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East/West: U.S. Competing With Europeans For Hungarian Fighter Contract

U.S., French, Russian, and Anglo-Swedish aerospace companies have long competed to gain contracts to re-equip with modern fighter planes the air forces of new NATO members Hungary, Poland, and the Czech Republic. Now the U.S. is seeking to gain the advantage from Hungary's preliminary decision last week not to buy new aircraft, but instead to re-equip in the interim with used Lockheed Martin F-16s. RFE/RL correspondent Breffni O'Rourke reports the Anglo-Swedish consortium SAAB-BAe has made a counter offer.

Prague, 16 February 2001 (RFE/RL) -- Sweden is holding diplomatic discussions with Hungary in an attempt to keep alive an offer by the aerospace consortium SAAB-BAe to equip the Hungarian air force with Gripen fighter planes.

SAAB-BAe spokesman John Neilson tells RFE/RL the Swedish ambassador in Budapest is engaged in talks with Hungarian officials to this end. The consortium's new offer consists of lending Hungary a total of 24 second-hand Gripens for five years without charge, except for the costs of converting the aircraft to local conditions. That is meant to counter an offer from the U.S. government to lease a similar number of Lockheed Martin F-16s.

Neilson expressed surprise the Hungarians had not invited his company to submit a competitive bid at the same time as the U.S. offer was made.

"What we were surprised about was that the Hungarian government had not requested whether there was an option to acquire some used Gripen aircraft for the same period of time. We had been invited to submit a bid for the supply of new aircraft, and we had fully expected that if the Hungarian government's requirements had changed -- whether from budgetary reasons or for political reasons, internally -- we would have expected that we would have been invited to participate with an offer for used aircraft as well."

A spokesman for Lockheed Martin, Joe Stout, said the F-16s which Hungry would receive if the deal is concluded would be what he described as "like new" and "excellent fighters." But Stout noted the U.S. agreement with Hungary for ex-U.S. Air Force planes is on a government-to-government basis and does not directly involve Lockheed Martin as a commercial company.

"This is really an agreement between two countries that is based on the defense needs in question. The United States' goal is typically to ensure stability within a region and to ensure that our allies are adequately equipped for their own defense, that they are able to meet their equipment and air force modernization needs. And so it would basically be a decision made on the merits of the defense issues in question."

The number of airplanes involved is actually small and the lease arrangement would bring no commercial profit to Lockheed Martin. What's more, expected Polish and Czech orders for modern NATO-compatible fighters will likewise be modest. So why are the big aerospace companies fighting so hard over such slim pickings? A military aviation expert with Jane's publishing group, Nick Cook, tells RFE/RL:

"The Americans, the Swedes, and the Russians are taking the long view that over time, the Central and East European market is going to be very important. As and when these economies flourish and generate more cash, they will then be in the frame for more defense equipment. And once you are in with your foot in the door, these countries tend to come back to their original suppliers for more items. So I think that's the idea, if you can get in on the ground floor, then you're in good shape for future orders."

In other words, according to Cook, companies are hoping that if their fighters are used first in the East -- even if they are second-hand -- then firm orders will follow for new models later.