Podcast: What's New With Europe's Fighter Programs?

Robert Wall: Welcome to Check 6, where today we discuss GCAP, the European defense budget environment, and combat aircraft in the European market more broadly. 

While much of the attention in recent weeks has been on the U.S. and what the political changes there may mean for defense, there have been several important developments in Europe, so we wanted to use this podcast to walk you through some of those. Joining me today are Tony Osborne, Aviation Week's London Bureau Chief, and Craig Caffrey, Head of Defense Markets and Data here at Aviation Week. I'm Robert Wall, Executive Editor for Defense and Space, and your host today. 

Let's start with the future combat air programs in Europe, particularly given the uncertainty about what may be happening in the U.S. with the Next Generation Air Dominance program, which has raised questions about what Europe will do with its efforts. The morning after President Trump was elected in the U.S., the German defense minister rushed to Paris to talk to his French counterpart. And in their comments after the meeting, they came out strongly in support of their collaborative programs, including FCAS, the fighter development that also includes Spain. 

But, Tony, the Italian-Japan-UK counterpart to that, the Global Combat Air Program or GCAP, seems to have made even more meaningful progress. So why don't you catch us up on that first. 

Tony Osborne: Well, good morning, Robert and good morning, listeners. Yes, GCAP is making significant progress. I think the last time we probably spoke about this, where we were talking about the GIGO, which is a strange name for an organization that will essentially run this project. It's a bit like the Joint Program Office for the F-35. But because it was being set up between three nations, that had to be set up for a treaty. And so each nation's parliament, each nation's lawmakers, had to go through this treaty with a fine-tooth comb, but that's now been ratified by all three nations, and Italy was the last to do so. 

In a sense, we are getting now to the point where that organization will be set up, as will a new industrial joint venture between BAE Systems, Mitsubishi Heavy Industries, and Leonardo will also be established. And that will then take orders from this GIGO organization, which will be set up in Reading of all places, which was announced by our defense minister a couple of weeks back. I don't think that was actually expected, but he gave evidence to the Parliamentary Defense Committee and mentioned that this organization will be set up in the leafy suburb of Reading. 

Robert Wall: Are they trying to signal they're going to be very frugal? Is that what it is?

Tony Osborne: I'm not really sure, but I mean, it's not really the sort of ... Reading's never been really been associated with high-tech aerospace, but it is on the old famous M4 corridor, so great links with Heathrow if you need to travel between Italy and Japan. So that's probably one of the reasons that they chose that. 

But I mean, GCAP is now being prepared really for this major contract mid next year. I mean, back in July there was talk about whether GCAP could be on the chopping block. The UK is undergoing its strategic defense review, but when you spoke to the industrial leaders back at Farnborough, they were heartened by the fact that Labor ministers who had just been elected into post were coming through, looking at this gigantic model of the aircraft and giving their nod of approval. And then in the last few weeks there's been suggestions from ... certainly through the Financial Times and then also by John Healey a few days ago in the House of Commons Defense Committee, that actually this has got the backing of all the ministers, including Prime Minister Keir Starmer. So it looks like this is a program that's going ahead, and it probably always was, to be fair, given the tri-national nature of this project. We didn't want another major embarrassment pulling back and becoming more isolationist by withdrawing from such a project. This almost looks certain to go ahead. 

The big question is how much money gets put into it. I think when you and I, Robert, spoke to the boss of Leonardo at Farnborough, he was talking about the project costing 45 billion between the three nations. But then there's this whole question then about Saudi Arabia. The prospect of a fourth nation that perhaps isn't particularly ... that the other nations might not be too enamored with having on board, but could bring an inordinate amount of money, but without the aviation experience. So this is another rumor that's going around at the moment. It's far from certain how Saudi Arabia could join GCAP, and we wait and see in the next few weeks whether this really comes to pass. If Saudi Arabia does join, it would be a remarkable turn. We knew that something like this could come along, how it will happen is the big question. 

Robert Wall: I mean, interesting to me was when this first got rumored or got seriously rumored, I was talking to someone on the Japanese side about this because to some extent Saudi Arabia has close ties with the Chinese, and you would think that would discomfort the Japanese potentially. And this person had a very pragmatic attitude in basically saying bringing Saudi Arabia into the fold would ... not necessarily something that Japan would object to or Tokyo would bristle at. In fact, it might be an opportunity to try to get Saudi Arabia a bit out of the Chinese orbit. 

