$4.5bn Brazil defence deal – Saab shares soar

While our new website was being developed, a huge defence deal broke as Saab beat competitors, Boeing, to supply the next generation of fighter jets for the Brazilian Air Force.

saab sharesSaab shares rise by 27% back in December after Brazil chose the small Scandinavian defence company, beating rival Boeing to secure one of the biggest emerging market defence deals. Those share prices were the highest level for Saab, since 2008. The share price rose to SKr 174.3 in Sweden during early trading. The $4.5bn deal, will mean that Saab will produce the jet fighters up until 2023.

After nearly 20 years of stops and starts, the award of the contract to Saab is a bitter loss for Boeing of the US and Dassault of France, which until recently were seen as the more likely winners.

Dassault revealed its anger at losing the tender as it pointed out that Saab’s ‘Gripen’ jets include many US parts. Dassault believed the ‘Gripen’ did “not belong in the same category as the Rafale,” arguing that the Swedish aircraft was cheaper because it “does not match the Rafale in terms of performance.”

saab sharesSaab’s Gripen is widely seen as a cheaper alternative to most of its competitors and does not come with the military and political might of jet fighters from countries such as the US, France and the UK. In Brazil both those elements may well have proven decisive.

Saab’s challenge has been to persuade potential customers that being cheaper does not make Gripen a less capable aircraft. This has proved to be a tough sell in the past as the market dictates that a high price tag is often equated with higher-quality. Saab, however, believes the steep cuts in defence budgets in Europe and beyond will give Gripen a boost.

Saab is also pushing to widen its international presence. Earlier in December, it announced a partnership with Boeing, to develop a new design for a trainer aircraft for the US Air Force.