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.
On the French government's July 20 decision to start negotiations with Dassault on a supply of the Heron TP medium-altitude long-endurance (MALE) UAV, Edelstenne said this meant sustaining a French design capability in military aircraft instead of paying for the "Messerschmitt design office" in EADS.
Edelstenne said in picking OHB over EADS, Germany made similar national selections in its space procurement.
Asked what the significance was in selecting Dassault as supplier of an interim MALE UAV, Edelstenne said the choice showed a determination to maintain a French national capability in building combat aircraft, as the next manned fighter jet would not enter service for another 30 to 40 years.
The negotiations would determine what sensors and communications payloads would go on the Israeli Aerospace Industries' UAV air vehicle, which is intended to provide an interim solution until the planned Anglo-French new generation MALE UAV enters service, expected in 2020.
IAI has agreed to disclose technical information on the Heron TP, which will be adapted to French requirements, including the ability to carry weapons, Edelstenne said.
The interim MALE UAV could have a service life of around 10 years and could overlap with the new Anglo-French air system, a company executive said.
On an asset swap under negotiation between Safran and Thales, Edelstenne said the airplane engine and equipment maker was holding up a deal by saying "no" to each new proposal from the electronics company. That forced Thales into a corner, he said.
"The valuation levels are a bit extraordinary," Edelstenne said.
Dassault signed an agreement with the government on an asset swap when it took its 26 percent stake in Thales, covering inertial navigation, onboard electricity generation and optronics, Edelstenne said.
Safran's sales in optronics are worth around 600 million euros, and if the business were put into Thales, that would make the electronics company second or third in the world market for electro-optics.
At the Paris Air Show in June, French President Nicolas Sarkozy said the government would impose a settlement if industry failed to reach a voluntary agreement.
Edelstenne said he was "very satisfied" with the Thales first-half results, which were released on July 27. The results displayed early effects of the Probasis restructuring plan and improved management of large programs and contract negotiations, he said.
Dassault reported a 35 percent fall in net profit to 129 million euros from 197 million euros a year ago, as sales dropped 34 percent to 1.32 billion euros from 1.99 billion euros.
The sales and profit slide came from lower deliveries of the Falcon business jet, with a delay in shipment of the Falcon 7X into the second half.
Orders declined to 95 million euros from 99 million euros.
On a production rate of one unit per month, Dassault has delivered six Rafale jets so far this year out of 180 total orders to date.
Privately, company executives expect the French government to stretch out future Rafale orders because of expected defense budget cuts, especially if export contracts are won.
Besides the UAE, Dassault hopes to sell the Rafale to India, Brazil and Switzerland. India is holding to its timetable to buy 126 medium-range combat aircraft, and the Swiss government has shown renewed interest in replacing its F-5 fighters.
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