Thursday, July 28, 2011

UAE, weak dollar delays the Rafale deal

Defense News report about Dassault Aviation press conference :

PARIS - The price resistance from the United Arab Emirates on the Rafale fighter jet stems from an unfavorable euro-dollar exchange rate, but talks on the French aircraft continue, Dassault Aviation executive chairman Charles Edelstenne said July 28.
The UAE's discussion with Lockheed Martin about a potential purchase of additional F-16 fighters was "not a negative sign," Edelstenne told a press conference on the company's results for the first half of the year.
"Talks are going on," he said.
But with the euro at $1.40, the Rafale's sale price was boosted by the currency exchange rate, Edelstenne said. Dassault could not cut prices by 40 percent to offset the weaker dollar.
"I make Mirages, not miracles," he said.
The euro was trading at $1.43 in early afternoon, with the dollar under severe pressure from the U.S. government impasse on raising the debt-ceiling limit ahead of the Aug. 2 deadline.
Edelstenne refused to disclose the unit price of a Rafale, but he said an export purchase generally involves a political decision to pay a "price premium" that granted "independence of action." As the Rafale is built in France, reflecting a strategic decision on sovereignty, its costs are in euros, making it more expensive than an American fighter aircraft sold in dollars.

In other words, given a Rafale fly away price of €60 million,
One year ago, one Rafale could be bought for $72 million while the very same aircraft would cost $86 million today, only because the $/€ has fallen.

If you intend to by 60 aircrafts like the UAE, that's $830 million more to pay (and in fact much more if you take into account the whole contract perimeter with spare parts, weapons, training...)

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