Defence industry buoyed by Asia, Mideast demand


Defence industry executives say they are seeing unprecedented levels of interest in warplanes and other weapons from the Middle East and Asia, where buyers are described as “awash with money.”

Potential orders from India, Singapore, and a host of Gulf countries offered respite for European and US companies hawking their wares this week at the Farnborough Airshow, given that defence budgets in their home countries will be stagnant at best — and many will fall sharply.
“With oil at US $70-plus a barrel, all of our Middle Eastern customers are awash with money and they’re buying,” said Alan Garwood, group business development director at British defence group BAE Systems, shrugging off expected cuts in European defence budgets.

BAE’s view, shared by many defence industry executives at Farnborough, reflects the global nature of the aerospace industry, which draws on orders from around the world to offset troubles closer to home.

It stands in stark contrast to the doom and gloom surrounding domestic defence spending across Europe as governments look to cut costs to rein in spiralling budget deficits.

Dennis Muilenburg, the top defence official at Boeing Co, the world’s biggest aerospace company, said he was seeing more customers at Farnborough, outside London, this year, and people were more optimistic about the global economy.

Dozens of competitions for military planes and other weapons are under way at the moment in Asia, the Middle East, and even some European countries, leaving most defence industry executives fairly relaxed about defence cuts in Europe.

Many weapons buyers from those countries were making the rounds at Farnborough this week, where the weather and the outlook were considerably brighter than expected, buoyed by tens of billions of dollars of orders for commercial aircraft.
“I’m not seeing the cloud,” Muilenburg said, when asked whether news of declining defence spending in Britain, Germany, France and other European countries had cast a shadow over the biennial air and arms show. “I’m upbeat.”

Sean O’Keefe, who heads the North American unit of Europe’s EADS (EAD.PA), said commercial orders were the biggest he had seen in years and pointed to a real recovery in the industry.

Two top U.S. defence officials toured the new EADS A400M transport plane, and were looking at a wide range of capabilities, and even within Europe, some defence procurements were clearly proceeding, O’Keefe said.
“It’s quite a positive sign; no doubt about it,” he said.

India, which has embarked on a major weapons buying spree, was clearly in the limelight at the air show this week.

The chief U.S. arms seller, Vice Admiral Jeffrey Wieringa, told Reuters he had visited India eight times over the past three years, helping to broker several major arms deals.
“The relationship is at the best and highest level it’s been,” Wieringa said, noting that the Obama administration had shown support for his efforts by approving the exports of many technologies that might have been off limits in years past.

Boeing is working out a deal valued at up to US $5.8 billion deal to sell India 10 C-17 military transport planes and executives say India, once a traditional buyer of Russian-made equipment, could eventually double the order.

BAE, for its part, is close to sealing a 500 million pound (US $758 million) deal to sell Hawk jets to India, Garwood said.

ITT Corp, the world’s leading maker of night vision equipment, is gearing up to meet years of pent up demand from Britain and other US allies, after working literally around the clock for the past five years to make 1 million goggles for US troops serving in Iraq and Afghanistan.
“We’re seeing unbelievable demand from India,” said Mike Alvis, executive vice president of ITT Defence International, noting continued economic growth in India, which has the second largest army in the world. “There’s a lot of willingness to spend on defence.”

Makers of unmanned planes say they are getting inquiries from many countries, now that the U.S. government has begun to allow exports of unarmed versions of the drones that have dominated headlines from Iraq and Afghanistan.

General Atomics has already received export licenses to sell an unarmed export version of the Predator to Saudi Arabia, Egypt, the United Arab Emirates and Morocco, and has applied for a license to sell to Pakistan, said company spokeswoman Kimberly Kasitz.

Textron Inc reported a $64 million deal this week to sell four of its unmanned Shadow aerial systems to Italy, and is seeing strong demand from the Middle East in particular, said Frederick Strader, president of Textron Systems.

Strader scheduled 40 meetings in 4 days at the Farnborough show this year. “I’ve never been busier,” he said.