Now, I don't know if that's naive or anything, but it was an interesting approach. It made me think that maybe initially I thought, "Well, the Japanese would probably not be okay with this," but they did seem much more relaxed about it than I thought. And as you point out, the money they bring is significant, with the big question of course industrially, how do you manage it? 

Tony Osborne: And of course, yeah, given the enormous project, the enormity, the prowess, the technological advances this will bring, I mean, Saudi will make considerable efforts to, I guess, arrange itself security-wise to put that ring, that wall, Chinese wall around it, if you like. Hopefully not with the Chinese on the inside of it.  

So I guess once you get onto a program like this, there's an element of pride. You can just imagine that whole Vision 2030 aspect will be absolutely ... this will be a major win for that initiative. 

Robert Wall: Yeah, no, for sure. These things are fleeting and things change a lot, but it does seem right now that GCAP of the ... If you take the three big sixth-generation fighter programs in the West, so NGAD, FCAS/SCAF, the German-Franco-Spanish program, and GCAP, GCAP does seem the healthiest. Because even though the French and the German defense ministers have kind of gave a nod to FCAS SCAF being important, especially maybe in a Trump era, a rallying cry for Europe to do more together, I mean, there's still big questions about the industrial relationship there and the history obviously with the French on, first, being part of a European program and then pulling out and birthing Rafale and doing that on their own. I think there's just a lot of questions really, whether that really has got it. And then NGAD, who knows right now? So GCAP is sitting pretty well. 

Tony Osborne: I think it's quite telling as well, the new UK-German relationship through the Trinity House, one wonders if FCAS doesn't go the right way again, whether we could see a new GCAP relationship with Germany emerge. I mean, that's been rumored for years. It's been talked about. But one wonders whether that Trinity House initiative has really been established to try and perhaps nudge Germany towards us. And particularly, there's even language in the Trinity House agreement around adjuncts, collaborative combat aircraft and so on, which makes that quite interesting. 

Robert Wall: Well, and there in particular, just to pick up on your thought that, I mean, I remember being at an event and a German senior officer saying to a British senior officer, I don't think they realized I was sitting there, saying, "We need to do more together because you guys constantly work ..." This was the Brit saying to the German, "Yeah, working with the French isn't really great." And the Germans looked on, "Yeah, yeah. It's much healthier when we do things together." 

And it's interesting of course that the French have now gone off with, under the F5 program for the Rafale, to work on a UCAV effort, building on the neuron experience. Very interesting program, they were pretty early on. But the German Air Force has been pretty clear, they would like to do something in the, whatever you want to call it, collaborative combat aircraft arena before FCAS even gets fielded. And you hear the same thing here. So there is a natural alignment there. And I guess we'll have to see, and we still have German general elections coming up, but where this all goes, but certainly it does seem like fertile ground. 

Tony Osborne: I couldn't agree more. And there is progress. I mean, I think the elections are going to throw a spanner into works for FCAS, especially given the fragility of the German government, how quickly that comes along. But that could also influence things like additional orders for Typhoon, which I think we'll get on later on. 

Robert Wall: Yeah, no, for sure. But of course this is all great to have these wonderful programs, GCAP and FCAS and I guess NGAD, but as we all know, someone has to pay for it. 

So bringing in here our numbers guy, Craig, give us a sense for what has been happening in the European defense spending environment. And I guess I bring it up in part not just because of GCAP and FCAS, but obviously the 2% issue was such a major point of contention the first Trump administration, and it's not likely to have gone away as a talking point at least this time around. So where is Europe situated in 2025 or thinking, forward January 20, 2025, versus 2016 in the first time Trump moved to the White House? 

Craig Caffrey: Yeah, there's obviously been a lot of change. And I think Trump will obviously pay attention to that. But maybe we take the wrong lessons from it, we can get into that in a second. 

So I have one statistic before I get into it. Back in 2019, so five years ago, Europe was spending about $69 billion a year on procurement of defense equipment, and today spending something like $141 billion, so it's something doubled the procurement spend over that period. So there's been a really big change, essentially Europe's doubled the market. I was in DC last week, and don't give away my age really, but I've been talking about defense spending to companies in the U.S. for nearly 20 years and- 

Robert Wall: Only? 

