Swedish Fighter-Jet Maker Sees Tensions in Asia Boosting Sales

(Bloomberg) -- Swedish arms manufacturer Saab AB says rising tensions in Asia may turn the region into one of its fastest growing markets.

Increased threats from piracy, China’s territorial ambitions and North Korea’s nuclear program were helping drive demand for new systems, Saab Asia Pacific head Dan Enstedt said in an interview on Friday. The region accounted for about 18 percent of the Stockholm-based company’s 2016 revenue.

“Events in the region are making nations more aware of some key capabilities that they lack,” Enstedt said by phone. “There are many nations with urgent modernization requirements to boost the capabilities of their armed forces – particularly air and naval forces.”

Asia’s governments have been shopping for everything from submarines to fighter aircraft as threats increase and growing economies boost defense budgets. Piracy, illegal fishing, seaborne refugees and drug trafficking have also been a boon for surveillance products.

One beneficiary has been Saab’s GlobalEye airborne early warning and control system, Enstedt said. It can detect jet skis, periscopes and other objects over distances of as much as 600 kilometers (373 miles).

“Countries in the region are beginning to realize that things are going on around them, in their sea lanes, along their borders -- and they just don’t know what’s happening,” Enstedt said. “There is a big need for awareness.”

Biggest Opportunity

Military tensions across the globe have helped drive a revival at Saab in recent years, with sales set to climb nearly nine percent this year as companies bordering Russia and Ukraine stock up on missile systems and ground-combat arms. In Bulgaria, Saab is in the running to replace eight Soviet-era jets with its marquee Gripen warplane.

Saab’s biggest single opportunity in the region lies in India, which is expected to make an initial order of up to 100 fighter jets. Prime Minister Narendra Modi is keen to use the warplanes contract to boost manufacturing and obtain technology as part of his “Make in India” program. 

India is in the final stages of choosing between the Gripen and Lockheed Martin Corp.’s F-16 to upgrade its existing fleet of 650 fighter jets, a third of which are more than 40 years old. Lockheed, which is winding down F-16 production in the U.S., has agreed to shift its production line to India if it wins the contract.

Saab has proposed providing India with a “complete fighter industry ‘ecosystem’” involving the transfer of the capability to design, develop, manufacture, support, upgrade, improve and enhance a new fighter force for the next 40 to 50 years.

‘Transformational’ Deal

“A project like India will be transformational for Saab,” Enstedt said, adding that the company has “100 percent support” from Sweden’s government.

Sweden’s biggest ever single export order was in 2014 from Brazil for 36 single-engine Gripen jet fighters valued at about 40 billion Swedish krona ($4.5 billion), said Rob Hewson, head of communications for Saab Asia Pacific. Saab sold 12 Gripen jets to Thailand since 2008.

Saab’s attempt to deepen its foothold in Asia faced a setback last week when Indonesia’s trade ministry said it plans to buy Russia’s Sukhoi Su-35s as part of a plan to upgrade its jet fighter fleet. A ministry of defense spokesperson didn’t immediately respond to questions sent via text message to his mobile phone.

An unspecified number of Russian planes would be bought in a barter deal worth about $600 million that may involve commodities like rubber recycled from scrap auto and truck tires.

“We are waiting to see what happens next,” Hewson said.

Saab has also ventured into the submarine market with the purchase of ThyssenKrupp AG’s Swedish marine unit Kockums in 2014, though it is yet to compete in any Asian submarine tenders. Saab shares have gained 25 percent in Stockholm this year.