:: June 2015 Letter ::
About 25 years ago, the great political commentator James Fallows wrote More Like Us, a thoughtful book arguing that the US’s best way to compete against global economic challengers (Japan then, China now) was to be more like itself, rather than to emulate others. After three weeks in France, my top conclusion is that nobody in France needs to write an equivalent book. France will always be France. In the US, we’re celebrating Uber as a liberating form of transport; in France, the local taxi monopolies are rioting, and the government arrested the local Uber executives, a uniquely French response. In the aerospace sector in particular, France is doubling down on Frenchness.
First, Le Bourget seemed like an unusually French air show this year. If you heard a boom, it was the Rafale (unless it was the JF-17 Thunder, a Sino-Pakistani creation that was also an omni-role fighter, in that it could convert fuel to both noise AND smoke). Pretty much everything else that flew horizontally or vertically was built by Airbus or Dassault (another exception: a nice 787 in Vietnam livery).
Next, consider the Rafale itself. This is the most mono-national fighter built outside of Russia. US planes, especially the F-35, have significant international content. Eurofighter is multinational. Gripen has a US engine and other international components. If built, Korea’s KF-X and Turkey’s TF-X would be heavily international. But if there’s a non-French rivet on Rafale, I don’t know about it. The engines, EW system, weapons, radar, structures, and on-board crepe dispenser are all local. There are exactly zero ITAR considerations for exports. It’s a classic Franco-French collaborative effort.
And, Rafale’s parent Dassault recently got Frenchier. Starting in November and continuing through March, Airbus has reduced its share in Dassault to below 25% (from above 46%). Dassault, always a paragon of Frenchness, no longer needs to worry about interference from outsiders.
Meanwhile, vertical French content is increasing in French platforms. A few years back, the A400M program rejected a Pratt Canada engine in favor of a Snecma/Rolls-Royce model. Dassault’s Falcon 5X began life (as the SMS) with a Rolls-Royce engine, but this was replaced by the Snecma Silvercrest in 2013. Airbus Helicopters’ H160 began life (as the X4) with a choice of Pratt Canada or Turbomeca engines, but the non-French option was withdrawn this year.
Is this strategy working for France? Absolutely. France’s aerospace industry – the second largest in the world, after the US – does better with exports than almost any other country (as a percent of total revenue). Safran, Dassault, and Thales (and Airbus) continue to do well in the US and other export market countries, and the French military remains a protected market for French companies. Airbus remains heavily French too, in terms of employment and overall economic footprint. Since it’s vertically integrated, a very high percentage of France’s aerospace revenue is kept in-country.
Recently, geostrategic considerations have boosted France’s aerospace fortunes, particularly with Rafale and all the French weapons and systems associated with it. The US rift with the Arab Gulf states over the Iran nuclear deal and the Arab Spring has given the Arabs (and other countries, like India) a strong incentive to dual-source weapons procurement. Since France offers systems with purely French vertical content, there’s no risk of a parts and weapons supply cutoff from any other country (and little risk of a French cutoff, of course). Meanwhile, the UK’s recent isolationism and defense cuts make them look less desirable as a strategic partner. High-end weapons purchases almost always involve a desire for some kind of partnership.
The result of these political changes has been profound. Until a few months ago, 25 years of trying had produced exactly zero Rafale export wins. But this year, there have been two firm (Qatar, Egypt) and one near-firm (India) export contracts, with more likely. The Super Puma has also done extremely well lately, with big sales to Kuwait, Mexico, and Poland.
Are there drawbacks to France’s approach? Maybe. France no longer cares about establishing global partnerships, which may have long-term repercussions. Consider France’s aerospace evolution. In the 1960s, they joined Airbus, the single most successful aerospace multinational venture of all time (they joined the legendary Concorde too). In the 1970s, they joined with GE to create CFM, arguably the single most successful transatlantic industrial creation of all time. Arianespace was created in 1980. Prior to 1980, France also joined less ambitious international ventures, like the Jaguar fighter and AlphaJet trainer.
Then, in the 1980s, France declined to join Eurofighter (technically, France demanded 46% of the program, an offer the UK, Germany, Italy, and Spain were bound to refuse). Since then, the only international aerospace programs France has joined have been tentative (and unlikely to see series production), such as the Anglo-French Future Combat Air System (FCAS) study. Dassault’s nEUROn UCAV demonstrator is basically French, with minor contributions from other European partners; Britain is focused on its BAE-led Taranis UCAV.
But this determination to avoid international programs may be understandable. Contrast France’s approach with Italy’s, where almost all new programs for the past three decades have been multi-national. The result for Italy has been a mix of disasters, modest successes, and no flagship achievements. The US has also taken a far more global approach to aerospace than France, but the US is large enough to be the dominant player in these projects. Even then, the US’s biggest multinational programs, particularly the F-35 and 787, have had serious problems.
So, for France at least, most of the recent lessons in aerospace globalization have been negative. Given the alternatives, France’s nationalist approach seems to be working.
Finally, there’s the matter of the A380neo. This very bad idea would never happen in any kind of rational economic world. But the alternative – ending the A380 program – might be too traumatic for a country that’s hell-bent on aeronautical glory. The 380neo is still not in our forecast, but my top post-Le Bourget conclusion is that this abomination has a better chance of being launched (and then failing anyway) than I had thought. France’s aerospace strategy, like any industrial strategy, occasionally creates epic failures.
A380neo or not, France probably won’t change. But then again, that’s why I vacation there. And, now that I’m back, we’ve updated our annual Trainer/Light Attack Aircraft overview this month. Other updated Teal aircraft reports cover the Learjets, HAL’s LCA and ALH, and the Rooivalk. Have a great summer.
Yours, ‘Til Francois Hollande Commutes To Work By Uber,
© Richard Aboulafia 1997-2006, All rights reserved.