A very interesting aerospace development

It's just been announced that France and Brazil have reached agreement in principle for the latter nation to buy 36 Dassault Rafale fighter aircraft.

Dassault Rafale (image courtesy of Wikipedia)

France will make available full technology transfer on the Rafales (most of which will be assembled in Brazil). In return, France will buy a dozen Embraer KC-390 transport aircraft, a brand-new design still under development. Below are two artist's impressions of what it will look like.






This deal comes on the heels of another major defense sale, whereby France will sell Brazil five submarines (four Scorpene-class conventional boats and one nuclear-powered vessel of a new design) and 50 Cougar helicopters (all of which will also be assembled in Brazil, with technology transfer) in a deal worth over ten billion US dollars.

This latest arms agreement is particularly significant for a number of reasons, and is likely to have a dramatic impact on a number of other deals-in-progress in the world market today.

• Libya has signalled an interest in buying Rafale fighters as well, and has already commented that only France seems prepared to allow full technology transfer as part of the sale. Competing aircraft manufacturers and/or their nations of origin are apparently less willing to allow sensitive information to be so fully disseminated.
• India has a competition currently in progress to select a new fighter aircraft to replace its MiG-21's and other older aircraft. It wants to purchase over 120 new planes, making this competition the biggest fighter deal on the world market today. If France's Rafale gains the Brazilian and Libyan orders, its position in the Indian competition (which also requires extensive technology transfer) will be significantly strengthened.
• The deal's very important for France itself. To develop and produce a modern fighter aircraft is an extraordinarily expensive undertaking. There are only a handful of countries that can afford it. France had not succeeded in selling its Rafale to other countries for over a decade, meaning it's had to bear that enormous expense on its own to date. Now that at least one, probably two, and possibly a very large third order are on the horizon, suddenly those costs can be spread over a much wider user base. That'll make it easier for the French to afford more Rafales for themselves, because by spreading the development costs over a larger number of airframes, the cost per airframe is significantly reduced. The sales will also provide income to develop the Rafale's successor in due course.
• For Brazil (and possibly for Libya, if that sale is firmed up), the full technology transfer promised by France is extremely important. Modern technologies such as Active Electronically Scanned Array (AESA) radar are very advanced and sophisticated indeed, with only a few countries having successfully developed them. Their transfer is often subject to stringent conditions: indeed, it was reported earlier this year that the US stopped Sweden's SAAB from including an Israeli-made AESA radar in its Gripen fighter, in the configuration offered to India for that country's fighter competition. (The Israeli radar uses some US technology.) A French-designed and -manufactured AESA radar will become operational on the latest-generation Rafales in 2012 - just in time for export deliveries. It's certain that Brazil and Libya will insist on getting this radar, with all its enormous advantages and potential for development, which means that this technology will spread more widely around the globe (to the guaranteed concern of other First World manufacturers and defense forces).
• Brazil gains a thoroughly modern fighter that can match the advanced Russian aircraft being supplied to Venezuela, a potential competitor for influence in the region. In addition, Embraer gains access to the latest French aeronautical technology to help it develop the new KC-390 transport, and probably also French marketing assistance to help sell it on the world market. Lockheed Martin, manufacturer of the C-130 Hercules transport, can't be very happy about that, because the KC-390 is designed to be a faster, more modern competitor for the C-130.
• Embraer of Brazil is already a successful manufacturer of smaller jet airliners. With what it will learn during the development of the KC-390, particularly with French assistance, it may now be in a position to develop larger airliners, perhaps competing with aircraft like the Boeing 737 and Airbus A320. This will be a very unwelcome development for Airbus and Boeing.
  
• If the KC-390 proves successful, it might undercut - or even eliminate - the development of another proposed transport aircraft, which Russia and India have announced they will develop as a joint venture. The Russo-Indian Multirole Transport Aircraft (MTA) is intended to have a similar payload and performance to the KC-390. If Brazil and France move quickly, and offer India a partnership in developing the KC-390 instead (perhaps as part of a Rafale sale to India), they may cut Russia out of the picture altogether - and India will, I'm sure, be quite happy to expand its influence in South America by partnering with Brazil, a fellow Third World country. Even if India and Russia proceed with the MTA, they'll find the KC-390 a formidable competitor on world markets, which won't please them (but will please prospective customers - competition is always good for the buyer).
  
• France is part of the European partnership developing the Airbus A400M military airlifter, which is three years behind schedule and facing enormous problems. There's little doubt the A400M program will continue: but if France has a modern (albeit smaller) alternative available in the KC-390, and is willing to put its technological and marketing muscle behind it, this puts enormous pressure on Airbus to make the A400M program work, and do so quickly. If it doesn't, it might see France slash its orders for the larger aircraft in favor of the smaller, cheaper, faster Brazilian alternative - and other A400M customers might be tempted to look elsewhere, too. Talk about lighting a fire under the management!
• This is a good deal for South Africa, too. That nation's Denel armaments conglomerate had already signed up with Embraer as a risk-sharing partner to develop the KC-390. It, too, will now gain at least some access to the latest French technology during development, to add to its growing international participation (for example, it's making some components for the A400M program). If the South African Air Force buys some KC-390's (a not unlikely scenario), that will help boost the aircraft's prospects in the African market; and it's logical that Denel will offer a service and support base for the aircraft on that continent and in the Indian Ocean area.
  
• This is a bad deal for the USA. Boeing had offered its F/A-18E/F Super Hornet strike fighter to Brazil, and has now been shut out. Furthermore, Brazil will now gain access to technology that's probably at a higher level than the US would have released to it, which will pose security implications for any US forces that may operate in the region. In addition, as noted earlier, the KC-390 program will offer very significant competition to US strategic airlifters on world markets, and Embraer may use what it learns from that program to develop larger jet airliners. That will have economic implications for US aircraft exports.
  

So, what's seemingly an order for a mere three dozen fighter aircraft may have ramifications far beyond what's visible on the surface. For those watching the international armaments and aviation markets, this is a very significant development, one that will bear monitoring.

Peter