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May 29, 2017

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US budget cuts sharpen battle for fighter jet exports

WASHINGTON--Competition is heating up in the global fighter jet market, prompting accusations of aggressive tactics as major arms makers jostle for export business to offset domestic spending cuts.

Purchase decisions in the coming months from South Korea and Brazil, as well as the finalization of a huge Indian contract tentatively awarded to France, could shape the balance of power in the aerial combat market for years to come.

Demand for air artillery is increasing due to a cocktail of regional threats, aging fleets and high oil and commodity revenues swelling the resources of emerging economic powers.

Still, it is a far cry from the levels suppliers would need to be sanguine about domestic spending cuts, and top contractors and analysts told Reuters this week that the battle for export contracts to keep assembly lines running was growing tougher.

"Competition is increasing each day. I think we see in many areas a sharpening of prices," said Hakan Buskhe, chief executive of Sweden's Saab, which is competing with Boeing and France's Dassault for the delayed Brazil deal.

Experts and lobbyists say suppliers on both sides of the Atlantic are playing the jobs card at home — in some cases bluntly reminding politicians that defense workers have votes — while cutting attractive deals to help capture new orders.

"It is a great time to search for a bargain in the fighter market," said defense analyst Loren Thompson, chief operating officer of the Arlington, Virginia-based Lexington Institute.

Importers also increasingly have the upper hand in demanding generous transfers of technology to support local aerospace businesses, a key factor in markets like India and Brazil.

Buskhe, a former energy executive who became Saab CEO two years ago, said he was dismayed to find his phone had recently been bugged in Switzerland, and now took extra precautions.

"It just went berserk," he said, gesturing towards the smartphone during a meeting with Reuters editors and reporters.

Buskhe said Swedish security services had launched an investigation but declined to discuss the outcome.

The deal to sell 22 Gripen jets to Switzerland was seen as a lifeline for Saab's fighter, whose future had been in doubt.

Subject to a Swiss referendum, its production lines are now assured into the next decade, but it remains a minnow in global markets compared with other Western and Russian majors.

Demand Rising

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