If India picks Eurofighter, it will create thousands of jobs here
Eurofighter GmbH, formed in 1986, is a consortium of three companies- Alenia Aeronautica, BAE Systems and the European Aeronautic Defence and Space Company (EADS). It is one of the world's leading manufacturers of advanced fighter aircraft, and one of six companies in contention for the $10 billion for the 126 aircraft Medium Multi-Role Combat Aircraft (MMRCA) deal. Their Supervisory Board of Eurofighter met in India for the first time on October 25 & 26. Mint met Bernhard Gerwert, CEO CASSIDIAN Air Systems & Chairman Supervisory Board, Enzo Casolini, CEO, Eurofighter GmbH, Enrique Barrientos, CEO Cassidian Spain, Christopher Boardman, managing director Typhoon Mission Support & International Programmes, BAE Systems and Maurizio de Mitri, senior vice-president Commercial Defence Aircraft, Alenia Aeronautica, for an interview.
Eurojet's EJ200 lost out in the race to be the engine for the Mark-II version of the Light Combat Aircraft (LCA). What do you think went against the EJ200? The consultant for Eurojet, reportedly had privileged information on the bids. Would this not dent your chances for the Medium Multi-Role Combat Aircraft (MMRCA) deal, considering the Eurofighter uses the same engine?
Bernhard Gerwert: We were not involved in Eurojet's campaign. The EJ200 of course, being the engine, is important for the Eurofighter. But we do not have enough knowledge about the offer of Eurojet for the LCA. We however recognize that the decision has been taken and the GE engine was declared as the lowest bidder. We have no shareholding in Eurojet. It is a supplier for us, and a totally independent company, so I believe it will not affect our campaign for the MMRCA.
By when do you see a down selection or a shortlist coming, if at all? By when do you see the final MMRCA deal being signed?
Bernhard Gerwert: I would be pleased if I were in a position to answer that. What we know is that the flight evaluation is over and that the Indian Air Force (IAF) has submitted the report to the ministry of defence. The offset offers are being discussed. We have received queries on our offset offer. So the process is progressing well. I expect the commercial envelopes to be opened soon, in the next few weeks or months.
How did the Eurofighter perform at the field trials? Were you satisfied with the performance? One understands that there were a couple of minor glitches. Any comments?
Bernhard Gerwert: We are quite satisfied with Eurofighter's performance. The feedback which we have got is quite promising. I think we have done a good job in India, with the support of the air forces in Europe. Overall I think it went well. Our own feedback for the performance is quite positive. I cannot talk about the feedback that our competitors received.
Conventional wisdom suggests that at the end of the day, the decision on the MMRCA will be a political decision, that will be taken, keeping in mind India's long term strategic interests. In such a scenario, do you see a realistic chance that the Typhoon will win?
Bernhard Gerwert: If we thought we did not have a realistic chance to win the MMRCA campaign, we would not be here. You can imagine that such a campaign is a huge investment for us all. The team has been working in India for the last two years. The flight evaluation trials have cost us a lot of money. Do you believe we would do that if we thought we did not have a realistic chance of winning the deal? So, without any doubts, we strongly believe we have a good chance.
There is talk of cuts to defence programs in Europe. How will it impact Eurofighter? Italy, in fact, reduced its order of Eurofighter jets by 25 and the Germans grounded their fleet citing security concerns. How will that impact you? Does it not affect how the aircraft is perceived?
Enzo Casolini: Officially, there is no document that suggests that Italy has reduced its order for the Eurofighter. Thus far, it is mere speculation. We have a total commitment of 620 aircraft, under the so called four nation "umbrella contract," and we're sticking to that till someone officially comes to us and tells us they don't have the money and so have to reduce or cancel the contract. As for your other question, the fleet was grounded in all the countries due to a problem related to the ejection system, which was solved within a week. The same ejection system is used on the LCA as well. As for perceptions, we have a track record of 100.000 flying hours with just one accident. So, our safety record is much better than the others.
Christopher Boardman: The UK has had a defence review, whose results have been announced and are now being implemented. The UK has had to make some tough decisions in the current economic climate, but its chosen to retire its older aircraft, the Harrier and has reaffirmed its investment commitment into Eurofighter. From the very beginning, the Eurofighter was designed to be upgraded to greater capability, and the UK government is now committed to that. There is an expectation that the Eurofighter will carry the bigger defence burden as we go forward in time.
You have reportedly said that if you win the contract, you will move avionics operations and a few thousand jobs from Europe to India. In light of the above situation, isn't that a bit too far fetched? Isn't avionics too high end a domain to be moved to India?
Bernhard Gerwert: Let me correct you. We already have an EADS engineering centre in Bangalore, which was started three years ago for Airbus. In the beginning of this year, we have also opened our military engineering centre in Bangalore. We have hired twenty engineers there, but our intention is to ramp up our strength to 250-300 people by 2012. This program is independent from the Eurofighter. So, for the moment, we are not talking of moving thousands of jobs to India. If, however, the Eurofighter is selected, then, we would be contractually bound to affect a sixty percent technology transfer. Now, in Europe, the Eurofighter program employs roughly one hundred thousand people. We have roughly 400 main sub-contractors in Europe. So, if India decides for the Eurofighter, the technology transfer clause would mean that we would create thousands of jobs in India.
