Dassault Hopes Brazilian Sales Lift Company

(MoneyWatch)  The worlds aerospace companies have been hurt badly by the global recession. This has not only caused sales of civil aircraft to fall but also reduced domestic defense budgets. Lower spending has made it harder to keep sales and revenues up for all defense contractors around the world. Many of the big U.S. and European companies are trying to make up these cuts by selling to Asia, the Middle East and South America.

One country that is looking at significantly upgrading the technological capabilities of their military while also investing in their domestic defense industries is Brazil. They have already signed a major contract with Eurocopter to manufacture new military helicopters with parts and assembly to occur domestically.

The next bigger contract is for several dozen modern fighters. This contract too will require substantial offsets either through actual investment in Brazilian companies or like the helicopter contract buy parts or do assembly in Brazil. Like the new Indian fighter program this contract saw bids from Boeing, SAAB in Sweden and Dassault Aviation in France.

The U.S. company's bid has been complicated by export and technology control laws which makes it easier for SAAB or Dassault to sell their products. This is despite Boeing's strong commitment to maximize their offsets to aid their bid of the F/A-18 aircraft. Dassault has yet to sell their Rafale fighter to any foriegn company and the SAAB Gripen has been leased or purchased by South Africa and Thailand and leased by the Czech Republic and Hungary. SAAB is hoping that they will win the Indian and Brazil contracts as they can currently see the end of production.

Dassault like a great deal of other aerospace companies was focusing on their civil Falcon luxury jet production. This aircraft made up the bulk of their sales and revenues but with the economic problems world wide sales have fallen. This has put the focus on military aircraft sales to make up the losses. The Rafale has so far only been purchased by the French military and the Brazil sale would add to that quantity.

Unfortunately once these two contracts are awarded most of the world's military will be switching to Lockheed Martin's F-35 JSF. This aircraft will dominate new sales to the United States and its Allies as it begins to replace the F-16 bought by so many of them. If the projected quantities are built of the F-35 then the price will be very competitive for overseas sales. The integration of it with the U.S. and NATO technologies also makes it more attractive. This means that Dassault only has limited opportunities to cushion the business jet market.

Unfortunately the future may be bleak for some of the marginal producers. If there is not a great recovery for the civil market they may remain dependent on their military line. The European countries and the U.S. are looking at reduced spending in the future as deficits and social spending dominate their budgets. That will make it harder to keep investing in modern aircraft. In the past France has supported their domestic industries by buying strictly from them but this may prove too difficult and expensive.