Looking at markets--combat aircraft: the view now shifts to a particular market area in the shape of combat aircraft and, as has already been seen, there are a number of major combat aircraft acquisition programmes in progress around the world. (Complete Guide).

According to the American analysts of the Teal Group, a total of 2951 combat aircraft valued at $139.6 billion (in current year dollars) will be built worldwide between now and 2011. Teal state that 175 fighters, worth some $7.2 billion, will be delivered this year, with 193 fighters valued at $8.1 billion being delivered next year. According to Teal, this will be the first rise in four years. The key issue in the Teal Group's analysis is the fact that the fighter market is actually in transition, in effect it can be characterised as a market that will change is shape dramatically in 2015 when the Lockheed Martin F-35 Joint Strike Fighter (JSF) becomes available for export.

This characterisation of the fighter market as pre- and post-JSF would seem to be a fair assumption. If the JSF programme remains on track with initial operational capability achieved in 2010, the aircraft should start to make inroads in the export market from 2015 onwards. The US Air Force is due to acquire 1763 F-35s to replace the F-16 and the A-10, the US Navy is to acquire 480, the US Marine Corps 609, the British Royal Air Force 90 and the Royal Navy 60. That equates to over 3000 aircraft as the initial requirement. Canada, the Netherlands, Singapore and Turkey are showing real interest in the F-35 programme amongst others, indicating that this aircraft will be the benchmark fighter from the middle of the next decade.

In the thirteen years between now and 2015 there exists a gap in the fighter market that will have to be exploited by Boeing with the F/A-18E/F, then Dassault with the Rafale, Eurofighter with the Typhoon, Lockheed Martin with the F-16C/D Block 60, RSK MiG with new versions of the MiG-29 and Sukhoi with the Su-30 family. It should be noted that the Lockheed Martin/ Boeing F-22 Raptor has not been included in this list, although it is due to obtain IOC in 2005, exportability issues will make it extremely difficult to market, as will its high acquisition cost.

Upcoming fighter competitions are actually rather numerous but do not involve the large numbers as in the past. Apart from the Brazilian Air Force F-X programme mentioned above, there are three major programmes in Asia alone. The Republic of Singapore Air Force has generated an operational requirement to replace its current fleet of A-4SU Super Skyhawk attack aircraft, some 50 of which are in service. Singapore issued a Request for Information to which responses were received from Boeing with the F-15E and the F/A-18E/F, Dassault with the Rafale, Eurofighter with the Typhoon, Lockheed Martin with the FR-16 Block 60 and Sukhoi with the Su-35.

The programme calls for the selection of two or three main contenders by the end of this year, with a winner being announced in 2004. Initially, 24 aircraft are required for delivery between 2007 and 2009. After this it is likely that a second batch will be acquired, probably a further 24, to replace the F-5S/T fleet. Eventually Singapore will seek to replace its 50-strong F-16 fleet with the JSF, allowing it to have a force based on two combat types: the winner of the current competition and the JSF.

In Malaysia, the Royal Malaysian Air Force (Rmaf) is working towards the acquisition of a new fighter type as it has generated an operational requirement for a long-range multirole system. The new fighter would join the current fleet of 8 Boeing F/A-18Ds and 17 RSK MiG-29N/NUB. This requirement seemed to heading towards the Sukhoi Su-30MKM until the recession of the late 1990s intervened. With the economic situation improving, the Rmaf programme is once again ready to proceed and Boeing has moved aggressively to attempt to meet the requirement by offering to take the existing Rmaf F/A-18Ds in part exchange for new F/A-18E/F aircraft.

The competition is evenly balanced between three contenders, the Boeing F/A-18E/F, the new RSK MiG-29MRCA and the Sukhoi Su-30MKM. Bearing in mind the less than stellar serviceability and support record of Rmaf MiG-29s, the competition should be a direct battle between Boeing and Sukhoi. In March, Dr. Mahathir Mohamad, the Malaysian Prime Minister, made a state visit to Russia and was briefed on the Su-30MKM as well as being treated to a flight demonstration at the Zhukovsky Flight Test Centre on the outskirts of Moscow. This show of official favour puts Sukhoi in the lead to win the 16 to 18 aircraft requirement of the Rmaf. However, Boeing ought not to be disheartened, as it is quite likely that there will be an F/A-18E/F purchase in addition to the stated fighter requirement. This will see the existing F/A-18Ds exchanged for a similar number of F/A-18E/Fs, according to Malaysian sources. Another point is that the competition is still very open and things change rapidly in Malaysia.

