PARIS: President François Hollande may have had little success reviving France’s sluggish economy, but his socialist government has become an effective lobbyist for French defence companies seeking deals abroad.
Last year the state helped the French defence industry win a record €16bn worth of overseas orders, according to the government, including cruise missiles, fighter jets and warships.
The exports have been a boon for companies including Dassault Aviation, DCNS, MBDA, Safran and Thales, as well as a legion of smaller subcontractors that support them.
After a difficult few years following the financial crisis when western governments cut military spending, the French defence sector is hiring again. It plans to increase its workforce by 20 per cent compared to 2015 levels, which would take it to 200,000 people in France by 2018, according to government figures that include subcontractors.
Export orders in 2015 were double those in 2014, which was the best year on record. In 2012, the year Mr Hollande’s government came to power, the value of overseas contracts signed was €4.7bn.
The most important contracts have been for the Rafale fighter jet, a 28-year-old aircraft made by Dassault, which cost more than €40bn to develop and until 2015 had not won a single export order.
The government last year signed contracts for Rafale jets with Egypt and Qatar, which each agreed to buy 24 aircraft.
“There has been a step change in the number of defence deals won under the Hollande government, driven by fighter jet sales,” says Ben Moores, analyst at IHS Jane’s. “The whole sector is benefiting.”
The Rafale deals with Egypt and Qatar included sales of missiles manufactured by MBDA, a consortium involving Airbus, the European aerospace group based in Toulouse. At least some of the MBDA products are thought to be Mica air-to-air missiles used on Rafale jets. Egypt also agreed to buy a Fremm frigate made by DCNS.
Mr Hollande on Monday announced some progress on finalising a deal to sell Rafale jets to India during a visit to the country. India signed an agreement with France to buy 36 aircraft, but both countries said there was still work to do on the financial terms.
The anticipated deal, likely to be worth about €5bn, is much smaller than one first mooted in 2012. Then, India said it was considering buying 126 fighter jets.
Narendra Modi, India’s prime minister, announced India’s decision to buy 36 jets during a visit to France last April, but there has been haggling over price and other issues.
The key sticking point has been offsets: the side deals demanded by governments as a condition for buying overseas defence equipment.
The India deal would be a win for much of the sector. Thales, the French defence electronics group, and Safran, the aircraft engine maker, are important suppliers to the Rafale programme, along with about 500 smaller companies.
The deal would also be a game-changer because it would enable Dassault to increase Rafale production from one jet a month to three.
People in the French defence industry say that part of the exports success is due to the efforts made by the socialist government, with particular praise directed at Jean-Yves Le Drian, defence minister, for supervising complex deals.
Andreas Loewenstein, director of strategy at DCNS, says France has a mature defence industry with combat-proven systems, but adds: “There is no doubt that Le Drian is outstandingly credible on the international markets.”
Some analysts say recent defence export success by France has also been helped by politics, including the country’s tough stance towards Iran during nuclear talks with major powers last year, which helped win the favour of Arab states.
Uncertainty in the Middle East, which made up €13bn of the €16bn sales of orders last year, also may have helped.
Lebanon, for example, last year took delivery of 48 MBDA anti-tank missiles, part of a $3bn contract funded by Saudi Arabia, which is worried about Iran’s influence in the region.
The rise in defence orders in recent years does not necessarily change the outlook for all France’s defence companies, say analysts.
Dassault, for example, is struggling with a drop off in demand for its Falcon business jets. The future of Safran hinges most of all on its ability to ramp up production of its new Leap engine for passenger jets built by Airbus and Boeing.
Amid mounting evidence of a slowdown in passenger jet orders, there are signs that robust French defence exports could persist. The defence ministry is predicting that another €16bn worth of orders could be won in 2016.
This year is set to see the sale of Caracal helicopters by Airbus to Poland and Kuwait, for example, while there are talks with the United Arab Emirates over the sale of 60 Rafale jets. DCNS is hopeful about winning a range of contracts, including a large submarine deal in Australia.
