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Dassault and the 2005 Paris Air Show

Dassault and the 2005 Paris Air Show

Press conference given on the occasion of the 46th Paris Air Show by Charles Edelstenne, Chairman and CEO of Dassault Aviation. Source: Dassault Aviation, Saint-Cloud, June 10, 2005.

Bruno Revellin Falcoz, Charles Edelstenne and Loïk Segalen (Dassault Aviation/DREXCOM Photo).

Bruno Revellin Falcoz, Charles Edelstenne and Loïk Segalen

    Ladies and Gentlemen, Dear friends,

It is an immense pleasure to welcome you to Le Bourget, one of the foremost events of the aerospace industry. Today, I am speaking to you in my capacity as Chairman and CEO of Dassault Aviation and not as current Chairman of the French aerospace industries association GIFAS. Insofar as this year's Air Show is shorter than previous editions, I thought it would be more practical and desirable to organize a meeting on board the Talisman ahead of the official opening of the show.

  • Since the last edition of the Paris Air Show, we have seen a marked improvement in the world economic environment despite apparently conflicting trends.

The geopolitical tensions that weighed heavily on transatlantic relations and the global economy two years ago are behind us. On the other hand, we are starting to feel the impact of rising oil and commodity prices. Furthermore, current euro/dollar exchange rates are a key concern for our exports. Prospects for the European economy are less clear. However, the United States and, to a certain degree, Japan, have renewed with growth while China and India continue to expand their economies.

The outlook for the world economy has improved considerably since 2003. For our industry this is reflected by the increased number of orders being won by commercial aircraft makers. Although the cycle in military spending is affected by different trends, we see brisk demand in defense markets, particularly for combat aircraft, with a large number of fleets requiring replacement in coming years.

So what has this meant for Dassault Aviation? Thanks to our flexibility we have emerged unscathed from the trough period of 2003 and now positioned to take advantage of the upturn in the aerospace sector. Those of you who regularly attend the briefings we organize on this vessel to present our financial results every six months are familiar with our annual results for 2004. Further information on our results is available in our Annual Report which can be downloaded from our website, www.dassault-aviation.com.

In 2004, our financial performance benefited from the fact that our order book was hedged at a rate of one dollar to the euro. However, the weakness of the US dollar will continue to drag on our profitability in 2005 and beyond. We have endeavored to hedge our future currency exposure wherever possible but the extent of such hedging is not complete. Moreover, as regards operating competitiveness, the dollar effect has coincided with a drop in civilian aircraft prices which began during the recent crisis years.

In this morning's presentation, I shall not be providing an update on our operating and financial results for the current year. I am, however, looking forward to the opportunity to briefing you on our results for the first half of 2005 at our press conference on September 15 which I invite you to attend.

  • The Falcon Jets

Falcon deliveries will reach between 50 and 55 units in 2005, representing a production rate of around 5 aircraft per month. Although economic conditions have improved measurably since 2004, this figure is slightly lower than the 63 aircraft we delivered last year. There were two reasons for this. The first was that we received orders for just 40 Falcons in 2003. The second reason stems from the introduction of an accelerated depreciation tax credit for customers of business-aircraft makers in the United States. This tax break gave US companies a key incentive to invest in new business aircraft in 2004. As a result, a number of our customers brought forward deliveries that were initially planned for delivery in the early part of 2005.

As regards Falcon orders, the rebound observed in the latter part of 2004 has accelerated in recent months thanks to the momentum created by a buoyant US economy. Although economic growth is slower in Europe, the region is nevertheless contributing to the impetus, mainly because of the weakness of the US dollar, the working currency for the aviation industry. Similarly, the fractional ownership market has emerged from crisis and NetJets are poised to place new orders.

  • As far as our civilian programs are concerned

To fill you in on the recent developments in our civil aviation programs, I shall first highlight our new flagship, the Falcon 7X.

7X Falcon Jet maiden flight (François Robineau Photo © Dassault Aviation).