Should Sukhoi win the Malaysian contract this will further strengthen their position in the Asian marketplace. During the 1990s, they supplied China with 40 Su-27SK and 10 Su-27UBK aircraft and signed a licence production contract for up to 200 Su-27s to be manufactured at Shenyang. In addition, another batch of 28 Su-27UBK are being delivered, with all to be in service by the end of this year. In 1999, China contracted to buy 38 Su-30MKK aircraft and the majority of these have been delivered, future requirements call for the provision of another 62 Su-30MKM aircraft.

India is another major Sukhoi market; the Indian Air Force is receiving 50 Su-30MKI aircraft from the Irkutsk Aviation Production Association (IAPO) and Hindustan Aeronautics Limited will manufacture 140 Su30-MKI at their Nasik facility. Vietnam has 10 Su-27SK and 2 Su-27UBK aircraft and has an outstanding requirement for another 24 combat aircraft, which will probably be met by the Su-30MK. Indonesia had signed a contract for 12 Su-30KI aircraft in 1997, but was forced to cancel due to the economic crisis. Russia still has hopes of resurrecting the Indonesian order and is looking at selling 24 Su-30KIs.

Australia is another nation with a significant combat aircraft requirement. The Royal Australian Air Force Air 6000 programme calls for the replacement of its fleet of 71 F/A-18A/B and 35 F-111C/G aircraft, which are due to reach the end of their operational lives in 2012. This has been designed to be a multi-phase programme that will incorporate both manned aircraft and eventually Unmanned Combat Air Vehicle (Ucav) solutions.

The structure of the Air 6000 programme could now be subject to change as Australia is becoming increasingly concerned that its F-111 strike aircraft will suffer structural failures and be unable to continue to 2012 as planned. This will mean that they can either opt for an expensive structural upgrade programme or look to lease combat aircraft to replace the F-111. It is understood that BAE Systems made a Eurofighter Typhoon lease offer and that Boeing has been asked, unofficially, to make an F/A-18E/F lease offer. It is thought that up to 20 aircraft could be required if the lease goes ahead.

Fighters in Europe

The Asian fighter marketplace is obviously very active, but it is not alone in that regard. The European Nato fighter marketplace will burst into life in this decade with the continuing delivery of the Dassault Rafale to the French Air Force and Navy (294 required) and the start of Eurofighter deliveries to Britain, Germany, Italy and Spain (620 required). With its selection by Hungary and, by implication, the Czech Republic, the BAE Systems/Saab Gripen has made the breakthrough into Nato and has a good chance of meeting the Polish Air Force requirement. The Gripen must also be considered to have a strong chance to meet the Austrian fighter requirement to replace the existing Saab J35OE Draken fleet.

Into the future, Greece will once again become an important fighter market, opening some interesting competitive possibilities. In 2000, it had selected the Eurofighter Typhoon and was looking for up to 90 aircraft, but the next year the need to control government expenditure, especially in the run up to the 2004 Olympics, saw the deal put to one side. On the other hand, Greece did proceed with contracts for 15 new Dassault Mirage 2000-5 Mk II fighters and an upgrade to existing Mirage fleet (subsequently 3 more Mirage 2000-5 Mk IIs were ordered), plus a purchase of 50 followed by an additional 10 Lockheed Martin F-16C/D Block 50-Plus aircraft.

The Hellenic Air Force will still need to replace its upgraded fleet of F-4E Phantoms and its A-7 fleet, indicating an ongoing need for a new fighter. This will once again see Eurofighter, Dassault and the other major companies bid, but the competition will be driven by politics and offset criteria as much as by absolute aircraft performance.

