Procurement: Losing Our Lease

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August 1, 2012: The Czech Republic and Sweden are stalemated in negotiations to extend the ten year lease for 14 Swedish JAS-39 Gripen jet fighters. Currently the Czechs are paying $7 million a year for each aircraft and want a lower rate for a lease extension. In such a lease arrangement the Swedes take care of a lot of maintenance work on the aircraft while the user handles operational costs (fuel and ground crews).

The Swedes refuse to make a substantial reduction and the Czechs believe the Swedes are taking advantage of the fact that the Czech defense budget is tight and the expense of replacing the Gripens with a new jet is too expensive. The Gripen lease expires in 2014, and the Czechs want to extend it a few years while they continue an internal debate over just what kind of armed force they require. Many Czechs are in favor of a minimal force, with no high-tech jets like the Gripen.

The Swedes are only willing to give a small discount and insist that the original deal was very generous and that they cannot afford to take losses from a lease extension deal. The Czechs believe they are being gouged while the Swedes insist this is not the case. Negotiations are to continue into November, at which point both sides will have to make a decision.

Meanwhile Sweden continues to have success selling and leasing Gripen. Earlier this year Hungary renewed its lease for 14 Swedish JAS-39 Gripen jet fighters. The original lease began in 2001, and the extension takes it to 2026. At any time Hungary can buy the Gripens. But since the lease arrangement includes guaranteed prices on maintenance and upgrades these aircraft may spend their entire service lives on the lease. This sort of thing is becoming increasingly popular. The Hungarian lease extension comes two months after Switzerland decided to buy 22 Gripen fighters to replace their elderly F-5s. It is also used by Sweden, Thailand, South Africa, and the Czech Republic.

The 14 ton JAS-39 is roughly comparable to the latest versions of the F-16. The Gripen is small but can carry up to 3.6 tons of weapons. With the increasing use of smart bombs this is adequate. 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-27/30) 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. There has been one major upgrade and another one in the works.

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.

 

 


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