VnomadPradip R Sagar
India’s biggest deal of procuring 126 medium multi-role combat aircraft (MMRCA) for $18 billion (Rs90,000 crore) has hit rough weather. Two years after French aircraft maker Dassault Aviation bagged the deal for its Rafale fighter jets on account of being the lowest bidder, its cost has now shot up by 100 per cent.
In January 2012, when Rafale was declared the winner, its price was quoted between $60-65 million (Rs373-Rs400 crore). A top defence ministry official said the price of a fighter jet made by Dassault could now cost $120 million (Rs746 crore). The second bidder, Eurofighter, had quoted $80-85 million (Rs497-Rs528 crore).
The price hike would mean that the deal would cost India nothing less than $28-30 billion (Rs1.75 lakh crore-Rs1.86 lakh crore),” said an Indian Air Force (IAF) official, who is privy to discussions of the cost negotiation committee.
The defence ministry headed by AK Antony has developed cold feet after the cost doubled compared to the original estimate. With the general elections just months away, Antony is unsure about the fate of the deal, a defence ministry official said. “As the negotiations continue, the cost is spiralling out of hand. It is a major worry,” he said.
An IAF official said that in 2007, when the tender was floated, the cost of the programme was $12 billion (Rs42,000 crore). When the lowest bidder was declared in January 2012, the cost of the deal shot up to $18 billion (Rs90,000 crore).
Eighteen of the 126 planes will be purchased directly from Dassault, while Hindustan Aeronautics Limited will manufacture the other 108 under a licence, at an upcoming facility in Bangalore.
The IAF, which is fighting its depleting combat strength, was banking on Rafale as this was going to be the force’s leading fighter plane for the next four decades. “With chances of the MMRCA deal getting inked appearing dim, there seems to be no solution to the immediate problem of shrinking squadron numbers as existing aircraft are forced into retirement,” said another IAF official.
The air force is seeking to replace its ageing MiG-21s with a modern fighter and MMRCA fits between India’s high-end Sukhoi-30MKIs and its low-end Tejas LCA lightweight fighter. The IAF has a sanctioned strength of 45 fighter jet squadrons. However, it only has 30 squadrons operational as old aircraft have been retired.
Vnomadthey have to pay separate for that 20 aircraft option. they can only afford 40 with FMS and no offsets like Boeing/EADS can provide with 4G fighters. so you cannot compare the overall cost of deals even if they are similar.
F-35 is more expensive than the F-15SE. Fact.
The F-35 costs 1.5 times more than the F-15SE. Guesswork.
Other part here.
VnomadYour calculation assumes average yearly inflation of approx 4 %, where actual yearly inflation in Sweden and the Netherlands was at most 2 %.
Approx 10 % aggregate inflation from 2008 till now.
Defence inflation runs about 2-3% ahead of the civilian index. In this case, I’ve assumed a conservative figure of 3% – which over 6 years, computes to €6100M.
VnomadExchange rate for Swedish krone against euro has been very stable since 2008, SAAB’s offer was calculated in kronor, converted to euro offer.
Dealings between SAAB and Dutch government would have been in euros, not in dollars. SInce 2008, dollars today will buy you more euros (kronor too) because of an exchange rate that has risen from 0.61 to 0.73 – that drives down Gripen’s price in dollars.
As of April 2008, 1 EUR = 1.58 USD. €4800M = $7500M.
The Euro has lost a lot of value between 2008 and 2014.
You can see it another way –
SAAB’s 2008 Gripen offer was SEK 45 billion (see the document). In 2014, that figure is equal to €5100M. For 85 Gripens, not including inflation. With inflation, probably €6000M+.
VnomadSAAB’s offer included radar sets and HMDS for all 85 aircraft. Check the pdf.
Unlike Lockheed-Martin, SAAB has a reputation for delivering on budget. Remember this was a fixed-price offer, I haven’t caught LM making any fixed-price offers for F-35s yet.
‘Spare engines, radars, HMDS’. Plus LDPs. The Dutch would have contracted them for a price over an above that quoted by SAAB. It wouldn’t increase the cost hugely though – maybe from $100M to upto $110M.
Basically, instead of 37 F-35s you’d get 50-55 Gripens.
There is no way in which 4.8 billion in 2008 euros translates to 6.2 billion in 2014 euros. 6.2 billion dollars – possibly.
Take the exchange rate for April 2008, adjust it for inflation and you’ll get $8.3 billion or €6.2 billion.
Vnomadsay its legitimate.
what options does India realistically have for a 5th gen air superiority fighter?
