12 janvier 2021 | Local, Aérospatial
We paid a visit to Swedish OEM, Saab, to learn if its Gripen E offering to replace Canada's aging CF-188 Hornets has the requisite muscle to give the other entrants a run for their money.
Estimated reading time 14 minutes, 12 seconds.
“Gripen E meets and/or exceeds all of the Canadian requirements. It's an efficient, modern fighter, and it's the latest development on the market.” So says Anders Håkansson, Saab's deputy campaign director for the company's participation in Canada's Future Fighter Capability Project (FFCP).
Canada's protracted search for a new fighter aircraft to replace its aging McDonnell Douglas CF-188 Hornets has narrowed to a field of three competitors. The U.S. manufacturing giants of Boeing and Lockheed Martin are respectively offering the F/A-18E/F Super Hornet and the F-35A Lightning II, with Sweden completing the trio with Saab's latest incarnation of Gripen — the single-seat E variant.
While Saab is often cited as an excellent model for cost-effectiveness — company marketing literature refers to Gripen E as “the smart fighter” — actual capability is sometimes overlooked. So, does Gripen E have the requisite muscle to give the U.S. heavyweights a run for their money in this important campaign?
The complex saga of the Royal Canadian Air Force's (RCAF's) CF-188 recapitalization project includes Canada becoming a partner in the multinational F-35 program back in 1997. This enabled Canadian industry to gain a foothold in the global supply chain for the stealthy fighter, and Canada ultimately planned to purchase 65 F-35As. But the then-Prime Ministerial candidate Justin Trudeau pledged to overturn the F-35 deal — forcing a competition rather than a straight, non-competed acquisition of Lightning IIs.
Fast-forward to July 31, 2020, and formal responses to a request for proposal were submitted to Ottawa by the three remaining interested parties in the FFCP. The Eurofighter Typhoon and Dassault Rafale had already withdrawn from the race, making this a three-way chase for the prized contract.
The $11 to $15 billion FFCP calls for 88 fighters to be procured through an open competition, with the aircraft required to enter service from 2025 and be sustained to around 2060. Canada will select a winner by late 2021 using a formula that assigns 20 per cent to industrial offsets, 20 per cent to cost, and the remaining 60 per cent to overall capability.
As the sole non-U.S. candidate, Sweden's Saab appears to be an outsider — maybe even a stalking horse. However, Saab is heavily committed to Canada with a strong, but understated, offering that shouldn't be underestimated.
While Gripen E's moniker aligns it with the lineage and ethos of its Gripen A-D predecessors as capable but “affordable” fighters, the E is a very different beast in many ways. With seven aircraft now in various stages of flight-testing, one aircraft now at its Brazilian test centre, and initial deliveries to the Swedish Air Force planned for 2023, Gripen E's program is gaining momentum.
Gripen E is a subtly beefed-up variant of the original Gripen in terms of airframe, but under the surface it couldn't be more different. With 10 external hardpoints, Gripen E can carry up to seven MBDA Meteor beyond visual range air-to-air missiles — a weapon that has been eyed enviously by the U.S. in comparison to its AIM-120 Advanced Medium-Range Air-to-Air Missile (AMRAAM).
Combined with the Leonardo ES-05 Raven radar, it gives Gripen E impressive detection and engagement ranges. On top of the nose sits a Leonardo Skyward G infrared search and track (IRST) sensor for passive tracking and targeting.
The cockpit features an 18-by-nine-inch-wide area touch screen display, and the pilot operates in an immersed world of fused data that is constantly updated via a fighter-to-fighter data link — as well as connectivity to other agencies via Link 16. Sweden has been working in this connected world for decades, reaching way back into the era of Saab's Viggen fighter.
According to Håkansson, Saab's assessment is that Gripen and its offer to Canada meets and/or exceeds all of the stated requirements, including meeting Canada's obligations under the North American Aerospace Defense Command (NORAD) mission of providing air defence for Canada and the U.S. Though program officials cannot reveal the exact parameters, which remain classified.
