Brazilian President Dilma Rousseff might be punishing the U.S. for allegedly spying on her government by denying Boeing (BA) a big fighter-jet order. On the other hand, she might just be a smart shopper.
Brazil signed a $4.5 billion order for Swedish-made Saab (SAABB:SS) Gripen aircraft this week, spurning rival bids from Boeing and France’s Dassault Aviation (AM:FP). The government said its choice was based on the Gripen’s cost and performance, as well as Saab’s promise to transfer key technologies.
Others, though, saw the decision as payback for recent reports that the U.S. National Security Agency intercepted communications between Rousseff and her staff. “Had the decision been last year, Boeing would have won,” Welber Barral, a former Brazilian trade secretary, told Bloomberg News.
Possibly. But the Gripen looks like a pretty good bargain for Brazil and for other countries that don’t need planes with lots of bells and whistles. The single-engine jets purchased by Brazil don’t have the range and payload capacity of the Boeing F/A-18E/F Super Hornet or the Dassault Rafale, twin-engine fighters that lost out. But Brazil’s air force doesn’t need to fly many long-distance missions, and it will cost a lot less to fuel and maintain a single-engine jet.
Saab, until now a minor player in the global defense business, may be well-positioned to capitalize on demand for more-economical aircraft in an era of tighter defense budgets. It has already sealed a major Gripen order with South Africa, and Swiss Parliament has voted to buy 22 Gripens, subject to approval in a referendum. Saab shares soared as much as 31 percent after announcement of the Brazil deal.
Former Brazilian President Luiz Inácio Lula da Silva came close to ordering France’s Rafale, a superadvanced new fighter that has struggled to find export markets. Since then, says Richard Aboulafia of Teal Group, a Virginia-based aviation consultancy, “It may have dawned on the Brazilians that a cheaper plane might be better.”
Dassault, in a statement issued after Brazil’s decision, seemed to acknowledge as much: “The Gripen is a lighter, single-engine aircraft that does not match the Rafale in terms of performance and therefore does not carry the same price tag,” the company said. “This financial rationale fails to take into account either the Rafale’s cost-effectiveness or the level of technology offered.” Boeing also expressed disappointment in the decision and said it would work with Brazil’s air force to determine why it lost.
The Gripen’s toughest competitor has been the F-16, a venerable single-engine fighter made by Lockheed Martin (LMT). The jet’s biggest wins have been in Brazil and South Africa, where the F-16 wasn’t in the running. And the F-16 program is winding down. “When F-16 orders run out,” Aboulafia says, the Gripen “might have a sweet spot.”