7X Falcon Jet maiden flight (François Robineau Photo © Dassault Aviation)

Since making its maiden flight on May 5, the latest addition to the Falcon family has logged about fifty flight hours and all systems have performed flawlessly. The second and third test 7Xs will enter flight preparation in July and September. A static and fatigue test airframe has undergone the equivalent of more than 5,000 simulated flights. Just as importantly, the 7X is a commercial as well as a technical success, and we have already received orders for 55 aircraft. Certification and first deliveries are expected before the end of 2006.

Allow me to add that the Falcon 7X is the first business jet to employ Fly-by-Wire (FBW) technology. The 7X is capable of covering 5,700 nautical miles (or around 10,500 km) and offers a maximum operating speed of Mach 0.9. In addition to easier maintenance and significantly reduced operating costs, it incorporates advanced aerodynamics, the new-generation EASy cockpit and a widebody cabin which offers unprecedented levels of comfort, particularly in terms of cabin pressurization and sound attenuation.

The Falcon 7X does much more than raise the bar in terms of performance. It has created an entirely new standard for business jets. With the 7X program, Dassault Aviation has pioneered a revolution in industrial design. The 7X is the first aircraft to be designed and engineered entirely on a digital platform using our Product Lifecycle Management (PLM) process. This unique concept is powered by a series of software solutions developed by Dassault Systèmes: CATIA, the world's leading virtual design solution, ENOVIA, for product data management, and DELMIA, for manufacturing engineering. These digital tools enable us to create a shared database which offers program actors real-time access to the data they require for each program phase, from initial design through to manufacturing engineering, assembly, marketing, and through-life maintenance and support.

However, new approaches such as PLM are only part of the story. The new industrial revolution must be accompanied by a cultural revolution within our enterprise in order to adapt our practices to the demands of electronic collaborative processes. Dassault Aviation is the first company to achieve such a transformation. Much of our efforts have focused on turning the concept of concurrent engineering from a buzzword into reality. We have not only achieved this in our company, we have also extended it to our industrial partners, thereby giving them the means to sustain their competitive advantage in the future.
This process has also given rise to another world first — our so-called "virtual platform" — which we believe heralds an entirely new approach to collaborative product development that promises to transform working relations between companies and even to revolutionize the entire air transport industry.

In the meantime, we are already applying the lessons learned from PLM to the Falcon 7X program. Thanks to this approach we no longer have to build physical mock-ups and prototypes of airframes. Thus, the first three 7Xs are series-produced, even if they are being used for trials and certification. Assembly time has been cut in half from 14 months to 7. Similarly, tooling costs are 50% lower than before and we are able to achieve flawless production quality, right from the first aircraft. To crown this success, Boeing plans to use our innovative approach as part of its 787 program.

The Falcon 7X has been at the forefront of attention in recent weeks. However it has not taken the limelight from our other major development program, the Falcon 900DX, which made its first flight on May 13. The Falcon 900DX will fill an important niche in the Falcon range between the 2000EX EASy and the 900EX EASy. In relation to its predecessor, the Falcon 900C, the 900DX incorporates a host of performance breakthroughs in terms of operating range, average climb rate and take-off distance. A number of orders have already been signed, and certification and deliveries are planned for this fall.

Concerning our EASy cockpit design, which is now in service on more than 50 Falcon 900EX and 2000EX, feedback from users confirms that our intuitive interface is a critical breakthrough in terms of aviation safety and pilot control. We plan to complete certification of the third version of this cockpit design for the Falcon 900EX EASy this summer and for the Falcon 2000EX in the winter.

  • And now, a few words about our defense activities.

As you know, over the last decade defense activities have accounted for a marginal share of our total sales. For example, our domestic military sales have averaged less than 20% of total sales during this period. By ensuring our technological leadership, the Falcon range has enabled us to consolidate our position in defense aviation. However, this situation is set to change. As I explained earlier, demand for combat aircraft is already increasing as a new replacement cycle begins. The 1970s generation of jet fighters is now being withdrawn from service and we believe we can retain our historical 15% share of this market. Rafale offers a real and viable alternative for countries which do not wish to purchase US aircraft or which are looking for a second source of procurement.

The Rafale program has reached a level of maturity that makes it competitive on export markets. To date, 120 aircraft have been ordered by the French air force and the French navy's air arm.

The Rafale M1 Version (Véronique Almansa Photo © Dassault Aviation).