The geographic scale of Canada must mean that range and endurance are two significant factors. With a 40 per cent growth in internal fuel capacity, Saab has clearly set out to address any perceived shortcomings of the earlier Gripens.
“Part of the reason we developed Gripen E was with range and endurance in mind — plus the more powerful F414 engine and other modifications,” said Håkansson.
One of the aces up Gripen E's sleeve is its electronic warfare system. It's completely new and provides what Saab refers to as a “digital shield.”
“The idea was not to build a geometrically stealth aircraft that would be obsolete long before the life expectancy of the fighter, due to continuously and exponentially growing new technologies that target geometrically stealth aircraft,” explained Håkansson. “We added an EW system that solves the issue electronically, and that will continue to develop exponentially because no one knows what threats are evolving.”
The embedded system combines active and passive systems to help protect the aircraft, which is cleverly combined with a 360-degree spherical missile approach warning system. “We have an airframe that is stressed for 8,000 hours . . . and Gripen E has the most advanced sensor fusion,” he said. “You can put the aircraft into an automatic mode and it suggests almost everything to the pilot so they can concentrate on the big picture, as well as the details.”
“The jewel in the crown is our avionics system — and that you cannot debate. No one else has that,” declared Håkansson.
Saab's Johan Segertoft led a team that masterminded Gripen E's revolutionary agile avionics architecture, which is attracting huge interest from other aerospace manufacturers. Saab set out to build a system that acknowledged computer technology is advancing like never before, with a mindset of embracing exponential growth in software code.
“Gripen E is the vessel that will bring you to the fight,” explained Segertoft. “The computer power is what will win and take the pilot home.”
He asserted Gripen E's avionics design is truly unique, already realizing the type of agile performance desired by U.S. manufacturers. Saab's approach has been explained as being akin to applications on a smartphone, where the operator tailors applications to their own preferences and without regard to hardware considerations that otherwise would slow the implementation. This means customers can design and develop their own software, enabling rapid introduction of new technologies and systems to deal with ever-evolving threats.
Explaining traditional avionics architecture, Segertoft said: “To solve an upgrade requirement, the operator today buys a new piece of equipment, such as a new radar, bolts it onto the aircraft and puts a new screen in the cockpit.”
To further explain this approach to upgrades, he used the analogy of buying an iPhone, but to get a new application on it you have to send it back to Apple and wait for three to five years to get it back! However, that is the legacy approach to complex integration issues in a highly regulated world. Safety in the aeronautical industry drives enormous cost.
While most modern avionics systems separate safety-critical elements from the tactical side, Gripen E has harnessed the ability to take both and run them seamlessly as onboard computers are upgraded. This allows Gripen E to immediately benefit from the exponential increase in computing capacity.
Saab said between the first flight of the prototype Gripen E (serial 39-8) on June 15, 2017, and the first flight of the second aircraft (39-9) on Nov. 26, 2018, all of the onboard computers were changed to upgraded systems providing more computer power.
“Changing computers like this is typically calculated in years — we measure it in days,” explained Segertoft. “We changed hundreds of software components — 40 per cent of which were certified to the highest level — all without compromising airworthiness. Our vision has always been coding in the morning and flying it in the afternoon, and we are very pleased with where we are.”
This philosophy makes it easy to add, delete, and modify coding, or to include third-party or partner involvement. Brazil, the first export customer for Gripen E, is already developing software and feeding it back into the main development program in Sweden.
Patrick Palmer, Saab's executive vice-president of marketing and sales in Canada, said: “The avionics are a unique feature that we have created through years of engineering work. We are now offering Canada the sovereign capability . . . to sustain, upgrade, and enhance through the whole life of the fighter.
“This is not just about aircraft performance; you also have to be able to upgrade the aircraft under specific rules and regulations. We have designed the weapons suite [offered in FFCP] to meet Canadian requirements, but there are many options we can offer in future — any weapon on the market — and our avionics make it really easy to integrate them.”