How do you plan to meet your offset obligations, assuming you win the MMRCA deal? Can you specify what projects will you undertake for this?
Bernhard Gerwert: Our consortium has offered a lot of different projects, which will help us to meet our offset obligations. Our offer is under consideration by the offset committee. But I cannot specify what we have offered.
Eurofighter is reportedly in talks with Indian firms like Mahindra and Hindustan Aeronautics Ltd (HAL), "to plug them into the consortium's global supply chain." Could you please elaborate on this? What synergies are you looking at? How would it help you?
Bernhard Gerwert: We must make a distinction here. Now, in Europe, we have "national champions." BAE is a national champion for the UK, EADS-CASA in Spain, Finmeccanica in Italy and EADS in Germany. If we win the MMRCA deal, HAL will, most probably, be the national champion in India. In addition, we would require strong partner suppliers for the program. Companies like Mahindra and L&T and others could then become important partners. In addition, we might have to involve a lot of smaller companies for the same.
India's relationship with most European countries continues to be bilateral rather than multilateral. India does not directly deal with the European Parliament. The other five contenders for the MMRCA belong to specific countries with which India has strong bilateral ties, unlike Eurofighter, which is a consortium of several European countries. Do you think that can have a negative bearing on your chances to win the contract?
Enzo Casolini: We think that rather than being a weakness, it would be a strength. Four countries are involved in this project, and so instead of being just bilateral, it will foster a quadrilateral relationship.
Eurofighter is largely perceived as being EADS, as it is the only consortium partner that is sene promoting it; it is often said that the Italians and Germans have their own agendas; the French always promote Dassault over the Eurofighter and the US is seen as promoting the Hawk over the Eueofighter. There is also a NATO linkage; 5% of EADS is held by the Kremlin, and that pits it against the US lobby, making your job tougher. Any comments?
Enzo Casolini: In Eurofighter, we designate "elite companies" and "elite nations" for specific jobs. The only reason you see EADS more than the others is because in India, EADS is our "champion."
Bernhard Gerwert: The Russians are no longer shareholders, their participation ended years ago. Yes, EADS is not getting any support for this deal from the French government. This is obvious, as Rafale (Dassault), a French company, is our competitor and is getting French support. The leading aerospace companies in Europe are behind the Eurofighter program. Germany, Italy, Spain and the UK are extremely strong nations that are backing us. The advantage of working with us is we know how to partner with others, our program is fundamentally a partnership. It might be hard to imagine that the right wing comes from Italy and the left wing from Spain, with assembly lines in different countries. But it works excellent, and we have the best combat aircraft in the world. This is the strong advantage we have.
Christopher Boardman: In BAE Systems, we are absolutely clear, India is of strategic importance. We want to be part of India and we want India to be part of our company. We see this program as a potential game change, and we support EADS on anything and everything that is necessary. So, I understand the perception. We are trying to simplify the interface with the Indian government. But, be assured that we are one and we all have our individual and collective interests. We have worked collaboratively in India for forty years and over 1.000 aircraft of British origin has been produced in India thanks to this strong relationship
There have however been several cost over-runs in the Eurofighter program. What do you have to say about that?
Christopher Boardman: You can take up any big defence program in the world, and they have all had cost over-runs at some point or the other? These are highly complex programs and cost over-runs do happen. In the US, in fact, they are quite used about it. In Europe, national audits have found that almost our programs have met their targets. The contractors in Europe will tell you that we deliver within the set cost parameters.
Bernhard Gerwert: On the production contract for the Eurofighter, we do not have any cost over-runs. We signed the contract in 1998, and we have exactly been within our cost parameters. This was even confirmed last year.
How would the Euro-US$ equation impact your price competitiveness especially vis-Ã -vis your American competitors?
Bernhard Gerwert: We strongly believe that with the current exchange rate, we are okay. It does not give us much competitive advantage.
Christopher Boardman: If this were a question of 2-3 years, the exchage rate question would be pertinent, but we are looking at a forty year commitment, a period so long that we cannot predict how exchange rates would move.
Boeing has said that it was not satisfied with the work done by Alenia Aeronautica SpA, on its 787 Dreamliner and that it had "discovered flaws in the workmanship on the horizontal stabilizers where they connect to the tail area of the plane. That required inspections on all of the test flight planes and some of the already-completed production aircraft." What do you have to say about that?
Maurizio de Mitri : It is not a big problem. These kinds of problems are quite common for a development stage in a complex and very modern program like the 787.
The Airbus A400M military transporter is reportedly facingtechnical and financial problems. Reports say that it is uncertain to win the $35 billion Pentagon contract for 179 tanker aircraft? What do you have to say on that?
Bernhard Gerwert : Yes, that was the case until last year, but that has now been resolved. We have renegotiated the A400M contract and the first flights in spring 2010 have been very successful.
Airbus did not loose the contract for the tanker aircraft, they in fact won it. Airbus won the contract, but the US government canceled it, after Airbus was selected. Now, there is a new Request for Proposal (RFP) on the table, and Airbus has answered it.
How have the Typhoons been doing against the Su-30MkI at the war games at Kalaikunda?
Christopher Boardman: The exercises are going on between the Royal Air Force (RAF) and the Indian Air Force (IAF). Since the exercises are still on, it would not be proper to pre-judge the performance.
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