Italy and South Korea in dogfight - Monocolumn | Monocle


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3 February 2010

The Singapore Air Show, which runs until Sunday, is Asia’s biggest and most prestigious aerospace event. All the same, this year’s jamboree suffered the indignity of being upstaged before the doors even opened. Dominating the shop-talk here in Singapore has been the US’s decision to defy China by selling 60 Sikorsky Black Hawk helicopters to Taiwan as part of a $6.4bn (€4.5bn) arms package announced last week. An uncharacteristically subdued air show has struggled to match that by writing headlines of its own.

Defence traditionally weathers economic squalls more easily than most other industries – “countries always need defence”, the marketeers like to chime – and military aerospace has certainly fared better than the commercial airline business, which is on its knees. Yet the air of caution prevailing here in Singapore betrays the fact that military budgets have widely been squeezed as a result of the financial crisis. BAE Systems, one of the world’s biggest defence primes, did not even bother showing up at this year’s show, so hard is it to prise new opportunities out of an Asian defence market that every player, large and small, now craves. Meanwhile, other majors such as Boeing, who did come, were left to smile through gritted teeth as they contemplated China’s threat of sanctions in retaliation for Washington’s latest Taiwan transgression.

BAE’s absence is surprising given that success in Asia, though difficult to achieve, is potentially very lucrative (defence budgets are still growing here, unlike in the West). Air force chiefs from Asia and beyond still walk the exhibition halls with sizeable chunks of GDP tucked into their attaché cases. It’s just that the competition for their business is fiercer than ever, and the choice of weapon systems more diverse, meaning that procurement decisions now only come at the end of labyrinthine selection processes. So today defence is a game of staying power as much as firepower. “People still have budget; they just want more bang for their buck,” says one Singaporean executive, explaining the difficulty of landing defence contracts. As a man who sells bombs, he ought to know.

Old industry hands smiled sagely as the week unfolded, unfazed by the lack of show-stopping announcements at Singapore 2010. Defence is a slow-moving, cyclical world, they pointed out, where new technology programmes take decades to come to fruition. We just happen, they said, to be in the fallow part of the cycle.

If major contract announcements have been scarce, the hushed, billion-dollar discussions that are the stuff of defence shows continued as normal. Much talked-of this week have been South Korean firm KAI and Italy’s Finmeccanica, both of which have developed new advanced jet trainer aircraft that they are trying to sell to the Singaporean air force. Singapore’s order will be relatively small, but other countries will likely take their cue from the decision, making it a potentially make-or-break deal for the two competing aircraft.

The rewards – and the risks – are greater still for Lockheed Martin, the world’s largest defence firm and the developer of the F-35: the next-generation fighter aircraft of the US military and a string of partner nations, including the UK. Optimistic presentations about the F-35’s progress delivered by brave-faced Lockheed executives have become a familiar air show theme in recent times; so too has the subsequent mauling from the press pack, who harp on the programme’s delays, lack of progress and eye-watering costs. Lockheed still expects to sell over 3,000 F-35s over the next few decades, at around $80m apiece. But potential customers are wavering, and the US government this week said it was withholding $614m in performance fees in light of the programme’s continuing failures. Clearly, the F-35 needs to start working very soon if its global potential is to be realised.

A more certain vision of the future involves unmanned systems – not just aircraft, but also naval vessels and land-based vehicles – which bedeck the Singapore exhibition space and point the way to the remotely operated wars which will soon be fought. Also noteworthy has been the participation of Chinese aviation giant AVIC. Until fairly recently, Chinese aircraft would not have passed muster at this kind of show. Now, China’s low-cost, but capable, fighter planes are attracting a lot of attention from developing countries; and as Chinese defence firms continue to grow in sophistication, they will only make life even tougher than it is already for the blue-chip players from the US and Europe.

This, perhaps, is the future that BAE sensed when it decided to stay at home.


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