's $5Billion.

 

[pmaitra]

I'm referring to the contradictory messages in your statements. On one hand you said the the Cold War ended in 1991 yet your line of thought on the US still is straight out of the Cold War play book: US is out to undermine India and is thereby inherently untrustworthy.

Let me clarify, I was referring to the fact that it has not been long since the Cold War ended.

France has not been averse to trading and collaborating with the USSR, even though it was in NATO. Ditto for Italy.

I think that is one more reason why we can trust the French in this case.

 

[JAISWAL]

The difference is too high for EF to squeeze through. That's $5Billion.

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Now thats some serious amount of money, and i for that matter anyone in his sane mind will not going to change this decision in favour of EFT.
That will be completly in-sane.

 

[arundo]

French managed to reinvent the term Pyrrhic victory.

I didn't know that you had so many details on real Rafale costs, its real price and the package offered by the French.
This "pyrrhic victory" will probably open further doors and a lot of opportunities in the future, so it's a great victory since it is considered as "the mother of all deals".

We should not make remote diagnosis without knowing anything about the details of the French bid and avoid explaining the French, how they have to calculate. They know best what they can do and they already managed to keep their costs under control.. Of course they won't sign a contract without expecting measurable and heavy return. Even if the margin is narrow or nil, it can be wise investing now in order to get the fruits later. The stakes were high and the German lost.

The French acted with the long run and perhaps the weakening of one of its main competitors in their mind, which is legitimate. The deal will secure several thousands of jobs according to French media and is much more than just a sacrifice to Sarko's electoral ambitions. BTW Rafale was cheaper in most cases (except for CH).

 

[Armand2REP]

The Sarko haters say Rafale sale is a losing proposition for France. They forget that after 18 deliveries, there will be another 60 knock-down kits which is most of the work for Dassault. They forget this will be a boon for Thales and Snecma which is 50% the value of the aircraft. Outsourcing several billion in offsets to India will lower costs to the Air Force for future purchase of Rafale that we can't afford now. It keeps 30,000 people employed across large and small 500 subcontracted SMEs across the country, more people may be hired to increase production that to date has been slow.

 

[vanadium]

Had we chosen the EF, France may have been open to sell to China. It is a totally different factor that they would probably build 50 odd aircraft and reverse engineer the rest.

You obviously mean China (Taiwan)...as a follow up to the Mirage 2000.

For all the supposed independence of action from the US, France on fundamental issues has rarely deviated from bowing to the US vital interests. So please rest assured, if the Rafale deal with India falls through, France will not sell it to China.

Second point, China would not buy it anyhow...I mean in numbers. Probably a couple of jets, just to see if there were anything worth reverse engineering. I guess they would not find much...

 

[vanadium]

Let me clarify, I was referring to the fact that it has not been long since the Cold War ended.

France has not been averse to trading and collaborating with the USSR, even though it was in NATO. Ditto for Italy.

I think that is one more reason why we can trust the French in this case.

Everybody was trading with the USSR... bar Albania and a couple of other "nut cases".

 

[vanadium]

The difference is too high for EF to squeeze through. That's $5Billion.

That looks like pretty tough...

 

[Armand2REP]

That looks like pretty tough...

Much of that was in life cycle costs, there is nothing they can do to change that.

 

[vanadium]

The Sarko haters say Rafale sale is a losing proposition for France. They forget that after 18 deliveries, there will be another 60 knock-down kits which is most of the work for Dassault. They forget this will be a boon for Thales and Snecma which is 50% the value of the aircraft. Outsourcing several billion in offsets to India will lower costs to the Air Force for future purchase of Rafale that we can't afford now. It keeps 30,000 people employed across large and small 500 subcontracted SMEs across the country, more people may be hired to increase production that to date has been slow.

Do these people prefer a Eurofighter deal then? Because that´s the alternative to a French deal.

 

[JAISWAL]

Google Translate
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'C'est ça'
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BRASILIA - After so many comings and goings, the government is finally hitting the hammer in favor of the Rafale, the French Dassault, to renew its fleet of FAB. The notice must be in the first half, but only after May 6, when the second round of presidential elections in France.
The final push was India's decision to buy 126 Rafale, Dassault taking the choke. It is the first international order your jet, so far restricted itself to the French Air Force (sic). With production scale, the price of the planes also tends to fall in business with Brazil, emptying one of the major constraints to them: the cost of the product and especially maintenance.
Following the announcement of the deal with the French Indians, Celso Amorim (Defense) was coincidentally in India, in a statement citing the victory of Dassault and noting that 108 of 126 fighters "will be built in the country [India], with technology transfer ". The term "technology transfer" is a mantra dragged FX-2 program, the purchase of aircraft.
Lula was with pen in hand twice to sign the contract with the French. At first, fell after the embarrassment of announcing the option before the completion of the technical report of the FAB.
At second, when the sheet of report published the result with the Swedish Gripen first, the F-18 in U.S. Rafale second and third and last.
By assuming, Dilma used good argument for cutting the budget study business. The victory of the Gripen in FAB has been considered and the F-18 returned to the wheel. But during one year, crystallized two certainties in government: 1) the Gripen is just a project and Sweden has zero political weight, 2) it is impossible to trust the promise of technology transfer from the U.S., subject to the mood of Congress and alternation
of power.
Everything indicates that the Rafale coming.

