June 12, 2009, Saint-Cloud, France
Speech given by Charles EDELSTENNE,Chairman and CEO of DASSAULT AVIATION, at the 2009 Paris Air Show press conference
Ladies and Gentlemen, Dear Friends,
It is with great pleasure that I welcome you all here today to this major event, the Paris Air Show. Let me take this opportunity to review the situation of the company I consider it my privilege to run. We could have hoped for more favorable circumstances to celebrate the one hundredth anniversary of the Air Show, which is still today the foremost and finest showcase of the world’s aerospace industry.
After 4 years of unprecedented growth in business aviation, our industry is now faced with a profound crisis. Nearly 17,000 jobs have already been lost at manufacturers in both North and South America. Despite a healthy Falcon order book, cancellations and postponements mean that we have to scale down our production rate. For the first quarter alone, we posted a negative balance of -27 orders. There is nothing in the current situation and forecasts to indicate that any significant improvement could be hoped for before the end of the year. We anticipate about 80 deliveries in 2009, but the present climate means that any prediction can only be extremely approximate.
In macro-economic terms, the dollar strengthened in the second half of 2008, from 1.50 to 1.25 against the euro. However, in recent months, the American currency has dropped back and currently stands at about 1.40. We are therefore far from the 1 for 1 parity situation which would place us on an equal footing with our North American competitors.
On a more optimistic note, we are seeing the first signs of stabilization of the pre-owned market. In recent weeks, we have also had slightly more positive contacts with a number of existing and potential customers, but nothing has as yet been confirmed.
With regard to Defense activities, the picture is somewhat brighter. In France, the White Paper ratified the principle of a force of 300 French fighter aircraft, which is consistent with the eventual target for the Rafale. On the export side, our teams are in discussions with a lot of countries and enjoy the full support of the President of the Republic, as we saw very recently in the Emirates. However, we must be wary of crying victory too soon.
In a context which remains on the whole a difficult one, our company stands firm, as it has always done. Those of you who are familiar with our six-monthly press conferences are fully aware of our results last year. For the others, all the necessary information is given in the file that will be distributed after this meeting, as well as in our annual report that can be downloaded from our website. For the current year, I will not give any economic or financial forecasts but would simply invite you to attend our next press conference, at which we will be presenting the results for the first six months. It should be noted that this conference will be on 23 July, one month earlier than usual.
So, let’s now take a closer look at business.
We will begin with business aviation
The Falcon 7X aircraft in service now total more than 12,000 flying hours. Customer feedback confirms that the handling and comfort of the aircraft are much appreciated. The Falcon 7X was also recently qualified to operate from London City Airport, which is only accessible to aircraft that have demonstrated excellent handling, short take-off and landing capability and low environmental impact.
With regard to the Falcon 2000LX, we delivered the first aircraft in early May, after receiving both EASA and FAA certification. This aircraft further improves on the already remarkable performance of the Falcon 2000, in particular with range extended to 4,000 nm. But above all, no other plane in this category is as efficient in terms of fuel consumption and pollutant emissions.
The Falcon 900LX has the same ambitions. Development, albeit more complex than for the Falcon 2000LX, is well under way and production has been launched. Flight testing will begin in the first half of 2010, with certification and deliveries scheduled for the second half of the year.
With regard to the SMS, we are continuing with the development process. As this is a major investment for the continuation of our Falcon business, we are taking the time to run a fine tooth comb through every detail to make sure that we reach our technical and financial goals once the crisis is over. It is still too early to reveal the broad outlines of this future aircraft.
Concerning EASy phase 2, you are aware that this new version of our cockpit was launched last year. It comprises a certain number of new functions, such as the synthetic vision system, which will ensure that the F2000 / F900 / F7X avionics remain among the most sophisticated and intuitive in the world of business aviation.
With regard to Falcon support, we have completed the ramp-up of the Saint-Cloud Technical Center to optimize technical communication with our customers, our network of service stations and our partners. This centre supplements those in Teterboro, New Jersey and Boise, Idaho. Coordinated operation by these three sites means that we will be able to respond without delay to any query, round the clock, 365 days a year. This parallels the development of our worldwide network of service stations: in 2008, we announced the creation of two new Dassault maintenance centers, in Sorocaba, Brazil, and Reno, Nevada. The first of them has just been approved, while the second has been operational for several weeks now. We have also boosted our maintenance capacity at DFS-Paris and at Little Rock.
Finally, with regard to the more distant future, our multi-year cross-group plans to prepare for the next generation of innovative- technology Falcons, are running nominally. Their main aim is to achieve a significant reduction in the environmental impact of the business jets of tomorrow and to offer our customers very high-quality services. The work launched last September under the European Clean Sky initiative is a part of this strategy. This work will use technology demonstrators to validate innovations in the fields of on-board energy management, advanced aircraft controls, drag reduction and eco-design.