Craig Caffrey: Yeah, I know, I know. The hair's getting gray. That's having kids, so it's different. But yeah, I think it's the first time I felt like people were genuinely listening to me about Europe. I think there's been, completely justifiably, a dismissiveness around global spending in general outside the US, but also more particularly about European spending.

And I think there is still a bit of dismissiveness around how long this [inaudible 00:11:36] in spending stays in, but there's definitely genuine interest now because it's become such a huge market. I mean, it's not far off ... I think the US spends about $170 billion on procurement. So Europe's catching up on that, and it's still probably going to grow a little bit more from where it is. 

In terms of comparing it to Trump, so 2016, I know this because it was part of my presentation last week, so Europe was spending about on average 1.3% of GDP on defense and it's now spending 2.2%. And I think it'll go up a little bit further from there over the next few years. I think the other really important win, this relates back to procurement spending as well, there's two NATO spending rules. There's please spend 2% of GDP on defense, and there is please spend 20% of your budget on procurement or equipment. And on the equipment, from the spending, they were spending about 14% in 2016 when Trump was last president or last elected I should say. And then as of now, it's about 33%, so that's more than doubled. 

So yeah, it's changed a lot. I think the thing is, Trump's going to come in, we've already had indications that he's going to be like, "Right, well, 2% is great, but we need 3% now," because he's correct that things have changed quite a bit since he was last in power with what's gone on in Ukraine. I mean, if you look at most of the countries, they are aiming to get to targets by 2030, so I think spending will still grow, but I think we're coming out of the really rapid bit of growth now or probably growth will drop to something like ... I think it's been at about 10% for the last three years, and then it'll drop down to probably about 3, 4%, I'd imagine next year. And then there are elements of special budgets that'll come out of Poland and Germany beyond that. 

I think that, yeah, Trump will push for 3%. It's not going to happen. There's no money. And we've got the fiscal rules being reimposed as well in Europe now, so 3% maximum deficit now. So it's really hard to get spending any higher than it's. But at the same time, I think Trump coming in, maybe not in the way you think, does help European capitals to boost spending because now I think you're looking around and you would say, yes, the US is definitely still our indispensable ally. That's who we should be interoperable though with. That's who we buy our equipment for, that's who we need to cooperate with. 

But are you a little less certain than you were two years ago that the US will turn up to help Europe if Russia invades, and yeah, you probably are. So I think the main impact of Trump on European spending will be to sustain spending at current elevated levels rather than to push it on much further. 

Robert Wall: Yeah. I mean, I thought quite interesting in recent weeks, or what happened here in the UK, I mean, the UK, the government has pledged to raise defense spending further to 2.5% of GDP at some point, not spelled out when. But what I think is quite interesting is even as they do that, they are realizing, and I think this will happen and is happening in other MODs in Europe too, getting more money doesn't necessarily solve all your problems. 

So you still face tough choices. And, Tony, you can walk us through that. I mean, the UK, even before the strategic defense review has been done, has announced that the government has told us we're going to get more money, but that doesn't mean we don't have to do difficult things. And maybe just catch up some of our listeners on those decisions. 

Tony Osborne: Yeah. A couple of weeks ago, long before the SDR is even published, the UK has already decided it will scrap its Puma helicopter fleet, it's Chinooks. And also interestingly, the Watchkeeper fleet, although the Watchkeeper UAS, a bit of a troublesome beast. I don't think that's going to be missed by many people. But the fact that we are already getting rid of some capabilities, including some warships and some support ships would suggest that there's an eagerness to try and at least make a few more savings before the SDR. 

But also, these were old capabilities that I think some were reluctant to just simply scrap and say, "Look, we don't need this." And obviously, when you take aircraft off the books, you perhaps look a little less strong, it doesn't look so good politically, and maybe the previous government wasn't so keen on doing that. The new government coming in has done that, and actually a few former conservative MPs have said, "Yeah, perhaps that wasn't a bad thing." But that saves up about 500 million over the next five years, which is small beans compared to the billions that we are talking about. 

