Dassault Aviation <AVMD.PA> has still not found a foreign buyer for
its multi-role jet, the Rafale, billed to be one of the most
effective and sophisticated fighter jets in the world, but also one
of the most expensive.
Shares in the company fell around 2 percent on Thursday after
Brazil's decision to award a $4.5 billion contract for 36 jets to
Saab <AB SAABb.ST>, a surprise coup for Sweden, and a second blow
this year after missing out in Switzerland.
"This isn't a failure. It's a disappointment on a target that wasn't
a priority," Defense Minister Jean-Yves Le Drian told Europe 1
radio. "Brazil was not the priority target for the Rafale. We have
more important targets in India and the Gulf (Arab states)."
France had come close to sealing a deal with Brazil in 2011, with
Dassault promising to transfer technology for the new jet in a bid
to get an edge over the competition, but the Brazilian government
delayed its decision due to the economic crisis.
"I'd been expecting this ... for several months," French President
Francois Hollande said in Brussels where he travelled for meetings
devoted largely to the European defense community.
"What counts is that the Rafale is not bought only by the French
army," he added. "In order for it to be cheaper, it must sell more,
so it's a process ... I'm doing the main thing, which is to defend
Hollande had travelled to the Latin American oil producer on
December 12 to push the deal.
Dassault has been in exclusive negotiations with the Indian
government for more than a year to sell 126 planes.
In an interview with Reuters, Dassault Chief Executive Eric Trappier
said he was confident that Indian national elections to be held by
May would not have any impact on talks and that a deal would be
"I'm quite confident on the success of the Rafale in India in the
coming months," he said.
INDIA CRUCIAL FOR DASSAULT
An Indian air force official said at the end of October it hoped to
conclude the deal by March 2014.
"Brazil's choice was logical," a Paris-based trader said. "It was an
economic choice to pick the Swedish plane.
"France needs to understand that the Rafale is too expensive and
that the quality of the equipment is not taken into consideration in
the current decision-making process. With this failure, the India
contract becomes crucial for Dassault."
Under a five-year defense plan, the French military will slow the
pace at which it takes delivery of Rafale jets from Dassault, taking
just 26 over the years instead of 11 a year.
[to top of second column]
The French government's decision to slow the production line may
push Dassault to review the cost of the plane — threatening to raise
costs for the defense budget.
"We have good reason to think that in India and the Gulf (Arab
states) there will be results," Le Drian said.
The aircraft has received a great deal more interest since it was
deployed in the NATO mission in Libya in 2011, its first ever combat
operation, and earlier this year when France intervened to oust
Islamist rebels in Mali.
France's stance on Syria and a tough line over Iran's nuclear
program, has helped its relationship with the hydrocarbon-rich Gulf
Arab states prosper, already resulting in multi-billion dollar
defense contracts this year.
Officials say they are optimistic on securing a large deal to
deliver anti-aircraft defense missiles to Saudi Arabia, where
Hollande will travel at the end of December, but also the sale of
Rafales to neighboring Qatar.
Doha wants to replace its fleet of 12 Mirage fighter jets, possibly
buying 24 to 36 units. It is looking at the Rafale, the BAE
Systems-backed <BAES.L> Eurofighter Typhoon and various Boeing-made
Dassault and BAE are also in a tight race to win a deal for 60
aircraft to replace the United Arab Emirates' Mirage fleet.
Trappier declined to comment on the two Gulf tenders and another
competition in Malaysia.
"There are also other (opportunities), but further down the line,"
(Additional reporting by Dominique
Vidalon and Alexandre Boksenbaum-Granier; editing by Patrick Graham
and Susan Fenton)
[© 2013 Thomson Reuters. All rights
Copyright 2013 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.