Norway also has a fighter requirement, the Royal Norwegian Air Force had a competition that eventually saw the Eurofighter Typhoon face off against the Lockheed Martin F-16C/D Block 50, this ground to a halt in May 2000. Norway is now trying to restart the competition, looking to procure a first batch of 24 to be delivered from around 2006 and a second batch of 24 aircraft to be delivered from 2015. Aircraft to be evaluated include the JSF, the Eurofighter, the Rafale, the Gripen, the F/A-18E/F and the F-16C/D. Bearing in mind past experience, the Norwegian fighter requirement must be considered as uncertain until a proper budget is allocated for it. A similar level of scepticism must also be applied to the Netherlands fighter requirement; the Royal Netherlands Air Force has requested information of the Rafale, the Eurofighter and the Gripen. However, their interest in the JSF would seem to indicate that will be Norway's F-16 replacement path.

As far as the Middle East market is concerned, of the GCC states all eyes are once again on Saudi Arabia. Bahrain is wedded to the F-16, Oman just ordered the aircraft last year and the UAE has based its future on the Mirage 2000-9 and the F-16C/D Block 60. Kuwait is said to be interested in a new fighter to replace its fleet of 40 F/A-18C/Ds, but this will probably go to the US and the F/A-18E/F. This leaves the Royal Saudi Air Force (RSAF) as the key regional customer. A 1990s plan to replace the F-5E/F fleet with the F-16C/D died by the end of that decade and although the requirement still exists it could be drawn into something much larger.

There has been speculation that the RSAF wants to replace its Tornado ADV air defence fighters (some 22 in service), as well as the F-5s, and this could open the way to a competition. Politics will be the key here as Saudi will seek to placate the US and attempt to keep its procurement options open. Most likely it will attempt to pay for the deal with an oil barter similar to the Al Yamamahi deals with Britain. The US, Britain and France will compete for any potential RSAF business. In the long-term, from 2015, the Tornado IDS fleet (83 aircraft) and the F-15 fleet (181 aircraft) will be ripe for replacement.

Air-to-Air Developments

The fighter market seems to have significant potential in the near and long terms with European manufacturers seeking to exploit the opportunities available prior to the arrival of the JSF from 2015. Equally, Russian industry has much to look forward to with Sukhoi continuing its successful run of contracts in Asia. Russian sources believe that Sukhoi could sell over 400 aircraft in the next few years, something that will be very important to overall Russian defence sales as Sukhoi combat aircraft account for nearly 80 per cent of total defence exports.

A healthy fighter market will also be a major boost to missile manufacturers, electronic warfare manufacturers and many others. The provision of missiles for these new fighters and existing fleets is turning into a very interesting battleground, in particular in the air-to-air sector. Russian manufacturers such as Vympel will obviously dominate the market for Sukhoi and MiG combat aircraft. However, outside of this the real competition will be between the US, Europe and Israel.

The Raytheon AIM-120 Amraam in the medium-range sector and the AIM-9X Sidewinder in the short-range sector are the US contenders. Europe can offer the MBDA Mica in the medium-range sector and, in the future at the end of the decade, the Meteor in the long-range sector; short-range solutions include the BGT Iris-T and the MBDA Asraam and Magic. The Israeli alternatives are the Rafael Python 4 covering the short range and the Derby for long range. To be fair, other countries have air-to-air missile solutions, South Africa for one, but US, European and Israeli companies are the leading forces in the marketplace.

The US government often uses missile access to further its foreign policy aims. For example, it has sought to control the entry of advanced medium-range missiles into certain areas of the world and it has also alluded to the fact that should a country purchase non-US combat aircraft it will not get access to advanced missiles of US origin, a major obstacle for the European combat aircraft manufacturers to overcome. All of which adds even more uncertainty factors into the air-to-air missile area.

The fact that the US seeks to control missile access is of obvious assistance to Israel who has cleared their missiles, such as Python family, on the Israel Air Force fighter fleet and on other aircraft such as the Mirage, F-5 and various MiGs. The medium-range Derby system, which was publicly unveiled last year, has great potential for those who are unable to acquire the Amraam or are unable to obtain the number of missiles that they need. It is assumed, although unconfirmed, that the Derby has been acquired by Singapore and Chile.

For MBDA in Europe their Mica medium-range missile is optimised for the Mirage and Rafale fighters, but the Asraam has broken through onto a US platform after being acquired by Australia for its F/A-18 fleet. The BGT Iris-T system will, like the Asraam, be used by Eurofighter and other aircraft flown by Germany and other European nations. For the future, the key European air-to-air missile programme will be the long-range Meteor system, this will allow Europe to break the US missile stranglehold. In the meantime, the Amraam will remain dominant. For the AIM-9X Sidewinder, it finds itself with a lot of competition, thus it will have to fight hard for market penetration.

