PARIS - France will postpone program contracts worth some 5.4 billion euros ($6.8 billion), most of them for the French Air Force, in an effort to slash 3.5 billion euros from the military budget over the next three years, a member of parliament and defense executives said.
A sketchy outline of affected programs emerged during a July 7 hearing in which Defense Minister Hervé Morin appeared before the parliamentary defense committee. Morin said the government plans to postpone orders for a new fleet of multirole tanker and transport (MRTT) aircraft to replace the C-135 fleet and the 700 million euro ($888 million) upgrade of Mirage 2000D aircraft, according to Jean-Claude Viollet, a member of Parliament who attended the hearing.
Other programs to be pushed back include an upgrade to level four of the SCCOA national air command-and-control system, worth some 500 million euros to Thales in new radars, and elements of the Scorpion land systems modernization program, Viollet said.
Defense sources said Morin told lawmakers that the Barracuda nuclear attack submarine, Félin infantry gear, FREMM multimission frigate, Rafale fighter and VBCI armored vehicle would escape the budget cuts.
Defense Ministry spokesman Laurent Teisseire declined to confirm which programs would be affected, saying anything that had "not been signed or put under contract" could be delayed.
But he told journalists on July 8 that the budget reduction would not affect staff numbers. And he said the intended cut of 3.5 billion euros was significant but would leave intact the main operational capabilities outlined by France's military budget law.
One defense official said that even after the cuts, revised budget figures show the Defense Ministry getting an average annual raise of 3 percent. That's far better than the "zero value" increase set by the prime minister's office for other government departments. Such a scenario for the Defense Ministry would have meant cutting 4.8 billion euros.
Another defense official said studies are now being done on how to implement the delays to mitigate the effects. Ministry staffers were looking to get a 50-50 split between equipment and administrative costs.
Morin told lawmakers that the reduction allows maintenance of the broad balance in capabilities.
"The concern is how to succeed in the reforms for defense and the consequences of the cuts on the contract for operations," Viollet said.
He said the Defense Ministry needed to lay all the cards on the table, giving details of the different budgetary scenarios and the effect the cuts will have on the price of equipment.
Invalidated White Paper?
But at least one analyst said the cuts push the military off the track laid down by the government's most recent broad strategic guidance.
"The budget announcement renders invalid the defense white paper," said Loic Tribot La Spiere, chief executive of think tank Centre d'Etude et Prospective Stratégique.
The white paper set out objectives for an operational contract for the armed forces, notably deployment of 30,000 troops within six months for a year, backed by 70 combat aircraft for high intensity operations, and air assets projecting 1,500 soldiers out to 8,000 kilometers, with full autonomy in command and control, air detection and air traffic control.
But key to that vision are the MRTT aircraft now slated for delay. The biggest item in the budget - an order for 14 aircraft - could cost around 4.2 billion euros, based on one market analyst's estimate of 300 million euros per militarized Airbus A330 MRTT.
The expected delays on upgrading the Mirage 2000D and the SCCOA air command-and-control system would hit Thales, which stood to sell equipment on both programs.
Work on converting the Mirage 2000D fighter bomber to an air defense variant was worth about 700 million euros, Viollet said.
An Air Force spokesman confirmed the figure.
The upgrade of some 70 Mirage 2000Ds, expected this year, is essential to meeting the operational contract, the Air Force spokesman said.
Under the planned delivery rate of 11 Rafales a year, the service would have a fleet of 130 of the multirole aircraft by 2020. That is when the Mirage 2000D would be retired from service, leaving insufficient fighters to meet the operational contract.
The upgrade, however, would extend the operational life of the Mirage 2000D to 2025 and give additional air-to-air capabilities to the aircraft, which is equipped as a strike fighter.
"This is a big operational requirement," an Air Force officer said. "This is a complete mission change."
Gen. Jean-Paul Palomeros, the Air Force chief of staff, told the defense committee on Oct. 7 that he looked to the 2010 budget to "allow us to start the process of upgrading our Mirage 2000D, which will allow us to extend our fleet to 2025." He added, "guaranteeing the life of our combat aircraft remains a challenge of the absolute first order."
For the Mirage upgrade, Thales stood to have signed a contract to swap out the present terrain-following radar and install the RDY 3 radar and a fire-control system for the infrared-guided Mica air-to-air missiles needed to boost the Mirage's self-protection. The refit would also include integrating the Astac radar reconnaissance pod and changing the man/machine interface.
Technical studies, worth 36 million euros, have been done on the conversion, but the delay means less revenue for Thales.
On the SCCOA command-and-control system, Thales had expected to sell some 500 million euros of new GroundMaster radars in the next three to four years in the upgrade to level four.
EADS and Thales have a 50-50 joint venture company dubbed MOSS SAS, which acts as prime contractor for the SCCOA program.
Other Programs in Limbo
Among other measures, an option to buy a small number of Dassault Falcon 2000 executive jets, to replace the Falcon 700, for the government falls due in the next few months and is under review. A second Falcon 7X was bought in March but has not yet been delivered.
The purchase of A400M airlifters will go ahead without any change in numbers, although there are questions about whether Germany will buy all planned 60 units.
The revised defense budget for 2011 will be 30.15 billion euros, 30.5 billion in 2012, and 31 billion in 2013, Morin told the parliamentary committee.
Those figures compare with those published in the 2009-14 military budget law: 29.65 billion for 2011, 30.32 billion for 2012, and 30.73 billion for 2013. Those figures were at 2008 prices.
On that basis, the 2011 equipment spending would be about 15 billion euros, 2 billion less than the 17.02 billion budgeted for 2010.
A projected 1.9 billion euros in "extra-budgetary revenues" has been revised upward to 2.3 billion euros because the digital frequencies to be sold, along with buildings, and sale and leaseback of the Syracuse military telecommunications satellite, had been undervalued.
A decision to postpone programs is "just smoke and mirrors," Tribot La Spiere said. Given the size of the reduction, real decisions need to be made on which programs to cut. "This is a no-decision decision."
He said the delay would simply put off a decision to someone else.
Given the planned cuts in Britain, France, Germany and Italy, decisions need to be made on pooling capabilities and a specialization of defense tasks, he said. Given the lack of money to perform the full range of missions, governments should think about which ones to opt for, he said.
Senior Air Force officers had been hoping an order of 14 air tankers will be placed next year to replace the aging fleet of 14 C-135 FR aircraft by 2015.
The parliamentary committee asked Morin if the British Future Strategic Tanker Aircraft fleet might be shared as a stopgap measure.
The MRTT is to refuel nuclear-armed strike aircraft, and also carry cargo long distances.