As you can see, we are not sitting idly by. The crisis is even an opportunity to work yet more closely with our customers, to help them resolve their problems, whether in terms of services, warranties or financing. This is what business aviation is all about: to provide tools and solutions to support or stimulate growth worldwide. Innovation and investment are therefore more than ever the watchwords.
There can be no doubt that after the crisis, our planes will be even more necessary than before. Quite simply because they correspond to the needs of an increasingly global economy and increasingly global communications. The image problems encountered in the United States will not last, simply because they in no way reflect the real picture, which is that more than 80% of business aviation passengers are Middle Managers, including sales staff, engineers and project managers, who play a direct role in creating value.
Let us now turn to our military business, beginning with the Rafale
The Rafale is seeing intense active service at the moment, particularly in Afghanistan, where our aircraft are giving complete satisfaction. A second Rafale squadron, the “1/91 Gascogne”, entered service in Saint-Dizier at the end of March. Its role is to conduct nuclear missions.
This service entry follows qualification of the F3 standard, pronounced last year on-time. I would simply remind you that the F3 standard is that which makes the aircraft fully “omni-role”, in particular enabling it to carry the Reco pod and the Exocet AM 39.
We are continuing to work on the road-map to increase the Rafale’s reconnaissance, detection and identification capability.
With regard to the new active electronically scanned array radar, the various modes were recently validated during testing, and pre-series production began, with series production to be launched shortly. We are well ahead of our non-American competitors and qualification of the entire post-F3 standard, resulting from the road-map, is scheduled for 2011.
We are also expecting qualification of the Damocles pod at the end of the year, in line with the F3+AGL standard, which will give the Rafale an independent laser-guided weapons capability.
I would add that the first production Reco-NG pod will be delivered to the armed forces this summer, for qualification and operational service entry at the end of the year. This pod is the only one in the world that has two sensors (an infra-red sensor for very low altitude/high-speed and a visible light, near and far infrared sensor for high and medium altitude).
All of these innovations will be available for export. For example, I can already reveal that the demonstrations conducted on the new radar with some potential customers have proved more than conclusive.
With regard to export prospects, you are familiar with our principle of discretion, and I will make no exception here.
Concerning the nEUROn program
The preliminary definition reviews for the various subsystems have been held with all our partners and guarantee the overall consistency of the definition. Work on definition of the interfaces is nearing completion and production of the first parts has been launched.
The actual physical offices will gradually be scaled-back during 2009, moving towards a virtual office with all our industrial partners (Alenia Aeronautica, SAAB, EADS CASA, HAI and RUAG). The first flight is scheduled for early 2012, with flight testing to take place in France (at Istres), Sweden and then Italy, for more than eighteen months. However, the first flight is not an end in itself. What matters in the nEUROn program is to maintain and advance skills and the effective cooperative model that it generates.
Concerning the SDM
You know that last year we made an unsolicited proposal to the French defense procurement agency DGA, together with Thales, Indra and IAI, for a practical low-cost solution to fill the MALE UAV capacity shortfall within the French Air Force (FAF). The French Joint Chiefs of Staff EMA and the DGA have not yet issued their decision. I would point out that the SDM comprises two French experts: Thales for the electronics and Dassault for the platform and integration aspects. It is now up to the Government to make a choice by selecting the best product.
With regard to military support
Last year, we signed a large Rafale maintenance contract with the French Government, calculated on the basis of a flat rate per flight hour, for the next 10 years. We are currently negotiating the next maintenance contract for the other aircraft in service and are working with the Government on outsourcing of FAF Alpha Jet services. At the beginning of this year, the Rafale Simulation Centre in Landivisiau entered service, one year after that in Saint-Dizier. The French Navy and Air Force are fully satisfied with these two ultra-modern installations.
On the export side, spares and repairs support contracts have grown, in particular with the completion of the repairs negotiations with India and Brazil, enabling these countries to significantly increase the availability of their fleets. We also created a joint company with the United Arab Emirates, DASBAT, to simplify support for Dassault Aviation military aircraft in the Middle East.
Finally, concerning Thales, I believe that our acquisition of a stake in this major company is a significant milestone in the history of Dassault Aviation. We will be further improving our technical and commercial cooperation with this long-standing partner.
With Thales, we will also become a major player in Europe and indeed globally, for the development of all the main programs of the future.
To conclude, I would like briefly to describe what we are presenting at the Show this year. On the static display you will be able to visit the Falcon 7X, 2000LX and 900LX, the Rafale B and M, as well as a full-scale mock-up of the nEUROn. For the flight displays, the Falcon 7X is scheduled for Monday and Saturday. The Air Force Rafale will be flying every day at about 2 p.m. You will also be welcome on our stand and in our press department.
I hope you thoroughly enjoy this 2009 Paris Air Show.