Eurofighter Benefits from Euro’s Fall in Indian Fighter Contest

by: Matthew Potter
June 10, 2010

Category: Boeing, Business Line, Companies, Congress, Countries, EADS, Events, India, Lockheed Martin, MiG, Military Aviation, production program, Services | RSS 2.0

The buffet that the European economy and common currency, the Euro, has been taken over the last several months due to the debt crisis in Greece and other countries is helping its defense contractors competing for international contracts. The decline in the Euro towards the dollar is now allowing pricing to be adjusted in a way to benefit Eurofighter and EADS.

The Indian government’s contest for a new fighter drew bids from all over the world. Both Boeing (BA) and Lockheed Martin (LMT) of the United States, Europe’s SAAB and Eurofighter as well as Russia’s MiG and France’s Rafael submitted initial bids. Now the competition has reached a point where new prices and information may be submitted. The decline in the Euro will help Eurofighter and Rafael by lowering their bids from the initial ones last year. The stronger dollar may make the U.S. companies prices go up but at least stay the same.

The Indian plan is to have a multiple part contract where aircraft are down selected based on demonstrated ability to meet requirements. Then another round of bids and analysis will be held to choose the best solution. The lower prices now available to the European competitors may push them into the second round and perhaps to victory.

With the perceived decline in the U.S. and European defense budgets coming in the near term the contests in India and Brazil especially have taken on importance with defense contractors looking for improved sales. All of the companies are hoping that foriegn sales will offset any cuts with home budgets. In the U.S. the focus on the F-35 Joint Strike Fighter (JSF) limits Boeing’s ability to sell aircraft beyond the last contract for F/A-18 Super Hornets for the Navy and Marine Corps. The sale of this aircraft to other countries will help maintain sales, revenues and profits.

The changes in exchange rates between currencies might also aid EADS in its bid for the new U.S. Air Force tanker. The decline in its costs for a France built aircraft may make its price more competitive and limit the need to build a facility in Mobile, AL.

Photo courtesy of Shandcehm’s flickr photostream.

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