The Rafale M1 Version (Véronique Almansa Photo © Dassault Aviation)

The F1 standard (air-to-air capability) entered operational service with the French navy's 12F squadron in Landivisiau in June 2004. The F2 standard (multirole) is currently being validated and the F3 standard (omnirole) is under development. At the end of 2004, we made the first deliveries of an order for 48 Rafale F2s. We will achieve our target of having the first squadron in service in the French Air Force by summer 2006. Four two-seater Rafales have already begun initial testing at Mont-de-Marsan military flight test center and I handed over the keys of the first single-seater for the French Air Force to the General delegate for armaments last Friday.

  • At this point, allow me to sum up a few of the key factors that have contributed to the tremendous success of this program.

The first is that the concept of an omnirole fighter aircraft, as initially defined by the air force chiefs of staff, is now seen as the most operationally effective and cost-effective solution for today's environment.

The second point is that the Rafale combines the best of French technology. Marcel Dassault might have said that the Rafale differentiates itself by its excellence.

The third factor is that additional development costs incurred due to funding and calendar factors were almost entirely offset by cost savings achieved in manufacturing engineering for the series in spite of the relatively low production rates for the Rafale program. The reduction in the acquisition cost of the series was achieved through significant innovation efforts, internal productivity gains and the introduction of new manufacturing processes which were developed in-house and self-funded. Overall, the program budget was met to within 3%. The reality of this was upheld in an inquiry by the committee on defense spending of the French parliament. From every standpoint, the Rafale program has set precedents in the history of military aviation.

Comparable competitor programs have encountered both financial and technological obstacles. It is no secret that US combat aircraft programs have periodically had cost overruns similar to those being experienced today in the JSF program. The JSF's development has cost seven times that of the Rafale and the cost of the series-produced aircraft is twice the projected target. Eurofighter has faced similar difficulties, along with technical and scheduling issues, and its development costs are now three times greater than those of Rafale.

Rafale is a multirole jet fighter that comprehensively meets the needs of the French armed forces and is set to replace seven types of aircraft currently used by the Air Force and Navy. The end-result represents a major leap in terms of efficiency, together with optimized costs and increased savings.

As regards export sales of the Rafale, negotiations are in an advanced stage with a number of countries. As you know, I cannot comment about negotiations in progress.

  • Let's move on now to the Mirage 2000

Emirati Mirage 2000-9 over the UAE (Dassault Aviation Photo).

Emirati Mirage 2000-9 over the UAE (Dassault Aviation Photo)

The Bader 21 contract with the United Arab Emirates is in the final stages of completion. We have delivered 30 of the 32 new aircraft ordered. The last two aircraft concern the Mirage 2000-9 Mk2. Retrofits to the UAE's existing Mirage 2000 fleet are well underway, with 15 of the 30 scheduled retrofits already completed. We are also in the process of completing an order for the Hellenic Air Force of Greece for the acquisition of 15 Mirage 2000-5 Mk2 and the upgrading of 10 Mirage 2000 to the same standard. Finally, all 10 of the Mirage 2000H ordered by the Indian Air Force were delivered at the beginning of this year.

  • Let's now look at our future military projects and at the challenges we face in order to maintain and develop our capabilities in the future.

Firstly, allow me to say that the combat aircraft industry has always been a high-technology industry and therefore of key importance to national sovereignty. It helps to secure independence of decision-making and freedom of action. Our industry is also central to foreign policy and trade. It represents a major engine of growth for the economy, both through technology spin-offs it generates and employment it creates for other sectors of industry. Consistent investment in R&D and the experience acquired and consolidated from over one hundred programs in sixty years have placed Dassault Aviation in a class of its own in Europe while ensuring our independence. Our capabilities are backed by technological proficiency and unrivalled expertise in the development of military aircraft systems. We are committed to preserving these capabilities for the long term.
Our concern is shared by other European countries possessing aerospace industries of their own. To respond to this challenge, at the 2003 Paris Air Show, the French government announced an initiative to develop a unmanned combat air vehicle (UCAV) demonstrator as part of a project open to European cooperation. This UCAV demonstrator is code-named Neuron and will be as large as a combat fighter. It satisfies a twofold objective which the French Defense Ministry has identified as strategic for the future of the combat aircraft industry in Europe:

The NEURON (Dassault Aviation Photo).

