Saab Courts Asia, Eastern Europe to Save Gripen Warplane
Stock Chart for Saab AB (SAABB)
Saab AB is stepping up a campaign to sell its Gripen warplane in Asia and eastern Europe as Switzerland’s decision to delay a $1 billion fighter purchase threatens to curtail production of the 1,320 mile-per-hour jet.
Orders from Bulgaria, Romania and Slovakia and a follow-on contract from Thailand are “major near-term opportunities” for the Gripen, which competes with models from Lockheed Martin Corp., Boeing Co., Dassault Aviation SA and Eurofighter GmbH, Saab Aeronautics chief Lennart Sindahl said in an interview.
Switzerland will wait until 2015 before awarding a contract to replace ageing Northrop F-5 Tigers, its defense ministry said on Aug. 25, halting a tender regarded as key to the Gripen’s future by analysts including Teal Group’s Richard Aboulafia. Saab is still betting on orders from Brazil and India to save the flagship fighter as the production backlog shrinks, with Malaysia another prospect, Hakan Buskhe, the company’s new chief executive officer, said in his first interview in the role.
“We were a little bit sad that the Swiss postponed, but there was a tricky situation with the financing and I wasn’t totally surprised,” Sindahl said by telephone yesterday. “The good thing is that we haven’t lost the contract.”
Saab rose 1.6 percent to 95 kronor in Stockholm, where the company is based, paring the stock’s decline this year to 19 percent and valuing it at 10.4 billion kronor ($1.4 billion).
The Swedish manufacturer, which is competing with Dassault and Eurofighter in Switzerland, requires new orders as work on 26 Gripens for South Africa and an initial six planes for Thailand runs out in 2012, with an upgraded version not due to enter service with Sweden’s air force until at least 2017.
Saab also needs export orders to establish the Gripen as the model of choice in former Soviet and non-aligned markets not dominated by Boeing and Lockheed Martin, which is grabbing contracts with its F-35 Lightning II Joint Strike Fighter.
Saab’s ability to offer the Gripen with in-house radar technology is being pitched as an advantage over rival planes and helped it win the existing Thai order, Sindahl said.
Still, the Gripen’s prospects have been harmed as delays to contract decisions bring newer models into the reckoning which were unavailable at the time of tender, said Sandy Morris, an analyst at Royal Bank of Scotland Group Plc in London with a “buy” recommendation on Saab stock.
Regarded as the first of a new generation of fighter planes, the Gripen has been operational with the Swedish military since 1997, whereas the first Eurofighter Typhoon entered service in Britain, Germany, Italy and Spain in 2004.
“The Gripen was a capable fighter-bomber long before the Eurofighter was anything more than a pure fighter and you’d have thought there was a window of five-to-seven-years to sell to export markets,” Morris said. “But unfortunately these competitions just kept shifting.”
Saab views Brazil’s requirement for 36 jets as a live competition even after President Luiz Inacio Lula da Silva indicated last year that he favored the Dassault Rafale, Sindahl said, with no contract for the order yet signed.
In order to boost its chances of winning the $1.8 billion deal Saab has offered to establish joint manufacturing of the Gripen in Brazil, which currently operates Dassault’s Mirage.
“Every day that nothing new comes from Brazil I think we have gained a little bit,” Sindahl said. “The longer it takes, the more discussions there are and the more they start realizing how good the offer is both with respect to the product and also to the package for Brazilian industry.”
South America’s biggest economy is unlikely to choose between the Gripen, Rafale and Boeing Co. F/A-18 Super Hornet before a presidential election in October, the executive said.
India may announce the preferred supplier for a 126-plane requirement by the end of this year after scrapping an April 27 deadline to select a replacement for Russian-built MiG jets dating to the 1970s, Sindahl said.
The $10 billion order is the world’s biggest fighter-jet purchase in 15 years and has attracted bids from Lockheed, Boeing, Dassault, Eurofighter and Russia’s United Aircraft Corp.
Saab hasn’t given up on winning Dutch and Danish orders for the Gripen, CEO Buskhe said at the company’s Stockholm offices yesterday. The Netherlands has selected Lockheed’s F-35 as its preferred candidate and like Denmark is one of eight partner countries with the U.S. in developing the plane.
Saab is also pursuing a contract to provide day-to-day maintenance for Swedish air force Gripens that could be sealed this year or early in 2011, Sindahl said. An agreement would mirror one to maintain Sweden’s Saab 105 jet trainers.
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