Aero India Sparkles With Dealmaking Intrigue; Two Multi-Billion Dollar Contracts Up for Grabs

The implosion of the Rafale deal and the disappointing indigenous LCA opens up a gold-mine for American, European and Russian firms.

The implosion of the Rafale deal and the somewhat disappointing indigenous LCA programme opens up a gold-mine for American, European and Russian firms that may have missed out the first time around.

The Tejas light combat aircraft, whose disappointing progress has opened avenues for global defence firms. Credit: Reuters

The Tejas light combat aircraft, whose disappointing progress has opened avenues for global defence firms. Credit: Reuters

New Delhi: After nearly five years, India’s primary defence aircraft show, Aero India, is set to regain perhaps a little bit of its lost sheen.

While the usual aerial demonstrations and often-thrilling aerobatic displays will take place this year, what has been missing for the last two editions are the multi-billion dollar deals that come with excitement of outbidding, the Indian defence ministry’s sometimes-confusing specifications and just a hint of bureaucratic corruption.

The talk of this show will likely be the two major aircraft deals, each potentially worth anywhere between $12-$25 billion, whose request for information (RFIs) were sent out over the last few months.

While defence minister Manohar Parrikar may choose this moment to unveil his ministry’s much-delayed strategic partnership policy – there’s a certain amount of industry buzz that says this will finally happen – this aerospace get-together will almost certainly be used as an opportunity for global and Indian defence firms to seal deals and coalitions that will bid for the Indian Air Force’s (IAF) single fighter tender and the Indian Navy’s search for a carrier-based multi-role fighter aircraft.

The lucrative aircraft tenders trace back to two developments over the last year: Firstly, the whimper in which the much-vaunted Rafale/medium multi-role combat aircraft (MMRCA) deal ended. And secondly, the Indian Navy’s public dissatisfaction with the indigenous Tejas aircraft, which was expected to play a role in filling the India’s carrier-based aircraft fleet.

Which companies are in play and which aren’t? The Wire breaks it down.

Round 2: MMRCA Search

As The Wire reported and analysed, the Rafale deal was expensive, overpriced and still left India with gaping holes in its air-force. The IAF currently has 30-32 squadrons and one squadron usually has anywhere between 18-21 aircraft. The IAF needs 42 squadrons to adequately protect its borders against China and Pakistan – and by 2019 another 10-12 squadrons of ageing MiG 21s and 27s are expected to be decommissioned.

The Rafale deal only ended up netting India 36 new aircraft, which is why the IAF last October put out another call for what will roughly be 10-11 squadrons of medium multi-role combat aircraft.

Who are the likely contenders? The Wire spoke with multiple industry executives and government officials and the likely list is as follows:

Lockheed Martin: The Maryland-based aerospace firm, which didn’t even make it to the first MMRC tender shortlist, is perhaps one of the leaders of the pack here. It’s currently offering a new, more advanced version of its F-16 (dubbed ‘Block 70’).

If Lockheed was ruled out five years ago, why is it back in the running? Mostly because the new tender specifically requires a “single engine” fighter. The 2007 tender had no such terminology, which is why it ended up seeing bigger interest from companies such as Dassault, Eurofighter, Boeing and RAC MiG – all of which fielded either two single-engine or four twin-engine fighters.

None of these companies (perhaps barring MiG) can currently offer a state-of-the-art single-engine fighter, according to defence experts. Which is why Lockheed and Saab are in the running.

According to multiple people with direct knowledge of the matter, since October 2016, Lockheed has held meetings with nearly 40 different companies to gauge which companies could be used to help build a supply chain for manufacturing the F-16.

“They’ve been holding meetings in Bangalore and Mumbai, mostly last November and December, to decide which companies they could partner with,” a senior industry executive told The Wire.

The Wire has also learnt that keeping in line with Prime Minister Narendra Modi’s Make-in-India initiative, Lockheed is pushing for a joint-venture model where an Indian partner would be a “majority owner”. According to sources, while Lockheed hasn’t publicly disclosed who they would be working with, Tata Group firm Tata Advanced Systems (TASL) is likely to play a major role. This is primarily because TASL has in the past worked with Lockheed and is currently part of a JV with the US firm for its transport aircraft programme.

