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Patient Dassault Set To Win MMRCA
Aviation Week & Space Technology Feb 06 2012 p. 46
Asia-Pacific Staff New Delhi
Printed headline: Vive la MMRCA
“It would be wise for American OEMs to tone down their typical pitch of technological superiority which the Indian buyers are already aware of and respect” says Gunjan Bagla head of defense and aerospace at California-based management advisory company Amritt. “Hammering it further can be perceived in India as ‘American arrogance’ and does not help to win sales. India’s ministry of defense is not always dazzled with the ‘best’ technology rather it wants to specify a certain minimum threshold of performance. Exceeding the technical minimum does not confer advantage.”
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The Indian government late last month named Dassault Aviation’s Rafale the lowest-cost bidder against the rival Eurofighter consortium’s Typhoon in the long-running and fiercely contested competition to supply at least 126 Medium Multi-Role Combat Aircraft MMRCA to the Indian air force IAF.
The deal is believed to be worth 11-12 billion but could reach 20 billion as options allow for 63 more aircraft easily with fleet growth seen around 200 total by the end. The Rafales which will replace the aging Indian MiG-21 fleet are likely to be inducted into the IAF starting in 2014 and would remain in service for more than three decades.
Coming on the heels of tentative disappointments in the United Arab Emirates and Switzerland and slowed decision-making in Brazil Dassault could not have wished for a more emphatic beginning to selling the Rafale beyond the French air force and navy AW&ST Nov. 21 2011 p. 30. Indeed the Rafale has been the only current-generation Western fighter not to have secured an export order.
Apart from this enormous affirmation India’s decision rewards Dassault’s patience: What had begun in 1998 as an IAF proposal to simply buy more Mirage 2000 jets from the French company transformed to Dassault’s great disappointment into a global competition. Then after a unique procurement process that has spanned 56 months Dassault still came out on top albeit with some panicky moments along the way. In April 2009 rumors emerged of the Rafale being dropped from the MMRCA as a result of a noncompliant technical bid. While the IAF formally denied the elimination Indian sources say IAF headquarters had to intervene to ensure that no aircraft was eliminated purely on its paper bid.
In a nightmarish development in March 2011 Dassault’s Indian representative Posina Rao was temporarily blacklisted by the IAF after he formally complained of an IAF officer who demanded bribes for prime placement at the Aero India show the month before.
Beyond Dassault—and French President Nicolas Sarkozy who made securing a Rafale order a priority—MBDA also is a big industrial winner since it will provide much of the weapons package for the Rafales as is Thales.
Still all of this assumes that India and Dassault finalize the contract which—as the French have learned elsewhere—is not guaranteed. While Indian Defense Minister A.K. Antony says a deal was unlikely before the end of March his senior ministry colleagues believe negotiations between New Delhi and Dassault could actually stretch 8-12 months. India requires that deliveries begin 36 months after contract signature but the execution of offset obligations—50% of order value or at least 6 billion—will be an enormous challenge considering that India’s offset practices remain a work in progress.
What’s more Indian analysts warn that to derive the maximum benefit from the offsets Indian industry must be ready diverse and large enough to absorb major technology infusions. Benefits could be lessened if the Indian government focuses only on state-run defense units like Hindustan Aeronautics Ltd. HAL and ignores the private sector. While the first 18 aircraft will be bought off the shelf in flyaway condition the remaining 108 will be manufactured in partnership with HAL.
“The only thing worse than losing in India could be winning in India” quipped one industry executive whose company bid for the MMRCA.
Meanwhile it is the second big setback for Eurofighter in as many months having lost to the Lockheed Martin F-35 in Japan. The Eurofighter consortium comprises Italy’s Finmeccanica U.K.-based BAE Systems and EADS which nonetheless has a 46.3% stake in Dassault. The German side of EADS led the Typhoon campaign in India.
Bank of America analysts say that for BAE the loss hurts. “We believe consensus expectations in recent weeks have assumed the Eurofighter consortium was ahead on the Indian fighter jet contract therefore suggesting this news is a negative surprise for BAE.”
An EADS representative says the Indian Typhoon team was looking at all options including contesting the Indian decision but they admit the outcome is a big blow and first they want to learn more about what happened. EADS has requested and is likely to receive a detailed debrief on the final selection process.
“It’s puzzling that the Rafale hasn’t been judged a better fighter than the Eurofighter anywhere else in the world either in capability or price” one representative says. “Also there is always the possibility that Dassault will be unable to follow through with the commitments it has made in its commercial bid” this source adds.
“They have not yet awarded the contract” echoes British Prime Minister David Cameron who lobbied heavily for the Typhoon. “I will do everything I can as I have already to encourage the Indians to look at Typhoon.”
Indeed since April 2011 executives at the other eliminated vendors have stayed watchful amid persistent speculation that the downselect to the Rafale and Typhoon choosing the two most expensive contenders could only doom the MMRCA effort. As it stands a deal with the Rafale is expected to overshoot the 10.4 billion that the Indian government has formally budgeted for the acquisition. While the IAF and defense ministry have said that escalated costs have been taken into account any final contract will still need to be vetted by India’s famously finicky finance ministry currently headed by Pranab Mukherjee who served as defense minister when the MMRCA gathered momentum in 2004-06.
But in a country that notoriously spent 18 years deciding on procurement of Hawk advanced jet trainers no one—Indian or European—can predict timeframes or dramatic delays.
Moreover some defense analysts question the rationale of handing yet another large defense contract to France especially considering that India already has signed lucrative deals with French companies for six Scorpene submarines and pricey Mirage 2000 upgrades.
But while it is up for debate whether India would have gained more strategically if it chose U.S. fighters for instance a Rafale deal at the least consolidates an old and important relationship. “The decision will definitely strengthen France’s relations with India” says Ajey Lele who works with the New Delhi-based Institute for Defense Studies and Analyses.
“It would be wise for American OEMs to tone down their typical pitch of technological superiority which the Indian buyers are already aware of and respect” says Gunjan Bagla head of defense and aerospace at California-based management advisory company Amritt. “Hammering it further can be perceived in India as ‘American arrogance’ and does not help to win sales. India’s ministry of defense is not always dazzled with the ‘best’ technology rather it wants to specify a certain minimum threshold of performance. Exceeding the technical minimum does not confer advantage.”
With Jay Menon in New Delhi Robert Wall in London and Michael Bruno in Washington.