Also, the other interesting thing, and I think we'll probably talk about this as well, is that the UK, the Air Chief wants to get rid of the Hawk T2 jet trainer, and I think that's going to spark off a great deal of interest in the coming months, again, before the SDR. 

Robert Wall: Yeah, and speaking of appetite, I mean, they've been pretty clear the recent months, air and missile defense needs more money. Again, not an area that comes cheap necessarily or is done quickly. So you can definitely see why there's a need for belt-tightening, even if you are hoping to get more money. 

Tony Osborne: I think that all depends on how you end up doing it, doesn't it? I mean, it depends if you are going to end up investing in these expensive ground-based air defenses, things like Patriot, SAMP/T, CAMM or whatever. Or you approach it in a different way, and I think the UK wants to go down this route, but not necessarily by buying expensive ground-based air defense systems like Germany and Poland has. I think they would like to try and avoid that if possible. Because it's a fixed system once it's installed and you don't get much other use out of it like you do with another system, like combat aircraft. 

So I think they're going to try and go down this international approach if they can. But maybe that could include the German-led initiatives like the European Air Defense Cooperation Initiative and stuff like that. 

Robert Wall: We've talked a lot about the future of combat aircraft programs at the start of this podcast, but obviously there's some big programs that are still going on here in Europe. They're involved buying European, Eurofighter, Typhoon, Rafale in France, or other countries in Europe buying Rafale. And then of course a lot of F-35 buying. So, Craig, maybe just catch us up how you see fighter market right now here in Europe. 

Craig Caffrey: Yeah. I mean, it's a really interesting one because you were kind of looking towards the end of Typhoon production before the Russia invasion of Ukraine, and Rafale was even slowing down a little bit, but it's two completely different stories. 

So Typhoon is revived by ... Spain buys. Everyone's looking at top-up buys. Germany's looking at additional buys. Rafale, even before the Ukraine thing, they've done very well on export orders as well. So there's now looking production of both of those types going into 2030, which I don't think was necessarily where we thought we'd be a few years back. So those two programs are doing really well and they're starting to look like they'll sustain fighter production in Europe. 

I think there was an assumption that there'd be a bit of a gap between production of those aircraft and then the next generation coming online, but that doesn't necessarily look like it's the case. And there's a lot of campaigns running out there at the moment. I know the UK is pretty happy about trying to get Turkey on board with Typhoon as well. Yeah, it's looking a bit more rosy for the fighter market. And like you say, I think as the US pushed its program back for NGAD and F/A-XX as well, then Europe looks like it's probably on pretty level terms in terms of leading the market there. 

I think, going back to something we were talking about a little bit earlier, I wonder how happy Europe is about that because I get the impression, especially when you look at the sixth generations. In the past third, fourth, fifth generation, all you did was you made a better version of a fighter aircraft with new technologies in there. And I think this new one, the reason I think that everyone's occasionally seems a little bit panicky about it is it's not really just about a fighter aircraft, it's this whole system of systems thing, which sounds like jargon, but it's absolutely what everyone's trying to do, and it's really hard to figure out how you switch that. 

And also, there's a lot of institutional, not bias, I'm going to use the word bias, towards, right, well, obviously let's focus on the combat aircraft. And I think maybe that's where to some extent the US has found itself, which is like, we've thought so much about this, but right, well now we're moving along with CCAs. Is that really how we need to do this? Do we need to get the unit cost there? Most of these programs are delivered or want to deliver more mass because fighter fleets have been shrinking for years. 

And then I think the U.S. has taken a step back ... If I was GCAP and in the lead now, it's obviously an opportunity, especially when you look at export markets, but I think it's also ... It made me a little bit nervous because you can't be like, "Well, what are the U.S. doing?" Because they are doing stuff, but they're taking a step back on stuff as well. And if their strategy is to take a step back, maybe I'd be a little bit nervous about pushing on ahead. 

But yeah, so I think fighter market, there's plenty of requirements out there in Europe, there's plenty of production. The problem really is keeping production going. It's a capacity issue rather than demand issue in Europe. I think the other thing to think about that we never think about because it's not as sexy, let's say, as fighter sales, is everyone's looking at increasing availability rates for the record as well. So big problem in the past was amount of spares that there were, some of that driven by industrial capacity, some of that driven by countries just not buying enough spares, and how do these production lines build enough spares at the same time as they're trying to ramp up production rates for aircraft. 