There are a number of things weighing against Lockheed though. These include the Trump factor and the fact that the F-16 is perhaps old technology, that Pakistan has only a slightly older version of the aircraft and that there doesn’t appear to be much in the way of technology transfer: Saab on the other hand has offered a host of goodies with regard to improving India’s Tejas programme.

Saab AB: Sweden’s premier aircraft and aerospace firm has been waiting in the wings just as long as Lockheed. Just like Lockheed, it lost out in the first MMRCA tender because its best aircraft are single-engine. The plane on offer is the Gripen E multirole combat aircraft – which by most metrics scores over the F-16. As one government official put it: “It’s a younger aircraft, has better avionics and better chances of technology transfer for India.”

In addition to this, Saab has offered up a heap of sops aimed at helping the Tejas programme: from helping develop the Tejas Mark IA (which by all counts is desperately lacking when it comes to electronic warfare capability in addition to combat radar systems).

In the run-up to Aero India, over the last six months, Saab has promised the moon and more; a new major production facility and a dedicated Gripen design centre. Much like Lockheed, Saab has a few natural partners that will constitute its Tier-2 and Tier-3 supply chain ecosystem. The company already has a design and development centre in Hyderabad in partnership with Tech Mahindra.

“Saab’s downsides are that the plane is expensive. Per unit, most estimates place it has being 25% higher than the F-16s. Some of this is because it’s a more technologically advanced plane but it’s also because the Gripen-E is simply in the more initial phase of its life-cycle,” Anand Bhatia, a senior defence analyst, told The Wire.

While Saab, like Lockheed, hasn’t declared a primary Indian partner, industry buzz over the last six months has pointed towards a potential partnership with the Adani Group, which has made some headway in the aerospace industry over the last year. Industry sources say that if the Saab-Adani partnership fructifies, it could help give the Swedish company a decisive competitive advantage.

Other contenders: Leaving aside Lockheed and Saab, there are a smattering of other options. In interviews, defence ministry officials that while a number of unsolicited offers have come in, a proper search has not yet started. What’s left in the race then? The Russian Aircraft Corporation (RAC) has once again offered its MiG-36 multi-role jet.

Boeing’s F/A-18 “Super Hornet” fighters are also in the mix. Sources tell The Wire that even before the Rafale deal was heavily scaled down, former US Defence Secretary Ash Carter and Boeing had been pushing for the IAF to sign onto the ‘Super Hornets’, which would come with a brand new production line in India. The only catch of course, as industry executives point out, is that Boeing’s aircraft are twin-engine planes.  “Non single-engine fighters are simply no longer been seen as a viable option. They are more expensive and can’t be used for a variety of operational tasks that a single-engine fighter can,” a government official said.

A last, but extremely unlikely option, is that Parrikar takes up Rafale on its option to buy more planes.

Navy carrier tender: 57 planes

What surprised Indian defence watchers a few weeks ago is when the Indian Navy quietly issued an RFI for “57 multi-role carrier borne fighters (MRCBFs) aircraft for the INS Vkramaditya and Vikrant aircraft carriers.

The RFI also crucially stated that these 57 new fighters would fill the gap that had been left by December 2016 cancellation of the naval variant of the Tejas LCA for apparently “not meeting the operational capability” required by the Indian Navy. As Admiral Arun Prakash (Retd) wrote at the time, the Navy “has administered a well-deserve and stinging rebuke to the Defence Research and Development Organisation for its lethargic and inept performance”.

The DRDO’s failure, however, is Saab’s and Boeing’s good fortune. Saab is looking to offer its Gripen M (Maritime) aircraft whereas Boeing’s F/A-18 Super Hornets are far more suitable for the naval fighter tender and will be a good option of the Navy decides on it. Dassault is also in the game, according to sources, with the Rafale-M model not only being suitable but could also have some interoperability synergies considering the Rafale aircraft recently bought for the IAF.

However, unlike the MMRCA tender, which defence ministry officials are quickly moving on and far more familiar with at this point, the Indian Navy’s tender is still (at the very minimum) a year off.

“The RFI for the navy tender is unbelievably generic. There will be an outpouring of offers and until the Navy narrows it down by perhaps issuing a revised RFI it will not be clear what exactly they want. While there will be much talk at the Aero India show, it’s still very much in its infancy at this point,” a senior Indian industry executive, whose firm provides supply chain support to a European aerospace company, told The Wire.

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