July 23, 2012
Credit: Photo Credit: Boeing
Jen DiMascio, Joseph C. Anselmo and Amy Butler Farnborough and Washington
As bad as the U.S. budget picture seems, 2012 was the best year on record for the sale of U.S. weapons abroad. The administration expects to sell a whopping $51.6 billion worth of weapons overseas during fiscal 2012, soaring beyond what was a bit above a $10-billion-a-year business a decade ago. But with an increasing number of countries eyeing the same export pot, nations and companies will have to position themselves for global competitions that are growing more and more intense.
Boeing now anticipates that 30% of its defense sales will come from the international market, and Lockheed Martin is aiming for 20%. With Pentagon belt-tightening underway, U.S. defense contractors were expected to keep a low profile at this month's Farnborough air show. But business was booming at the chalet of defense electronics contractor Raytheon. “This is probably the busiest air show we've ever had,” said CEO Bill Swanson.
International customers accounted for 29% of Raytheon's bookings in 2011, and Swanson is relying on such sales to help balance what he believes will be an inflation-adjusted decline in U.S. military spending. “We see our international [sales] growing at high single digits,” he says. “If your international grows and your domestic goes down with inflation, then our company should have flat-to-slight growth.”
Raytheon has benefitted from its position in the market, capitalizing in sales of intelligence, surveillance and reconnaissance and electronic warfare equipment, and it is building ties abroad in key markets.
“Defense exports from the EU and North America have increased dramatically in recent years to Turkey, Pakistan, Singapore, the Baltic States, the UAE, Qatar, Malaysia and Japan,” a report by PwC states. “In Saudi Arabia, the growth rate of military expenditures and the growth rate of defense spending as a percentage of GDP are the highest in the world.”
Indeed, the U.S. weapons export numbers are riding high this year, in large part due to the $29.4 billion sale to Saudi Arabia of 84 Boeing F-15 aircraft amid rising tensions with Iran.