Can Dassault maintain its success in military and business aviation in today’s global market and resist the forces of consolidation?

One major industry player has been untouched by the tectonic forces of consolidation that have seen the USA’s prime defence contractors, then Europe’s national champions, merge or form international alliances in the past decade.

France’s Dassault Aviation is still owned by the family that founded the business 70 years ago. It is Europe’s only independent military aircraft manufacturer and one of three companies in the world making large business jets. Dassault’s sales of more than €4 billion ($5 billion) rank it among the top 20 aerospace companies.

In an industry dominated by multinational public corporations, Dassault almost seems a throwback to an era when flamboyant aviation pioneers led eponymous concerns. The company was formed by Marcel Dassault in 1936 and is now controlled by his 80-year-old son Serge through family holding company Groupe Industriel Marcel Dassault (GIMD). Dassault survived wartime sequestration by the pro-German Vichy regime (Marcel Dassault, then called Marcel Bloch, was imprisoned for refusing to co-operate) and a later attempt to drag it into state ownership.

EADS’s 46% shareholding is a legacy of a bid by the socialist government of Francois Mitterand to nationalise France’s aerospace and defence industry in the early 1980s. The 90-year-old Marcel Dassault offered the government almost half his stock for free in return for retaining control of the company. That stake was included when France’s state-owned Aerospatiale was merged first with Matra and then into EADS five years ago. Today, two EADS representatives sit on the Dassault board, but cannot sway decisions.

Independent agenda

The result of this independence has been that Dassault has set its own agenda over the past two decades. A supplier of military aircraft to the French and overseas armed forces since the late 1940s, the company branched into business jets almost as a sideline in the early 1960s. Today, the Falcon business jet division – which derives the bulk of its sales from North America – represents over 60% of its revenues (10 years ago it was around 40%).

However, this split could change if the Rafale next-generation fighter – developed in the 1990s and now entering frontline service with the French air force and navy – begins winning exports. In Singapore, it is competing against the Boeing F-15 and has edged out the Eurofighter Typhoon. Saudi Arabia is another potential target.

Dassault’s latest Falcon – the 7X – strengthens its hand in the business aviation market. The company’s robustness in both the defence and business aviation markets has meant it has been able to transfer technologies and expertise between the two, and the 7X – the industry’s first fly-by-wire business jet – takes Dassault for the first time into the long-range segment dominated by Bombardier and Gulfstream.

But there are suggestions that Dassault cannot remain independent forever. Serge Dassault is still the figurehead, but no longer has an executive role in the company. Although some of his children are involved in the company, none hold key positions. The Rafale will be the last military aircraft developed specifically for France’s armed forces, the company acknowledges. And while Bombardier and Gulfstream are part of larger corporations, Dassault’s business jets may not generate enough income to fund future generations of aircraft.

Last year, Dassault delivered 63 Falcons, generating revenues of about $2.7 billion. This total is likely to grow with the advent of the 7X, but the company has a relatively limited offering in only three or four segments of the market.

While Dassault’s lead role in Europe’s Neuron unmanned combat air vehicle (UCAV) project gives it a lifeline in the defence market after Rafale, that project looks less secure in the light of the UK’s decision to take a different path towards development of unmanned combat aircraft, and a lack of enthusiasm among Europe’s taxpayers towards funding growing defence budgets.

A variety of options have been mooted for Dassault. A report that the company might be interested in acquiring Lagardère’s 15% stake in EADS has been emphatically ruled out by chief executive Charles Edelstenne. He insists that Dassault is not interested in being a junior partner in the Franco-German-Spanish group. “When we acquire a business, we run it in our own way,” he said recently. The structure of EADS, he added, was “a little complex for us”.

The same logic would appear to rule out a more ambitious bundling of Dassault and Thales into EADS to create what would become the world’s biggest aerospace and defence company, majority controlled by French shareholders. EADS would love to get its hands fully on Dassault’s military aircraft business and systems integration expertise, but, according to one analyst, the Dassault family sees its relationship with EADS as a “fly in the ointment”.

Rather, Dassault is determined to stay independent, says Edelstenne. “EADS is a minority shareholder and there is no government involvement. It will stay that way,” he told Flight International in an interview last month. “There is no succession problem after Serge is no longer there. [The family] want to stay in the aeronautical business.”

As well as Dassault Aviation, GIMD’s subsidiaries include Dassault Systemes, a 797 million business that designs and markets computer-aided design and engineering systems, including the industry-standard Catia, as well as technology company Sogitec and Belgian aerospace services provider Sabca.

Dassault is in a strong position to exploit the Rafale for the next quarter century or more, insists Edelstenne. He says the fighter is well placed to compete in future contests. “We have an aircraft which is the answer to the market. Its biggest advantage is that it’s an omnirole fighter. It can carry out different missions simultaneously,” he says.

The Rafale was judged the best-performing aircraft in South Korea’s recent competition, but lost to the F-15 “for political reasons”, Edelstenne says. Similarly, it scored almost as highly as the Lockheed Martin F-35 in the Netherlands’ contest, despite that country being an industrial participant in the Joint Strike Fighter programme, he says. “These are just the beginning. I am optimistic.”

Competitive push

The Rafale is not just a capable and versatile aircraft, it offers an alternative to a US product, Edelstenne maintains. “When you compare the capacity of the USA, we should not exist. It is only because countries do not want to buy from the USA or want a dual source. This pushes us to be competitive, even without the benefit of mass production,” he says.

The company is resigned to the fact that there will be no more national military aircraft programmes in Europe. “We have to live with this. We are the last company able to build fighters in total,” says Edelstenne. “The question is how we maintain this capacity into the future.” Part of the answer is Neuron, the Dassault-led project to develop a European UCAV and in which Greece, Italy, Spain, Sweden and Switzerland are participating. “From now on, every military programme will have to be co-operative,” he says. “That’s why Neuron was opened to European co-operation. All of us understand we are preparing for the next generation of aircraft.”

Edelstenne is undeterred by the failure of Germany and the UK to join the project. The UK’s decision to sign a technology-sharing agreement with the USA on the Joint Unmanned Combat Air System programme as well as being a Level 1 partner on JSF precluded it from being part of Neuron. Berlin, on the other hand, faced budgetary pressures and had already committed its resources to the Euromale medium-altitude surveillance unmanned air vehicle. “When there is a real programme, Germany will join,” he says.

Edelstenne also insists Dassault’s strategy of sticking to the upper end of the business jet market is right. Although it will decide early next year on whether to fill out its range by developing a super mid-size Falcon – shorter-range and less expensive than the Falcon 50 – the company has no plans to launch or acquire a manufacturer of smaller business jets.

Similarly, trying to cover all sectors with several families of jets – as Bombardier does with its Learjet, Challenger and Global brands – does not make sense to Dassault. “I don’t believe you can simply move a customer through a brand from a bicycle to an A380,” Edelstenne says. “Bombardier’s experience has been that they cannot automatically move Learjet customers up to Challenger products. When a customer moves up, their chances are the same as mine of getting them.”

MURDO MORRISON/LONDON & GENEVA

Source: Flight International