The Rafale has cost $53 billion and is the key to France's defense economy, but it's not selling abroad
The Rafale fighter, made by France's Dassault Aviation, is loaded with high-tech avionics, radar, and targeting systems. Now all it needs are customers. France has been peddling the supersonic jet since 2000 and hasn't sold a single one. In the latest setback, Brazil said on Jan. 17 that it would reopen bidding for a fighter contract worth up to $7 billion—a deal France had thought it was close to sealing last year. Neither Dassault nor the French Defense Ministry would comment on Brazil's decision.
The Rafale's plight signals the end of an era for France. With their Mirage fighter program, developed in the 1950s, the French were able to bolster their national defense, promote new technologies, and provide well-paying jobs—while recouping much of the cost by exporting hundreds of jets worldwide. Hoping to duplicate that model, the French government has spent some $53 billion on the Rafale, more than the country's $40 billion annual defense budget. But deal after deal has fallen through, with prospective buyers South Korea, Singapore, and Morocco choosing Boeing's (BA) F-15 and Lockheed Martin's (LMT) F-16 over the Rafale.
Midsize suppliers such as France are being outgunned by bigger competitors. The F-35 Joint Strike Fighter, for example, is being developed by a U.S.-led consortium of nine countries that plan to buy more than 2,500 of the planes. That will ensure plenty of revenue from production and upgrades. Britain, Germany, Italy, and Spain have similarly joined forces to produce the new Eurofighter jet. "Nationally driven, nationally financed and controlled production of the most advanced weapons systems is now the exclusive purview of the U.S. and Russia, and in the future, China as well," says Mark Bromley, a senior researcher at the Stockholm International Peace Research Institute, a Swedish think tank.
Changing global politics has worked against France, too. During the Cold War, France successfully marketed the Mirage as an alternative to U.S. and Soviet planes. Other customers, such as the United Arab Emirates, bought French planes after the U.S. balked at providing high-tech weaponry. Now, though, the U.S. is eagerly seeking sales in the Gulf states. Many foreign governments, in turn, see arms deals as a way to forge closer defense ties with the U.S., says Loïc Tribot La Spière, an analyst at the Center for Studies and Prospective Strategy, a Paris think tank. "The sentiment is, 'We buy American because it assures security,' " he says.
The 93 Rafales produced by Dassault so far have gone to the French armed forces. To sustain production, the government has agreed to spend $1.1 billion on more Rafales over three years, even as it tries to pare budget deficits.
Finding customers will only get harder. As the Joint Strike Fighter enters service, U.S. manufacturers are set to increase their share of the $16 billion-a-year fighter aircraft market over the next decade from nearly 58 percent to more than 67 percent, according to forecasts by the Virginia-based Teal Group aerospace consultancy. Eurofighter and Russian manufacturers will get most of the rest, Teal predicts.
The longer the Rafale order book stays empty, the harder it will be to sell the plane, Teal analyst Richard Aboulafia says. "Customers like to see a home government that is determined to keep spending on buying and upgrading the aircraft" with the latest technology. Instead, he says, the Rafale is on budgetary life support. "That's the last thing you want customers to see."
The bottom line: France's decision to go it alone on its fighter program has cost the country $53 billion, with no export sales to offset the price.