A Welcome To Arms
We’ve just had the Farnborough Air Show, so much of the world’s media has been writing about the aviation industry, all the contract announcements, and especially about military aircraft sales (Farnborough’s real specialty). Much of it is simply hype by the companies. You don’t really believe that all those contracts were actually done at the show, do you? Billion dollar aircraft deals aren’t impulse buys. But the show is still immensely important for getting things started, and meetings and displays at this year’s Farnborough may lead to the contracts announced at Farnborough 2012 (or Paris, Berlin or Singapore).
The Wall Street Journal published an interesting summary last week of the export dependence of U.S. arms and aircraft builders. Assuming the Obama Administration really can extricate America from Afghanistan, U.S. defense expenditures may drop swiftly in coming years and U.S. suppliers, accordingly, are positioning themselves to expand their share of the worldwide armaments market. The WSJ quoted the CEO of Lockheed Martin as seeing “significant” potential for export sales in the Middle East and Asia, and noted Boeing’s goal of upping the foreign share of its defense sales from 16% today to 25% in 2015. This will require some creativity since the generally low-tech opponents that governments are likely to face obviate the need for such items as high-end stealth fighters. The real action may be in lower-tech equipment and drones.
Some big deals have gone down already this year: United Technologies’ sales of helicopters to Australia ($2.1 billion) and Taiwan ($3.1 billion). Boeing may get a $5.8 billion sale of cargo aircraft to India, and Canada is spending $377 million on mobile radars, radios and vehicles. That said, defense budgets are getting leaner in many countries, especially Europe, so expanding overseas sales may be a good trick. And non-U.S. competition is never to be underestimated.
Austrian Blackhawk (photo: Markus Gattringer)
We long wrestled with the ethical issues of arms sales when I was in the U.S. Commercial Service. At times, we had instructions not to help sell weapons systems, but we would be told that assisting non-weapons sales to foreign militaries was OK. It was sometimes hard to tell the difference and we often worked with U.S. companies to compete against foreign suppliers once a foreign government decided it had to get new weapons. And some supposed “weapons systems” are actually dual-use. I worked for two years to help United Technologies sell Blackhawk helicopters to the Austrian military. Yes, a Blackhawk has offensive capabilities, but the real selling point was that the Blackhawks could do heavy lifting in the high Alps during avalanche season. This was brought home pointedly to the Austrians during a disaster when they had to rely on U.S. Army Blackhawks flying in from bases in Germany to help trapped victims on mountain tops. So, was selling Blackhawks to the Austrians a weapons sale – or a humanitarian program? It counted as a foreign military sale in the export statistics.
Apologies to Ernest Hemingway for the headline.
