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Eurofighter Meltdown

Struggling against rising costs and American competition.

11:00 PM, Feb 6, 2008 • By REUBEN F. JOHNSON
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Kiev

If you think the United States has problems with the constant price increase of new-generation programs like the Lockheed Martin F-35 Joint Strike Fighter (JSF), take a look at the situation with the four-nation consortium Eurofighter program.

Several news reports, including a January 26 story in the Washington, D.C. based Defense News, state that the bill for the Eurofighter is going to now cost some €10 billion ($15 billion) more than the most recent cost estimates had previously projected. The Defense News report is based on a story from the German magazine Focus, which published its article after having obtained a copy of a letter from Eurofighter GmbH, the German branch of the multinational company that manages the program, with these details. The letter in question was addressed to the German Ministry of Defense (MoD).

The Eurofighter is a multi-role combat aircraft that was designed and built by a four-nation consortium of the UK, Germany, Italy, and Spain. The industrial partners are the UK's BAE Systems, Germany and Spain's EADS and CASA consortiums, and Italy's Finmeccanica.

The rationale for combining the efforts of these partners on the program was that no one nation in Europe had the economies of scale to design and build a new-generation fighter on its own. The numbers to be purchased by the four initial partners plus export orders is around 700 airplanes so far, which is more than any other modern fighter built in the current generation.

According to the Focus report the UK will have to pay an extra €5.8 billion (US $8.2 billion), Italy €2.16 billion (US $3.05 billion), Germany €1.97 billion (US $2.79 billion) and Spain €820 million (US $1.17 billion). The magazine also reports that "other clients" (meaning the current foreign customers of Austria and Saudi Arabia and any other potential future export buyers) will also have to pay additional monies to receive their aircraft.

The main reason for the increase in the program's cost is that the ambitious plans for three production runs--referred to as Tranche 1, 2 and 3--may now have to be scaled back to the point where Tranche 3 will be cancelled all together. No official announcement has been made, but without the additional production of the third Tranche in order to help amortise the R&D costs of the aircraft, the costs for the first two batches must increase accordingly.

As far back as December 2006 the then-UK Defense Procurement Minister, Lord Drayson, said that he would sign no contract to build Tranche 3 airplanes until the program is reformed.

"The area which for 2007 is a big project for me to deliver is further changes in the Typhoon industrial structure," he told the parliamentary committee in testimony on the MoD's 2005 Defence Industrial Strategy. "Before we can go forward on a Tranche 3 decision--and we do not need to take that decision yet--I believe there needs to be a remodeling of the [Eurofighter] Typhoon structure."

But little of this remodeling--or increasing of inefficiency--in the Eurofighter program has taken place. Therefore, expectations that Tranche 3 will be cancelled have risen as the capabilities for the third batch have been dialed back.

Originally, this last, third batch of the production run would have added conformal fuel tanks to increase range to the aircraft, a new, uprated higher-thrust EJ220 engine to replace the current EJ200, and an active electronic scanning array (AESA) radar. These new systems have all been gradually abandoned to the point where Tranche 3's configuration is almost identical to Tranche 2. The advanced capabilities listed above would all have to be retrofitted to the early production batch airplanes, which is another reason for the increase in program costs now being levied on the four partners and export customers.

But another real driver behind the woes of the airplane is the increasing conflict of interest between those Eurofighter consortium nations that are part of the F-35 program and those that are not.

The UK and Italy are both heavily vested in the U.S. program and they now realize that they cannot afford to have the JSF as part of their air force and at the same time procure additional Eurofighters with the advanced systems originally called for in Tranche 3. But Eurofighter is the only new aircraft being procured by the other two partners, Germany and Spain, and they have to stay in to the end and fulfill all of their procurement plans in order to maintain their force levels and replace aging aircraft in their existing fleets.