Developing Market Areas

As previously mentioned, the massive submarine contract that DCN has won in India with the Scorpene being selected for the Indian Navy Type 75 conventional submarine (SSK) programme. This decade could see the SSK market achieve the momentum that it has lacked for many years. The US commitment to supply Taiwan with eight SSKs will be difficult to achieve, as most major SSK building nations would not wish to anger China. However, the US is said to have received numerous bids for the work and so it is likely to proceed. Equally, an organic US SSK capability opens up some other possibilities; Egypt requires two SSKs, these would have to be paid for by US military aid and would have to be US-built.

Malaysia is on the verge of acquiring two SSKs for training prior to developing a true submarine force with the acquisition of three or four new boats. Singapore already has its training boats in the shape of the Challenger class (ex-Royal Swedish Navy Sjoormen class), two out of four having been delivered. By the end of the decade, Singapore will be in the market for up to four SSKs. Another Asian country that will be in the submarine market will be the Republic of Korea; here there is a requirement for a new submarine class known as SSU-3000 (a 3000-tonne design), with some six required. From just five countries, a potential market exists for 24 SSKs within this decade.

If there are positive signs for the future in SSK markets, the same cannot really be said for main battle tank markets. In Europe, the last two major requirements on offer have gone to KMW and the Leopard II, with Greece and Finland set to order over 300 vehicles. The ongoing Turkish M60 upgrade programme has gone to Israel, but a new tank acquisition is now becoming unlikely. In the Middle East there are no new orders likely, with the M1 Abrams, Leclerc and Challenger 2 all having picked up orders. In Asia, Russia obtained a 310-tank Indian order and Poland has secured a 60-vehicle Malaysian order. It would seem that for the major nations the acquisition of new tanks is not the answer, the real future market here will be upgrades and life extension.

Some salvation for armoured vehicle manufacturers will come in demand in the Light Armoured Vehicle (Lav) sector. Germany, the Netherlands and Britain will jointly procure the GTK/MRAV system, while France is also introducing a new generation Lav. The emphasis on Lavs for rapid reaction and peacekeeping operations can only aid the adoption of these systems. Even the US Army, which was never a major supporter of Lavs has adopted a new wheeled armoured vehicle in the shape of the Interim Armoured Vehicle (IAV). It is worth noting that the IAV was the first new armoured vehicle acquired by the US Army in 18 years. The requirement was won by General Motors and General Dynamics Land Systems with the Lav III (itself a development of the Mowag Piranha), with 2131 vehicles being acquired to equip up to six Brigade Combat Teams.

By the end of the decade new generation armoured vehicles should be entering service. For example Britain hopes to have its Future Rapid Effects System in service between 2008 and 2010 and the US Army still has its Future Combat System programme on the go. However, it is a long time between now and 2008 and armoured vehicle programmes are finding it hard to generate acquisition priority in cash strapped procurement budgets.

A Final Overview

Defence markets are still in a process of change. In 1985 the Nato nations spent $620.542 billion on defence, by 2000 that total was down to $464.654 billion, of which $294.695 billion was accounted for by the United States military budget. As a whole, global military spending declined from $1253.517 billion in 1985 to $811.452 billion in 1985. Although it had also declined heavily, Nato spending represents more than half of that global total, according to IISS figures.

The governing implication seems to be that military spending is on a downward curve, yet it still represents an enormous market. The only market areas showing growth over the 15-year period from 1985 to 2000 were Central and South Asia (including India and Pakistan) with spending up by $8 billion and East Asia and Australia with spending up by over $29 billion according to the IISS.

With the United States now increasing its defence spending, the pressure will be on the Europeans to respond. In the Middle East, if higher oil prices are sustained, there could be a move back to some significant procurement. Asia will remain a growth area, Latin America will exhibit marginal growth and Africa ought to decline in terms of defence spending. Considering these facts, some in the defence industry will doubtless be nostalgic for the 1980s, but there are still numerous demands and vast sums of money are needed in meeting the future global defence requirements.