 

[vanadium]

Much of that was in life cycle costs, there is nothing they can do to change that.

I have seen no numbers yet, so is difficult to entertain a serious debate without a few figures on the table.

My experience is that contemporary and same class fighters are unlikely to differ much in real LCC. It looks like Cassidian bean counters have mis-priced the deal or Dassault has undercut massively or a combination of both.

 

[Cola]

Oh c'mon Armand...
$119m per piece (providing its $15b indeed) with AESA radar, 50% offset and complete ToT?
Where will you produce it?
In China?

 

[Armand2REP]

Offsets are easy to get around in India. You get a couple decades to work them out which detract in value over inflation. You can write off just about anything on them. India is paying cash for the ToT and the OEM equipment to fabricate it. Source codes are included in the deal. ToT is 85%, critical components stay in France.

 

[p2prada]

The Sarko haters say Rafale sale is a losing proposition for France. They forget that after 18 deliveries, there will be another 60 knock-down kits which is most of the work for Dassault. They forget this will be a boon for Thales and Snecma which is 50% the value of the aircraft. Outsourcing several billion in offsets to India will lower costs to the Air Force for future purchase of Rafale that we can't afford now. It keeps 30,000 people employed across large and small 500 subcontracted SMEs across the country, more people may be hired to increase production that to date has been slow.

Ah! They are forgetting potential sale orders of 40 Rafales for SFC and 72 for IN. These will have to be made in France. HAL cannot handle so many unless they make major changes to the current plans, maybe by doubling capacity. I doubt there is any other company capable of handling such a large project.

So, a lot of the Rafale's for India may come from France, maybe half the potential orders, only if SFC and IN deals go to Rafale. Of course, now ALA can order the 100 odd aircraft that could have been denied to them.

F-35 may play spoilsport and this battle will be more interesting than the one we just had.

 

[p2prada]

You obviously mean China (Taiwan)...as a follow up to the Mirage 2000.

For all the supposed independence of action from the US, France on fundamental issues has rarely deviated from bowing to the US vital interests. So please rest assured, if the Rafale deal with India falls through, France will not sell it to China.

Second point, China would not buy it anyhow...I mean in numbers. Probably a couple of jets, just to see if there were anything worth reverse engineering. I guess they would not find much...

Europe will need a consensus in order to sell fighters and other equipment to China. Of course, whether China buys or not would be another issue because by the time a consensus is reached, they will have their fifth gen aircraft operational.

 

[Cola]

@Armand,
that's all fine (we'll see if Indians will actually cash the ToT, though), but you do realize that France pays more for Rafale than India, in that case?
Is that even legal?
Besides, if France pulls this off indeed, it can easily be seen as disloyal concurrency act after which you can kiss any tech share/collaboration with developed nations goodbye.
Is 150 planes worth that?

 

[p2prada]

I have seen no numbers yet, so is difficult to entertain a serious debate without a few figures on the table.

My experience is that contemporary and same class fighters are unlikely to differ much in real LCC. It looks like Cassidian bean counters have mis-priced the deal or Dassault has undercut massively or a combination of both.

The bids were opened On Nov 4, 2011. IAF and MoD took the time to make sure all costs were proper. This has happened before when EF submitted a bid for EJ-200 without adding ToT to the costs while the Americans had added ToT to their own bid for LCA's engine. In the beginning it turned out the Eurojet bid was lesser than GEs, but the problem was sorted out later and GE won the tender.

I guess the ToT costs alone were around $400million for the EJ-200.

Oh c'mon Armand...
$119m per piece (providing its $15b indeed) with AESA radar, 50% offset and complete ToT?
Where will you produce it?
In China?

Even better. In India.

 

[p2prada]

Offsets are easy to get around in India. You get a couple decades to work them out which detract in value over inflation. You can write off just about anything on them. India is paying cash for the ToT and the OEM equipment to fabricate it. Source codes are included in the deal. ToT is 85%, critical components stay in France.

Don't worry too much about it. The offset clause will come with a 5.5% increase, as is the case with the regular contract. The original Flanker contract was $3.5Billion in 2000 for 140 aircraft. The appreciation rate was around 2.5% until 2006 or 2007 after which it was revised to 5.5%. The current cost is over $14Billion including the initial Super MKI upgrade of $2Billion. Of course, the actual costs are unknown.

Also, let's not forget that there may be sudden fluctuations in exchange rate over the next 10 to 15 years. But this would benefit both parties I suppose.

This was indeed a competition where winner takes all.

With IAF in the bag, Brazil and UAE will follow suit. Dassault will have extensive bargaining powers. Maybe a much more aggressive bid for the Swiss tender, but it may not be necessary.

Officials say the cost difference is between 22-25% or Rs 25000Crores ($5Billion). If we consider $5Billion is 25% then the actual bid amount is around $20Billion for Rafale and $25Billion for Typhoon. However what I find difficult believing is why would the cost be so less when 40 years of flying time should be at least 2 or 3 times the unit costs. If we consider the $20Billion is for 40 years then the actual unit costs are less than $10Billion. Huh??? Not clear...

I guess we will know the exact amount once the contract is sealed in October.