A Defense Technology Blog
See All Posts
  • Euro Pains
    Posted by Bill Sweetman 4:54 PM on Jul 13, 2008

    One reason that you don't hear more than you do about exchange rates affecting the competitiveness of aerospace manufacturers is that most commercial products today have long global supply chains. Today, work and parts priced in pounds and euros cost more, but dollar content costs less, and the better distributed the supply chain is, the less you hurt.

    This isn't so with military aircraft. Case in point is the Airbus A400M, Airbus vice-president of marketing Peter Scoffham pointed out at IQPC's forecast and market conference last week. When the project started, with the dollar and euro close to parity, its EUR100m unit cost looked like a great deal versus $80 m for the C-130J. Today, with the euro at $1.59 and with most of its major pieces made in the Euro-zone, the A400M costs twice as much as the Hercules and runs up against bargain-basement, end-of-line C-17 prices.

    blog post photo

    The same applies as fighter manufacturers attempt to disrupt the JSF's global marketing plans. While it's important to remember that so far we haven't seen real price comparisons - that should happen later this year or early next, as JSF and rivals quote to common requirements - the exchange rate makes the Lockheed Martin fighter look like a bargain.

    You know and I know that exchange rates move, and that we've seen a $2.50 pound and similar things before, and that when you buy a military airplane you're talking about costs that are in the future, when aircraft are delivered and when they have to be supported. But another difference in the military market is that the decisions are taken by politicians, who by that time will be nowhere to be seen.

    So as long as these conditions last, European marketing people will be crying into their beer - preferably Sam Smith's, the last under-two-quid pint in London. And you probably won't see a lot of A400M export sales announced this week.

    Tags: ar99, a400m, airbus, jsf

  • Recommend
  • Report Abuse

Comments on Blog Post