Eurofighter Set for Rough Ride in Austria (updated)
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Austria had signed a EUR 2 billion contract to receive 18 EADS Eurofighters plus required support (just over $2.5 billion, or about $140 million per plane), and the aircraft were already under construction in Germany. The situation changed when the leftist SPO party, whose campaign promises included canceling the deal, had to be part of the next government in the wake of the 2006 election results.
Gradiose statements from the SPO immediately after the election were followed by a quick crash back to reality, as the mathematics of the electoral results asserted themselves. Eventually, a grand coalition government was formed that pledged to resume negotiations with EADS, after a response from Eurofighter GmbH set Austria’s cost of cancellation at EUR 1.2 billion in return for zero aircraft. While those negotiations continued, the first Austrian Eurofighter flew, #2 was rolled out, #3-6 were in final assembly, and the rest kept advancing into in partial assembly.
The Eurofighter’s rough ride in Austria has now come to an end, keeping most of the buy, but offering a minor face-saving compromise – an outcome that was nearly inevitable given the political and legal dynamics involved. DID has the details, and history…
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June 26/07: The Eurofighter consortium of of Alenia Aeronautica, BAE Systems, EADS CASA and EADS Deutschland reaches agreement with the Government of Austria. Instead of 18 aircraft, Austria will receive 15 Eurofighters with latest capability standard of Tranche 1. There will also be “a price reduction on the negotiated in-service Support Contract that has not been signed yet,” probably coupled with training cutbacks to reduce the need for service.
The price reduction on the contract is EUR 370 million, leaving the contract at about EUR 1.63 billion. Eurofighter GmbH announcement.
Note that most recent Eurofighter version is Tranche 2, scheduled for delivery beginning in 2008. Tranche 1 jets are mostly air superiority fighters, unless additional equipment is added/retrofitted. Eurofighter GmbH’s reference to “equipment standard strictly meeting the requirement for air surveillance” seems to imply that these upgrades will not be present, thus restricting Austria’s Eurofighters to combat air patrol until/unless the political dynamic changes and modifications are made in a future contract.
May 6/07: Austria’s Defence Minister says that Eurofighter GmbH has broken off talks, and threatens unilateral cancellation. EADS says it merely canceled the next negotiating session, after a parliamentary inquiry panel indicated it wanted to complete its investigation before further talks were held. Lots of sturm und drang. Not a lot of substance. See translated and annotated release at defence-aerospace.
March 21/07: Eurofighter GmbH announces a successful flight for the first production Austrian Eurofighter. AS001, Austrian Air Force designation 7L+WA, is a Block 5 standard aircraft, representing the last build standard of Tranche 1. Austria is supported in the acceptance process by the German Ministry of Defence, which flies the Eurofighter and is handling all acceptance testing and related process. Eurofighter adds this update re: program status, which bears directly on contract cancellation expenses:
“The second aircraft for Austria, AS002, was rolled out only a few days earlier and is now undergoing final checks before engine runs and the addition of Air Force colour scheme to the aircraft. First flight is scheduled for April 2007. AS003 through to AS006 are in Final assembly, while the major components for AS007 through to AS018 are in production. The training simulator has been installed at Zeltweg, the Main Operating Base (MOB) of the Austrian Air Force Eurofighter Typhoons, and first flights in the simulator have been achieved. This training device is currently undergoing an upgrade to the software, allowing for a greater capability in aircrew training.”
Under the terms of the contract, Austria will receive in total 18 aircraft and deliveries are scheduled to be completed in 2009. Eurofighter GmbH CEO, Aloysius Rauen, adds:
“The flight of AS001 as the first Austrian Eurofighter Typhoon and the first export Eurofighter Typhoon [DID: beyond the 4 partner countries], is a major milestone in the programme.”
Jan 24/07: Eurofighter GmbH launches a German language web site promoting the Austrian Eurofighter purchase.
Jan 8/07: The socialist SPO and the center-right OVP agree to form a grand coalition. Together with the OVP a “very comprehensive working programme” of about 180 pages had been developed for the next four years, said SPO leader Alfred Gusenbauer. The announcement adds that “The negotiations on the Eurofighter military jets are to be resumed to reach a more cost-favourable solution.”
Given that there is a contract in place, and EADS has made its position on cancellation clear, it will be interesting to see if that phrase ends up meaning anything beyond “we tried.”
Nov 6/06: Defense Aerospace translates a Ministry of Defence release issued in German-Austrian. In response to an Austrian request for an analysis of options relating to a possible cancellation of the contract, Eurofighter GmbH quoted a figure of EUR 1.2 billion (about $1.53 billion), in return for which Austria would receive no aircraft.
“In the letter, Eurofighter GmbH stated that, to large extent, it has already attained the major production milestones. In addition, approximately 400 subcontractors would be affected by a termination of contract.”
This looks like an opening negotiation bid to us, but the fact that it’s backed by a signed contract makes it a fairly strong one.
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Oct 30/06: The socialist SPO party has assembled a majority for a committee of inquiry on the Eurofighter deal, by adding the Green + FPO parties. In response, the conservative OVP party has suspended talks to form a coalition.
Austrian reader Robert Toegel adds that:
“Our last committee of inquiry on jets was working over a 4-year-period and the second batch of Saab 105Oe jets is still flying.”
Earlier in October 2006, Austria’s SPO had this to say:
“A committee of inquiry should clarify the political responsibility for the senseless procurement of this unbelievably expensive war machine,” Josef Cap, the Social Democrats’ floor leader, told Vienna’s Der Standard newspaper. “We don’t need the Eurofighter. It is not an ideological, but a financial issue. I’ve got nothing against these planes as such. But they cost an awful lot of money. I always believed that there were much better things to be done with that money.”
Odds are, those things don’t involve alternative fighter choices; Austria’s Luftabteilung recently retired its 1960s-era Draken fighters, and now flies rented 1970s-era Swiss F-5Es. At any rate, the translated Deutsche Welle article has a couple of errors (South Korea and Singapore made firm decisions and bought F-15s instead, and Greece canceled its 60-plane order), but is reasonably good at explaining the Austrian situation.
DID Local Reader Commentary
Austrian reader Robert Toegel writes from Vienna:
“The Socialist Party SPO [JK: O = Oesterreich, or Austria], which won the last election has promised to stop the Eurofighter deal. Now, the only potential partner for a coalition is the conservative party OVP, which signed the contract. The socialist party is on the way to “modify” their position to form a new government. Mr. Caps statement is a preperation for this negotiations. The conservative party will probably not even start negotiations when the socialists really insist on a committee of inquiry.
In Austria fighter deals are very unpopular – we had the same problems when we introduced the Drakens. The socialists have no alternative for air policing tasks and would fight against any plane. As long the conservatives will be part of the government, as long the contract will not be chancelled.
Both parties will start negotiations shortly. The SPO got the official note to start with negotiations from the President. I predict many Eurofighter press statements in the next months with many personal opinions without relevance.”
An accurate description, it seems, of any statement or analysis that doesn’t include the political coalition dynamics involved. The politics of the situation make cancellation very unlikely, and would be the same even if both party’s political positions were reversed. Toegel later adds:
“I forgot to note, that the Austrian Air Force has just started the first ground crew training course in Kaufbeuren (GER). From 10.09.06 to 05.04.07 there will be 6 courses for 6 to 14 crewmembers. 72 crewmembers will be trained in Germany (Source: Luftwaffe.de).”
