Rafale Curse Lifted, But Eurofighter Typhoon Owners Face Uncertainty

Strategic Insights -

France's Dassault Aviation appears to have finally broken the Rafale curse with the sale of 24 aircraft to Egypt, worth an estimated €5.2 billion. However, the same fate may have passed to the Eurofighter Typhoon programme, which is 33% owned by BAE Systems. BAE has warned that it may have to close production lines if new orders do not materialize, citing a 12% drop in underlying earnings.

BAE's chief executive, Ian King, remains confident that the Typhoon will attract a meaningful order in 2015, but the group's profits growth this year hinges on either new Typhoon orders or a successful conclusion to negotiations over new shipbuilding work for the Australian government. Despite winning two export customers, the Typhoon has lost out to rivals in recent years for multibillion orders in the United Arab Emirates, Singapore, and India.

Key Takeaways:

  • The Rafale curse, which saw multiple failed export orders, has been lifted with the sale of 24 aircraft to Egypt.
  • The Eurofighter Typhoon programme, owned by BAE Systems, faces uncertainty due to the lack of new orders.
  • BAE has warned it may close production lines if new orders do not materialize, risking the loss of industrial and engineering skills.
  • The Typhoon has won two export customers, but has lost out to rivals in several recent multibillion orders.
  • The programme's profitability is linked to new orders, with a 12% drop in underlying earnings reported by BAE.

Statistics:

  • Estimated value of the Egyptian order: €5.2 billion
  • BAE's predicted contribution of Typhoon to 2014 sales: 16%
  • Value of predicted 2014 sales: £16.6 billion
  • Number of Typhoon orders lost in recent years to rivals: multiple

Sources:

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  • BAE annual report 2014
  • Defence Analysis, Francis Tusa
  • Agency Partners, Nick Cunningham
  • The Financial Times, Peggy Hollinger
  • BAE press release 2015