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Swiss reject $3.5bn Saab Gripen NG fighter deal in referendum

A referendum in Switzerland has seen a narrow rejection of the $3.5bn acquisition deal for next generation of Saab Gripen fighters.

53.4% of voters opposed the deal for 22 planes. Switzerland’s political process permits holding a plebiscite to reconsider a recently passed law if 50,000 signatures are collected. The Gripen had been selected in 2011, but had only reached Swiss Parliament approval in November 2013. The decision may have been due to considerations of neutrality, as Switzerland hasn’t deployed its military for over 200 years. In a recent crisis where an Ethiopian Airlines plane was forced to land in Switzerland, the escort was provided by French and Italian fighters as the Swiss air force doesn’t operate to protect the country’s airspace outside of business hours. The other argument is that a militarily neutral country should instead be focusing its resources elsewhere, such as social security or transport.

The Gripens had been mooted as a replacement for the aging fleet of Northrop Grumman F-5 Tigers, and the referendum result has dented but not necessarily thwarted Saab’s ambitions with the fighter. An export order is still being negotiated with Brazil and has the potential for a larger order (currently 36, but could see numbers increase.) the loss of the Swiss order has made these negotiations more important, and introduced a degree of uncertainty. The Swedish parliament approved the Gripen fighter on the condition of at least one export partner being found.

The rejection is also an indication of the declining defence budgets in the developed economies; both Europe and North America are for the most part seeing their spending fall in real terms. It can be a tough sell for elected governments to declare there’s no money left for health or education then spend billions on new military equipment. Saab’s Gripen was hoping to appeal to these cost-conscious air forces. It prides itself on having significantly lower costs than its competitors in asking price and life time costs, while enhancing the capabilities of previous models significantly.

Encouragement can also be drawn from the nature of the rejection; it was not rejected on technical grounds, rather on popular will. This could also manifest as a problem in Brazil, where populist anger has resulted in riots and civil discontent over the expenditure on the World Cup and Olympics. Although Brazil does not pursue a neutral foreign policy, many of its citizens will question the validity of the F-X 2 fighter acquisition which will cost in excess of $4.5bn when millions of Brazilian citizens live in abject poverty. The negotiations have until the end of 2014 to conclude.

Saab aims to sell approximately 400 Gripen NGs over the next 20 years, with negotiations on-going with other countries. Thailand, South Africa, Czech Republic and Hungary all operate the older C/D variants. It is disappointed with the outcome of the referendum, but is still convinced that the program is off to a successful start. Export orders are crucial to combat aircraft manufacturers, as it maintains production lines and also widens lucrative aftermarket opportunities.

The company also remains unconvinced as to whether a reworked Swiss deal is viable; Gripen production prides itself on technology transfer and cooperation with local partners. According to the engineering trade group Swissmem, the no-vote will deprive the Swiss economy of CHF 2bn ($2.2bn) of orders. Under the contract, Swiss businesses would have received business from Saab and over 500 contracts have already been arranged. So far both Saab and the Swedish Defence and Security Export Agency FXM have said they will respect the decision, with the Swiss Defence Minister declaring that rigorous analysis will be undertaken before the next step is decided.

Saab’s Gripen ambitions in Switzerland for now have been dented, but with a larger order from Brazil still intact and several other countries interested in the product, it could still prove a successful cost effective alternative combat aircraft.

For further reading, check out our case study:
Saab AB: Can the Gripen NG fighter be an exporting success?

Or explore our Aerospace & Defense Industry Profiles

Posted in Aerospace, Aviation, Defense.

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