Murphy's Law: The Leasing Evolution


September 6, 2012: Switzerland has decided to buy 22 Swedish JAS-39E Gripen fighters to replace their elderly F-5s. The 16 ton JAS-39E is roughly comparable with the latest versions of the F-16 and is a substantial upgrade of the current JAS-39C model. The Gripen is also used by Sweden, Thailand, South Africa, Hungary, and the Czech Republic. The 39E is still in development and will eventually replace the 14 ton JAS-39C.

There is a problem, however. Sweden has limited production capacity and it will not be able to deliver all 22 fighters until 2021 (nine years). In fact, construction of these 39Es has not begun and won't start until final contracts are signed and Switzerland makes a first payment of $300 million of the $3.1 billion total cost. That is not supposed to happen until 2014, after the final contracts are signed next year. Then deliveries will begin in 2018. Meanwhile the Swiss F-5s are rapidly becoming unusable because of old age. So Sweden proposes providing 11 older JAS-39C fighters on lease (at $4.1 million per year per aircraft) from 2016 to 2020. As part of this deal, if the 39Es are late in arriving, the lease costs of an equivalent number of 39Cs will be waived. Sweden is hustling to get the contracts signed because there is still opposition in Switzerland to buying Gripens. But once the contracts are signed and money paid that opposition is no longer much of a problem. The leased JAS-39Cs is an attractive option for Switzerland. Sweden has successfully leased Gripens to other nations and this is seen as a growing trend.

Often regarded as an also-ran in the current crop of "modern jet fighters," the Swedish Gripen is proving to be more competition than the major players (the F-16, F-18, F-35, Eurofighter, Rafale, MiG-29, and Su-27) expected. Put simply, Gripen does a lot of little but important things right and costs about half as much (at about $35 million each) as its major competitors. In effect, Gripen provides the ruggedness and low cost of Russian aircraft with the high quality and reliability of Western aircraft. For many nations this is an appealing combination. The Gripen is easy to use (both for pilots and ground crews) and capable of doing all jet fighter jobs (air defense, ground support, and reconnaissance) well enough.

The Gripen is small but can carry up to 3.6 tons of weapons. With the increasing use of smart bombs this is adequate. The aircraft entered active service in 1997, and has had an uphill battle getting export sales. Sweden does not have the diplomatic clout of its major competitors, so they have to push quality and service. Swedish warplanes and products in general have an excellent reputation in both categories. Nevertheless, the Gripen is still expected to lose out on a lot of sales simply because politics took precedence over performance.

Switzerland needs Gripen to replace its much larger fleet of F-5s. Once a major user (with over a hundred F-5s) Switzerland has found many customers for its well cared for fleet of used but still capable F-5s. The F-5 is another Cold War relic that still manages to find work. Over 2,200 were built between the late 1950s and 1987. Now there's a lot being invested in rebuilding the several hundred still in service. The F-5 is a 12 ton fighter roughly similar to the 1950s era MiG-21 and is a contemporary of that Russian fighter. The F-5 was built mainly for export to nations that could not afford the top-line Western fighters but did not want the MiG-21s. The F-5 is normally armed with two 20mm cannon and three tons of missiles and bombs.





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