The NEURON (Dassault Aviation Photo).

- Firstly, the program marks a major initiative to maintain and develop expertise in these critical technologies for combat aviation in Europe;

- Secondly, as a test-bed for European cooperation in a highly innovative area, Neuron will bring together design and engineering firms with a complementary range of expertise and skills.

The French Defense Ministry was keen to introduce a new approach, by developing a French initiative open to European cooperation which would feature Dassault Aviation as a prime contractor and incorporate leading European industrial firms that receive support from their governments according to their ability to optimize program development. This approach has been enthusiastically received by European design and engineering firms which see the French authorities' commitment as a guarantee of the project's future success. Indeed, each major European success story in aeronautics or space flight has involved France as the main pillar and driving force.

  • Sweden, Italy, Greece, Spain and Switzerland have joined alongside France for the Neuron program.

Industrial contracts have been signed with Saab, Alenia, EADS Casa, HAI and Ruag. Inter-governmental agreements are being finalized. Our shared ambition is to for the new consortium to break new ground in terms of collaboration for the piloted and unmanned air vehicles of the future.

Remaining on the subject of drones, allow me to say a few words about the agreement with EADS we announced last year at Eurosatory. Under this groundbreaking agreement, Dassault Aviation takes on the role of prime contractor and will work alongside EADS for UCAVs while EADS will act as prime contractor and Dassault Aviation as associate contractor for reconnaissance UAVs. Finally, for the Euromale UAV program, Dassault Aviation is taking responsibility for the flight segment and system architecture.

Before concluding, allow me to mention that products are only as good as the service and maintenance that support them. In the field of service support for the Falcon range, we have launched a comprehensive, nose-to-tail service support plan, based on a fixed cost per hour schedule, for each new Falcon aircraft. This program, which we have entitled "Falcon Care", is being marketed as a six-year renewable support program which includes parts and labor, on-site technical assistance and service bulletins.

As regards support services for military aircraft, last year we signed a through-life management contract for in-service aircraft repairs for the French Air Force. A similar contract was signed for the first 37 series-production Rafales a few months ago. We continue to develop our services in areas such as integrated testability, remote maintenance, electronic documentation, training, logistics, online parts reordering, mission preparation and retrieval units.

  • A few words about what we are presenting at the Paris Air Show this year.

Our static displays include the Falcon 900EX, the Falcon 2000EX, the Rafale C, the Rafale M and the Mirage 2000-5 AAF. At center-stage will be two new products: the Falcon 7X, which will have top billing, and a life-size prototype of the nEUROn UCAV which will be unveiled on Monday, June 13. Flight demonstrations of the Falcon 7X will take place Monday and Saturday. We are running aerial displays of the Rafale and Mirage 2000-5 on each day of the show at around 2.00 pm and 1.50 pm, respectively. As always, you are welcome to visit our booth where we will be presenting mock-ups, videos and virtual reality simulations. Finally, we will hold a press conference at 4 pm on Monday, June 13 to announce the details of our partnership with Bertrand Piccard for his solar-powered airplane.

My conclusion will not come as a surprise to you since it has been the common thread behind each the examples of our activities I have given you today. The winning company of the 21st century will not only be digital and flexible, but also capable of building variable geometry coalitions, federating skills and competencies, and integrating the latest advances in information technology and telecommunications. Our sights are set firmly on the future. Our pioneering spirit is reflected in our current development programs, such as Falcon 7X, as well as in our systems of tomorrow, with Neuron. Make no mistake, Dassault Aviation will always be at the cutting-edge of innovation.

Thank you for joining us today. I shall now open the floor for your questions.


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Directeur de la publication : Joël-François Dumont
Comité de rédaction : Jacques de Lestapis, Hugues Dumont, François de Vries (Bruxelles), Hans-Ulrich Helfer (Suisse), Michael Hellerforth (Allemagne).
Comité militaire : VAE Guy Labouérie (†), GAA François Mermet (2S), CF Patrice Théry (Asie).

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