Emerging powers gain clout in foreign fighter jets push

Thu Jun 20, 2013 9:43am EDT
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By Brenda Goh

LONDON (Reuters) - After years of dictating the terms under which they supplied top of the range fighter planes and weaponry to a volatile third world, western defense contractors are increasingly losing the upper hand to their Middle East and Asian customers.

The global market in fighters has been a crowded place for some time, but with world defense spending falling and cuts in European and U.S. budgets gaining pace, the battle for an estimated $90 billion in orders by 2020 has become more frantic.

Industry players at the Paris Airshow this week said that has put all the cards in the hands of growing economies like the United Arab Emirates, India or Brazil who still have money to spend, allowing them to demand far more in return.

The value of reciprocal industrial contracts that firms like Lockheed Martin (LMT.N: Quote) or BAE Systems (BAES.L: Quote) are offering as part of such deals is expected to have risen tenfold in the decade to 2016 as a result, according to one industry study.

"There's a dramatic shift in aggregate demand from one part of the world to the other," Alessandro Pansa, chief executive of Italian contractor Finmeccanica SIFI.MMI told Reuters. "The shift is taking place from countries where defense companies exist, to countries where companies do not exist.

"We definitely are becoming more price takers than price makers."


Defense offsets, which funnel industry investment into the buyer country, have been around since World War Two but have proliferated as export deals increased in importance.   Continued...

A Dassault Rafale fighter aircraft takes part in a flying display during the opening of the 50th Paris Air Show at Le Bourget airport near Paris June 17, 2013. REUTERS/Pascal Rossignol