F-35? no way
something from France? can they actually do it?
China? unlikely
Korea? lots of ideas, no balls to actually do it… or the expertise
The assumption being that India’s requirements are built around the PAK FA. Why does it need to be an ‘air superiority fighter’, given that most aircraft are multi-role today?
VnomadSK decrease buy of FXX by 1/3 and delayed signing by one year to find funds. and that is lot 10. and since F-35 will be FMS sell there will be no big obligation of offsets like in F-15/EF deals.
40 aircraft with options for another 20. Like I said, no figures available to support the 1:1.5 assertion.
Tejas actual cost paid? from where those actual costs comes from?. It is hardly only 15 fighters built in last 15 years at a rate of one plane per year.
Cost being paid for the 40 aircraft on order.
VnomadNow you are going to estimate price of F-35 when you are so far off on LCA price. Take South Korea FXX competition. they have to postpone signing for 1 year as only 1 JSF can be acquired for the price of 1.5 F-15/EF etc. and that future higher production orders in lot 10.
One, the Tejas’ price was the actual cost paid by the MoD to HAL for the aircraft. Two, there are no figures available yet from the SK competition to support your 1:1.5 claim.
VnomadIt’s the same type of offer as the F35 had in the same tender. In Switzerland they wanted more stuff included and thus the price was higher.
6,2 bn $ for 85 Gripen gives a unit cost of 73 m $.
5,8 bn $ for 37 F35 gives a unit cost of 157 m $.
€6.2 billion at current day prices. That’s $8.25 billion. About $100M each. Not including spares. And this is an estimation – the NG was still on paper in 2008. We don’t in fact know if the final contract for the F-35 included the same list of items as quoted for the Gripen.
VnomadI think it must be a typo, the EUR/USD exchange rate was approx 1,3 –> 4,8bn € = 6,2 bn $
Check the exchange rate in April 2008. And then adjust for inflation.
VnomadSource:
http://new.isoshop.com/dae/dae/articles/communiques/Saab_NL_Offer_Gripen_NG_170409.pdf
———————————————————————————–
85 Gripen NG Aircraft (1 Flight Test Aircraft)Total Price
EUR 4792 Million
————————————————————————————————
As for screwing the Brazilians, I do not know the details of the deal offered to them by SAAB. Maybe you can enlighten me.
That’s equivalent to about €6.2 billion today. Which puts the SAAB’s offer at about $100M per unit. (Though it doesn’t appear to include spare engines, radars & HMDS or an LDP.)
The price quoted to Brazil and Switzerland is $125M and $140M respectively (but for smaller production runs). This includes ToT and offset costs. The balance cost (if any) can probably be explained by a simple underestimation – the NG was still in early development back in 2008.
Vnomad‘[We] have a new unit production cost of a generic F-35 at $185 million: F-35As are $159 million each; F-35Bs are $214 million each, and F-35Cs are $264 million each. This new calculation compares to the absurd $75 million per unit cost that a senior Lockheed Martin manager recently asserted. Real world costs for a useable airplane are literally multiples of that.’
Mr Wheeler now chooses to pretend that he doesn’t know the difference between flyaway cost and acquisition cost.
The currently quoted flyaway cost is $110M for the F-35A. As per the article, total acquisition cost for the aircraft is $160M.
Extrapolating from the above, if LM hits its target RUFC ($75M), the APUC at full production will end up at about $110M. Even if it overshoots that figure, not too bad.
(The F-35’s cost in 2015, that the article talks about, is a short term statistic. Immaterial to the bigger picture.)
VnomadIf we compare apples to apples (like the Netherlands) we get that the same money that buys you 37 F35 (ok 6,7% more) gives you 85 Gripens with all ground equipment and a lot of extra stuff. So the F35 is only 115% more expensive.
85 Gripen NGs for $6 billion, including the support package? Not likely. Not in light of the Brazilian and Swiss orders.
VnomadOf the 18 cost drivers mentioned above, the majority are unique to a particular Air Force. Since no two Air Forces operate exactly alike, “Program cost” needs to be determined for each Air Force based on their unique CONOPS .
If you want to calculate the exact difference in cost, yes. Particularly, if you have two aircraft with similar profiles, such as the Rafale and Eurofighter. But, if the question is broader – does the F-35 cost vary greatly from advanced fourth generation aircraft, a rule of thumb estimate based on the flyaway cost is good enough.
Vnomad“Apps” “YES”… I think this is quite important…. open source environment versus uncle Sam total dependency and lack of flexibility
While they both have a helmet display, so they’re equal in that regard.
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