Not only does Gripen E offer impressive features, but Saab also said the aircraft has the lowest associated maintenance costs. “It has been designed into the aircraft from day one, it was a driving factor,” said Håkansson.
IMP will absorb this knowledge so it can manufacture and support the aircraft through their life. IMP already has a close and longstanding relationship with the RCAF, and it expects to continue this theme if Gripen is selected for Canada — spearheading the sustainment of the aircraft and the sovereign control in Canada.
“When this competition first came about, we looked at which teams we may want to join,” said Bain. “It was pretty clear to us that easily the best value for Canada was going to be Gripen, and now COVID-19 means affordability is even more important.”
While Saab cannot to go into detail, its existing relationship with Brazil as the first export customer for Gripen E is a good indicator of what it has offered to Canada. Brazil has genuine, close involvement and is spearheading development and manufacturing of the two-seat Gripen F.
For Canada, the evaluation process for its new fighter is expected to continue into 2021, with an award sometime in 2022 — in time for deliveries from 2025. Despite Canada's obvious political pressure to buy an F-series fighter from its neighbour, Gripen offers a compelling case to meet the country's needs and boost industrial know-how.
https://skiesmag.com/features/saab-gripen-fighter-jet-canada
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By Adil Khan, Jim Adams and Steve Beckey Forbes; KPMG Contributor Jun 23, 2020 The current economic disruption—coming on the heels of the 737MAX suspension—has varying impact across A&D segments. The impact on commercial aerospace has been immediate and extensive, while the defense sector has largely remained unscathed. However, it is hard to see how it will remain so, given the extensive fiscal measures being taken. What will this mean for M&A in A&D? Some trends are beginning to emerge that will affect the entire deal life-cycle (from deal strategy through integration and value creation). Yet, as in other times of economic disruption, new opportunities will emerge, which leads us to believe that the slowdown of M&A activity will be short-lived. As we enter this next phase, deal makers who adapt quickly to the realities of the new industry landscape could be well positioned to maximize value. Pre COVID-19 environment Not too long ago, commercial aerospace was booming, with year-over-year ramp ups in build rates and record backlogs. There were expectations of another golden decade — further extending the unprecedented 14-year “super up-cycle”, defying the long-standing cyclicality of the sector. However, in 2019, the historic correlation between GDP, air-traffic growth, carrier profitability, orders and build rates was suddenly disrupted. GDP and airline profitability levels remained relatively healthy, but new orders and build rates dropped as the industry grappled with the 737MAX shock, as well as a slowdown in the twin-aisle segment. Other undercurrents also emerged — slowdowns in world trade from escalating tariff tensions, weakness in high-growth geographic markets such as China and India, and declining consumer confidence. In contrast, U.S. defense spending was on the rise, averaging 4 percent1 annual growth over the past 5 fiscal years; the $738 billion FY2020 defense bill2 ensured this momentum would continue. The government services sector was also set to benefit from continued funding increases to modernize IT infrastructure and address evolving national security challenges. With general confidence in the long-term fundamentals of the sector and a favorable budgetary environment, players in certain A&D segments pursued M&A to build scale. Others “re-realized” that content matters and initiated vertical and horizontal integration strategies to capture more value and drive cost competitiveness, or acquired targeted niche capabilities and emerging technologies. We also saw the emergence of Super Tier I's through scale-driving consolidation aimed at broadening capabilities and potentially exerting greater influence on OEMs. Deal volume in the A&D sector reached record levels — almost doubling over the last 5 years and outpacing the broader M&A market by 40 percent.3 Valuations remained elevated on the strength of high bidder interest, limited supply of attractive assets, high A&D stock valuations (which outperformed the S&P 500 by 8 percent),4 as well as healthy balance sheets and strong cash positions. TEV/EBITDA multiples for A&D transactions averaged 11x,5 outpacing increases in the overall M&A market. Although, deal volumes moderated