Boeing Co. (BA) and Eurofighter GmbH are among aerospace companies revising their strategies to win military exports as shrinking weapons budgets in their home markets increase the importance of overseas contracts.
Boeing, the No. 2 defense contractor after Lockheed Martin Corp. (LMT), said it’s increasingly utilizing the marketing expertise of its commercial aircraft unit, while Eurofighter, the Typhoon warplane maker part-owned by BAE Systems Plc (BA/), is reviewing its bidding strategy after losing out on a series of recent tenders.
Western defense companies are stepping up export drives to help cope with a reduction in arms budgets from Washington to Rome as the wars in Iraq and Afghanistan wind down and austerity programs bite. Military spending is still climbing in markets in the Middle East, Asia and Latin America, said Dennis Muilenburg, who heads Chicago-based Boeing’s defense unit.
“Opportunities around the globe are there, but we see more of our U.S. competitors being present and also more emerging entrants,” he said in an interview at the Farnborough air show outside London.
Eurofighter, reeling from lost bids in India, Japan and Switzerland, is looking at ways to tender for contracts without “additional markups” to the base price in competitions where the specification would normally require them, according to Enzo Casolini, the consortium’s chief executive officer.
With Eurofighter targeting at least 20 percent of the 800 export sales it estimates will come over the next two decades, London-based BAE, European Aeronautic, Defence & Space Co. of Toulouse, France, and Rome-based Finmeccanica SpA (FNC), its three owners, have sanctioned a review that should be completed by the year’s end, Casolini said in a briefing in Farnborough.
“The three of us agree we need to find a way to put this airplane on the market at a lower price and win projects,” Finmeccanica CEO Giuseppe Orsi said at a briefing in London, adding that the warplane program remains “a good money maker.”
Eurofighter is competing for a South Korean order with Boeing’s F-15 and the Lockheed Martin F-35 Joint Strike Fighter. It is also targeting Saudi Arabia, which is already buying 72 aircraft, Qatar, with a potential for as many as 36 sales, plus the United Arab Emirates, Malaysia and others, he said.
U.K. Prime Minister David Cameron said at Farnborough that the integration of newer technology and the addition of a more capable air-to-air missile, considered vital in developing the jet, have the backing of Britain, Germany, Italy and Spain.
“The four partner nations have agreed to take the next steps toward exploring growth potential of Typhoon,” he said.
Italy’s Finmeccanica has also used acquisitions as a tool to boost exports, Orsi said, adding Poland’s PZL-Swidnik in 2009 to establish the country as a “home market” and improve its chances of selling helicopters and training aircraft.
At Boeing, cooperation with the commercial arm was instrumental in securing Indian contracts for P-8 maritime patrol aircraft and C-17 military transports, Muilenburg said.
“Without BCA’s strength it would have been difficult to get the deals,” he said. “That was a market opening opportunity because of Boeing’s global presence and supply chain.”
The U.S. company aims to reach at least 25 percent of defense revenue from exports, the executive said. Boeing achieved 24 percent in 2011, and may reach a portion of 30 percent this year, Muilenburg said. That’s up from single digit figures only a few years ago.
Success in fighter campaigns will be central to sustaining that business share, with Boeing Military Aircraft President Chris Chadwick predicting the fighter market to remain “hot.” Foreign sales and follow-on orders from the Pentagon should stretch F/A-18E/F Super Hornet production through the end of the decade, matching the F-15 line, he said.
Boeing has also developed partnerships in major markets such as Brazil, where it signed a cooperation with Embraer SA (EMBR3) in April before disclosing plans to develop and market the local planemaker’s KC-390 transport. It will also help integrate weapons on Embraer’s A-29 Super Tucano, which is being pitched for a Pentagon requirement to supply Afghanistan’s government with 20 light-attack aircraft.
Lockheed Martin aims to extend its international business above 20 percent of sales from 17 percent, Chief Operating Officer Marillyn Hewson said. While much of that growth will come from the F-35, F-16 production set to shutter in 2015 will be extended through additional orders.
Austerity programs may be spurring demand for less costly single-engine fighters such as the F-16, according to Haakan Buskhe, CEO of Sweden’s Saab AB (SAABB), which makes the Gripen jet.
“I see a much bigger interest for Gripen now than I did before the crisis,” Buskhe said in an interview at the air show.
European missile maker MBDA, owned by Finmeccanica, BAE and EADS, is working with its domestic customers to ensure that specifications are written with foreign buyers in mind, CEO Antoine Bouvier said, with the “exportability of new products an objective in a way which it was not a few years ago.”
Overseas markets are driving decisions regarding a new powered bomb MBDA is making for the U.K., while there is a strong export outlook for the Fire Shadow loitering missile, designed to allow army units to effectively provide their own air support before ground attacks, Bouvier said. India and several Gulf states expressing an interest, he said.
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