Several themes characterise the conversations at Farnborough 2016 this week. Proof that politics dominates our industry can be found in the multiple conversations taking place over Britain’s decision to exit the European Union and what the consequences might be for the defence and aerospace industries. The long awaited appearance of the F-35 at the show is also a dominant feature of chat in the chalets, booths and hallways of the show.
The F-35 may not be getting it all its own way, however. Just the week before Farnborough opened, the Canadian government began a detailed re-evaluation of its CF-18 recapitalisation programme in a move that telegraphs continuing concerns regarding the decision to procure the LIGHTNING II as the replacement for the Canadian Air Force’s HORNETs.
In the national elections last year, Justin Trudeau’s liberal party was quite emphatic that it would kill off the F-35 acquisition and last week’s move is being widely viewed as the first step on the path to cancellation. But it is a complex and multi-faceted equation: According to Lockheed Martin, Canadian industry could benefit by up to U$11 billion in future opportunities on the F-35 programme, and has already concluded about $750 million of business. So what happens to existing contracts – and future opportunities – if the decision not to proceed with the LIGHTNING acquisition is taken?
The answer is nobody really knows. There is apparently no formal codicil to the agreement that says “if you don’t buy the aircraft you don’t get the benefits.” But there is widespread acceptance of the fact that this would be a perfectly logical negotiating stance for Lockheed Martin to take.
Just like Brexit, the decision Canada faces is a complex one and could become a startling example of the Law of Unintended Consequences. The complex equation of defence requirements, political imperatives and economic necessities will play out over months – if not years – to come. Which won’t prevent speculation, fierce debate and a potentially not inconsiderable measure of acrimony. Watch this space!