So there's a lot going on, but it's still ... Yeah, if you were in the fighter sector in Europe, you'd be pretty happy with where the demand signals are at the moment, for sure. 

Robert Wall: Tony, what's your gut feeling on UK and additional Typhoon buy, where do you think ... I mean, and [inaudible 00:21:38] going to ask you to make a call on numbers or our F-35 numbers, but do you think we'll finally get a bit more clarity out of SDR in the coming weeks or months, I guess? 

Tony Osborne: I think my conclusion would be no more Typhoon buys for the UK. I think that's almost 100%. I think if we are going to spend more money on fighters, it's going to be GCAP and it's going to be additional top-up of F-35. That's certainly the direction that everyone seems to be going. We are going to be up to 48 F-35s later this decade, around '26, '27. We're going to need at least another 20, 25, 26 aircraft to ensure that we have jets for those carriers. So that's where the money is going. The rest will be focused entirely on GCAP and Eurofighter upgrades. 

There is a letter to the Parliamentary Defense Committee from unions working in BAE Systems Broughton, for an additional buy of Typhoons to keep that gap between Typhoon production, that it's final assembly through to GCAP. But that's not actually necessary because when you look at it, you go, well, Germany's buying more Typhoons, Spain is buying two batches of Typhoons, and Italy has now ordered or is about to order another batch to replace Tranche 1. 

So BAE Systems is going to be busy just building the major units for those aircraft, because obviously BAE Systems builds 30-odd percent of each airplane. Even though they're not going to be undertaking final assembly, they're going to be building major units for all the extra 100-odd-plus Typhoons anyway. 

And then of course there's the export contracts because if Saudi Arabia comes on the GCAP program, they're almost undoubtedly going to buy those additional 48 to 54 Typhoons that they've been talking about since 2017, that batch two fleet. And then as Craig mentioned, you've got a potential order from Turkey, which would be absolutely significant, and which Germany has now given approval for secret briefings about. So that begins to move that down in a negotiation process a bit further. And the Turkish parliament's been very clear that, certainly the Turkish defense minister is very clear, that the Typhoon is very much on the table for him. They've decided to abandon an upgrade program for F-16s and focus that nationally because they can do it cheaper, they say. So that's frees up a hell of a lot of money for both Typhoon and also their development of KAAN. 

There's a lot going on in the world of Typhoon, and I think we've discussed Rafale. I don't see many more European opportunities coming up for Rafale. I think you've got the Greeks, you've got the Croatians. I think now it'll be focused on getting French production out because obviously the French halted deliveries for a long time. Now they're going to take deliveries of their remaining fleets and get those upgrade programs going, presumably with the United Arab Emirates working very closely with them on that. 

Robert Wall: Yeah. And then meanwhile, Sweden keeps doing its thing, and we all await what the future plan there is. 

Tony Osborne: Yeah, 2030 is the date for when the Swedish government will make a decision. But I mean, all the parliamentary hearings have all been very positive that Sweden needs to retain that ability to produce fighters. Now, whether that's uncrewed or crewed is a different ... Yeah, I mean there's definitely significant interest in maintaining that capability in the country. 

Robert Wall: Yeah. Craig mentioned, it is incredible, we've gone from talking about how long can Europe sustain these production lines to how can they find production slots for some of the demand that's at least foreseeable demand. And this, as you would say, these programs are coming to the end of their life. It's incredible, they've never been healthier almost. 

Tony Osborne: And don't forget, I mean, there's active discussions about how you develop the midlife update for Typhoon because it's really only halfway through its life. So that is going to be the next major step. And there's also the whole issue of industrial capacity for the next wave of upgrades for that aircraft. You've got the P4E program coming up towards the end of this decade that's going to put a hell of a lot of additional capability on the airplane. Yeah, I think there's a whole lot of challenges coming for Eurofighter alone. 

Robert Wall: Very good. Well, I think let's wrap it there. I hope for our listeners, that was a good catch up on what's going on in Europe and to show that even as we wait for new developments in the U.S., there's plenty to keep everyone busy. 

And with that, thanks for checking in to Check 6. Thanks, Tony, thanks, Craig, and thanks Guy for producing this podcast. And we look forward to having you back sometime soon on our next Check 6.