SHARES in Swedish aerospace firm Saab leapt by a third on Thursday after it beat U.S. and French rivals to win a $4.5bn fighter deal with Brazil, strengthening its hand in competing for export orders for years to come.
Brazil’s choice of Saab’s Gripen single engine jet over Boeing’s F/A-18 Super Hornet and Dassault Aviation’s Rafale showed the Nordic group could beat global aviation heavyweights, securing development of an aircraft that has been surrounded by doubts.
Saab pulled off the surprise coup after news of U.S. spying on Brazilians helped to derail Boeing’s chances. Analysts said it would still face stiff competition for export orders elsewhere, and deals with some buyers could raise ethical dilemmas for Swedish leaders who traditionally champion democracy and human rights.
So far only the Swedish air force has bought new generation Gripens, with fellow neutral nation Switzerland poised for a deal and Brazil opting for a similar model. However, Saab was offering a cut-price deal at a time when many governments are slashing their defence budgets.
Saab said it would begin final negotiations on Friday for the Brazilian contract which prompted celebrations in the southern city of Linkoping, where Saab has its main Gripen plant and 10,000-15,000 work in companies connected to the aerospace industry.
By midday, Saab shares were up 31.8 per cent at 175.30 Swedish crowns ($26.84) but others urged caution.
Saab, which has annual sales of about 24bn crowns ($3.67bn), started developing the Gripen in the early 1980s with deliveries to the Swedish air force beginning in the following decade.
An early version crashed in central Stockholm during a 1993 air display, although no one died in the accident. Saab has developed several versions of the Gripen, which can fly twice the speed of sound, but since the fall of the Soviet Union scepticism has grown about the need for Sweden to keep making cutting-edge fighters.
The Swedish air force is small and closer ties with NATO, of which Sweden is not a member due to its neutrality, have made the export market vital for Saab. Success has been limited, with fewer than 100 planes sold or leased overseas.
But with regional powers from Africa to Asia looking to arm themselves relatively cheaply against new threats and top Western fighter projects struggling to contain costs, second-tier firms such as Saab may score some more wins against bigger rivals such as Boeing and Lockheed Martin.
Saab’s Gripen was the cheapest choice for Brazil, well under the $8bn cost reported in media for Dassault’s Rafale and the more than $5bn for Boeing’s Super Hornet.
Saab, whose biggest shareholder is the Wallenberg family’s Investor AB with a 30 per cent stake, also says its planes are 50 per cent cheaper to maintain than rivals.
Earlier generations of Gripen have been sold or leased to South Africa, Hungary, Thailand, the Czech Republic and Britain as well as being used by Sweden’s own air force.
Brazil’s choice means Sweden can share costs of developing the new plane and future upgrades with other buyers.
Saab said parts of the aircraft will be built in Sweden and others in Brazil, where officials said domestic manufacturer Embraer SA would be its main local partner.
Founded in 1937 as an aerospace group, Saab ventured into cars and trucks after World War II, but sold off these businesses more than a decade ago. Today, fighter jets make up about 25 per cent of Saab sales, with the rest coming from weaponry and defence electronics.