in the second half of 2019, amid elevated uncertainty about defense spending heading into a presidential election year, the overall outlook remained optimistic. COVID-19 impact COVID-19 caused a precipitous collapse in air traffic. With travel restrictions and stay-at-home orders, carriers around the globe made unprecedented cuts to capacity, idled fleets, and began deferring or canceling new aircraft deliveries. Also, the MRO (maintenance, repair, and overhaul) and aftermarket segments, which had benefited from the prolonged 737MAX grounding and high fleet utilization, suddenly faced stiff headwinds. Thus far, the defense industrial base has not experienced a COVID-19 demand shock. There is no noticeable disruption in appropriations or major delays and cancellation of military programs. However, as in the commercial sector, defense contractors are actively monitoring their supply base and taking steps to preserve liquidity, minimize supply chain disruption, and taking measures to comply with CDC and local government guidelines. The range of scenarios for defense spending is bookended by two scenarios: an elevated national security threat that would preserve or accelerate funding, or a reordering of budget priorities to fund social and other mandatory programs, resulting in sequestration-type measures, similar to 2011. With these developments, volatility in the financial markets, lack of access to financing, alternative more pressing liquidity needs by corporates and most importantly, uncertainty in the marketplace, deal flow in A&D has come to an immediate standstill. Several “in-flight” processes have been halted, new deals in the pipeline have been deferred, and even some announced transactions terminated. Access to the new public offering market is effectively closed. The gap in expected valuations between buyers and sellers has widened considerably, due to disparate perceptions of the extent of economic disruption caused by COVID-19; contrasting views on reopening of the economy and the pace of return to normal; and diverse perspectives on what the post-COVID-19 new reality looks like. This has rendered financial forecasts and pre-COVID-19 market perspectives obsolete. Further, the extent and nature of unusual and non-recurring events6 impacting financials, present considerable challenges for deal makers to form a credible view of normalized earnings and cash flows. With the lack of reliable projections, it is nearly impossible to form a credible view on valuations let alone bridge this gap. Additionally, although M&A teams have attempted to navigate through practical challenges with offsite due diligence, virtual facility tours, video conferences, etc., adapting to a virtual M&A environment, especially for cross-border deals, has been challenging. Developments to watch as economies reopen Given the health concerns, changes in social behaviors (some of which may be slow to reverse) and anticipated lead-time to an effective vaccine, a V-shape recovery in air traffic appears increasingly unlikely. As governments move from combating coronavirus to reopening economies, the pace and extent of the economic recovery is expected to vary significantly around the world. Further, some long-lasting or permanent developments may trigger some dramatic shifts in the sector: KPMG Implications for M&A trends and outlook KPMG Although we probably do not expect to see M&A activity return to the pre-crisis levels immediately, we expect M&A activity to drive realignment of the industry landscape in the post COVID-19 environment. Implications for M&A Capabilities As we enter the next phase, deal makers will need to adapt to the realities that impact how deals get done. Examples include: KPMG While the challenges are intimidating, the opportunities will be vast, and those who move quickly and decisively are likely to be rewarded for years to come. Those who take this unique opportunity to prepare and are ready to act will stand ready to reshape the A&D industry. 1. 2019 DoD Comptroller Data (Green Book) 2. Department of Defense 3. CapIQ, Institute for Mergers, Acquisitions, and Alliances 4. Year return, S&P A&D index vs S&P 500 5. Trailing 12-month average to June 2019 and avg. 16x for deals >$500M in value; CapIQ, Dacis Company reports and Press releases 6 Worker furloughs, facility shut-downs, loss of business or order cancellation, idled or underutilized facilities, CARES Act funding, changes to performance-based compensation structures or payouts, health and sanitization related measures, IT infrastructure investments to adapt to remote working environment, deferral of payroll taxes, carryback of NOLs, increased interest expense tax deduction, etc KPMG Contributor