May 2013 Letter

Dear Fellow Aero-Oenophiles,

It’s nice to have a perfect vacation day. A day when everything goes well, despite the friction of travel. I recently enjoyed such a day, at a lovely winery in some beautiful hills. The pinot noir was delicious; local goat cheese went well with it. The proprietor was friendly. My kids enjoyed chasing each other around wine barrels. They also loved the booms as jet fighters passed overhead, on their way to destroy a very bad man’s missile warehouse a few score miles away.

As it turned out, our visit to Pelter winery, in the Golan Heights and about a mile from the Syria DMZ, was on the very day the Israeli Air Force struck targets outside Damascus. Aside from the occasional fighter jet boom, there were no other disruptions to our wine tasting in the region, and I’d recommend a visit. Northern Israel is like a hotter, drier Napa, with an emerging and very promising wine industry. The wine/fighters juxtaposition got me thinking, just in time for my annual travel letter. Wine should be local. Aircraft should not.

In Israel, as in many places where the local wine industry is successful and offers a wide variety of styles, most restaurant wine lists and stores feature the local product. A domestic wine industry provides an effective import substitution. It also offers considerable export promise, and decent tourist revenue. But wine and fighters are on two opposing ends of the spectrum in terms of industry characteristics. They’re at two extremes in terms of market structure (each country has millions of wine buyers, but generally one or at most two fighter buyers). They’re also at two extremes in entry barriers (most farmers can plant grapes and learn to make wine, even if it takes experience to do a good job; building a fighter takes $10 billion just to start, and you can’t raise that on commercial markets; you also need a massive pool of talent).

But the big difference is that wine is a local product. There’s a strong argument for growing grapes and fermenting the juice and aging the barrels in local conditions, and catering to local tastes. French winemakers tout terroir as the key ingredient that gives wine its regional character.

By contrast, fighters are no longer local at all. I once had the pleasure of viewing a Lavi prototype. The Lavi was supposed to be the perfect plane for Israel, a fighter optimized to counter local threats, and leverage national experience and training (for the full story, see Dov Zakheim’s Flight Of The Lavi). But in the modern warfare age fighters are merely a means to an end, reflecting an effects-based view of air power. In the case of the Damascus strike, the effect was to destroy a target in enemy territory, avoiding local air defenses and minimizing collateral damage, all to be done in the most cost-effective way. Yes, the Lavi was a marvelous optimized Israeli design. But decades later, are there any doubts that F-15s and F-16s, with their robust upgrade roadmap, large user communities, and first-rate supply bases are more effective at what they do than even an evolved second generation Lavi would be?

The F-35, with its decidedly non-local one-size-fits-all approach to fighter design, and its emphasis on one aircraft for all missions, is clearly designed to take advantage of these trends. The only problem is the price tag, which remains too high for most of the export fighter market.

As for self-sufficiency, fighters are increasingly just a collection of important components (radars, engines, EW systems, etc.) with the airframe of secondary importance. Even US planes need to use foreign suppliers to some degree, to guarantee quality and maintain competition. Thus, you can’t be truly self-sufficient in the fighter business (China is trying to be self-sufficient; I expect the results will be at best adequate and at worst exactly what they’ve been building). Wine can benefit from cross-border knowledge (winemaker Tal Pelter trained in Australia) but beyond that it can be made with purely local ingredients. With fighters, the most a country can hope for is to achieve a certain level of sovereignty, with a local ability to modify, repair, and upgrade an imported aircraft. Thanks to the level of embedded and highly integrated systems in planes like the F-35, that’s getting very difficult.

The result of this big divergence between wine and fighters is clear to see. Any country that can grow wine does a good job with it (I’ve even enjoyed some rather good Mexican wine). There are no national wine industry failures, and many successes. By contrast, all of the new-producer national jet fighters ever attempted have failed miserably. Israel’s Lavi, Japan’s F-2, Taiwan’s Ching Kuo, India’s LCA, South Africa’s Cava, and Yugoslavia’s Novi Avion all suffered from complete or partial failure, for a variety of reasons. Only the LCA remains alive, in an embarrassed “I can’t believe you’re keeping me alive” kind of way. In ten years time there will be hundreds of thousands of wine producers, and probably just four or five fighter producers at most.

The companies behind these aircraft suffered divergent fates. Israel Aerospace Industries and Mitsubishi have lots of other aerospace work to do, but they’re out of the fighter game. AIDC and Denel are alive as subcontract and mod shops. The Novi Avion folks ceased to exist, as did their country. Hindustan Aeronautics is still trying to figure out if the LCA can be made to work, and if rocks are edible.

For those seeking to get into the fighter business, there’s a clear lesson: avoid the mistake of thinking that you’re making wine, and that you can take advantage of local terroir. Don’t think about meeting unique domestic needs (although you do need a home market endorsement). Think exports. Take advantage of any global market needs that may be unfilled, and hope to offer a product at a good value (good enough to distract from the fact that you probably don’t offer much of a strategic relationship with your customer). Korea’s KF-X would certainly fit well with the country’s successful export-oriented industrial policy. If India ever re-starts its Advanced Medium Combat Aircraft, shelved earlier this month, or if Turkey really does pursue a TF-X, they ought to think in the same terms.

Tal Pelter told me his dad was an IAI contracts attorney. But, fun fact: Dassault is the only fighter OEM with its own winery (making a solid Saint Emilion Grand Cru Classé called Chateau Dassault). Fighters and wine may be extremely dissimilar, but it doesn’t mean they can’t be friends.

Useful book for travel in Israel: The Ultimate Rogov’s Guide to Israeli Wines. But I’m back from vacation, and back to my day job. Teal Aircraft Binder updates this month include the E-2, V-22, T-6/PC-9/21, T-45, CH-53, and the Regional Aircraft overview. Have a good month.

Yours, ‘Til Chateau Eurofighter’s First Cuvée,
Richard Aboulafia