* Brazil, S.Korea contests loom over combat jet industry
* Price, technology key weapons as suppliers seek more
exports
* Gripen maker 'takes precautions' after alleged
phone-tapping
* Thinktank says U.S. F-35 to dominate industry for years
WASHINGTON, Sept 9 (Reuters) - Competition is heating up in
the global fighter jet market, prompting accusations of
aggressive tactics as major arms makers jostle for export
business to offset domestic spending cuts.
Purchase decisions in the coming months from South Korea and
Brazil, as well as the finalization of a huge Indian contract
tentatively awarded to France, could shape the balance of power
in the aerial combat market for years to come.
Demand for air artillery is increasing due to a cocktail of
regional threats, ageing fleets and high oil and commodity
revenues swelling the resources of emerging economic powers.
Still, it is a far cry from the levels suppliers would need
to be sanguine about domestic spending cuts, and top contractors
and analysts told Reuters this week that the battle for export
contracts to keep assembly lines running was growing tougher.
"Competition is increasing each day. I think we see in many
areas a sharpening of prices," said Hakan Buskhe, chief
executive of Sweden's Saab, which is competing with
Boeing and France's Dassault for the delayed Brazil deal.
Experts and lobbyists say suppliers on both sides of the
Atlantic are playing the jobs card at home - in some cases
bluntly reminding politicians that defense workers have votes -
while cutting attractive deals to help capture new orders.
"It is a great time to search for a bargain in the fighter
market," said defense analyst Loren Thompson, chief operating
officer of the Arlington, Virginia-based Lexington Institute.
Importers also increasingly have the upper hand in demanding
generous transfers of technology to support local aerospace
businesses, a key factor in markets like India and Brazil.
Buskhe, a former energy executive who became Saab CEO two
years ago, said he was dismayed to find his phone had recently
been bugged in Switzerland, and now took extra precautions.
"It just went berserk," he said, gesturing towards the
smartphone during a meeting with Reuters editors and reporters.
Buskhe said Swedish security services had launched an
investigation but declined to discuss the outcome.
The deal to sell 22 Gripen jets to Switzerland was seen as a
lifeline for Saab's fighter, whose future had been in doubt.
Subject to a Swiss referendum, its production lines are now
assured into the next decade, but it remains a minnow in global
markets compared with other Western and Russian majors.
DEMAND RISING
Saab's predicament mirrors one facing the industry on a
wider scale and, analysts say, helping to intensify competition
- too many Cold War-era suppliers chasing too few exports.
Saab is one of three suppliers in Europe alongside the
four-nation Eurofighter Typhoon and France's Dassault, which
builds the Rafale, while the U.S. and Russia have two major
players each: Lockheed Martin and Boeing versus Sukhoi
and MiG.
Demand is rising: Virginia-based Teal Group predicts
deliveries of over 2,600 fighters worth $174 billion between
2011 and 2021, up 15 percent by value in a decade.
As well as competitions in Brazil and Korea, the Middle East
remains key, and there is a growing arms race in Southeast Asia
fuelled by territorial disputes and concerns over China's role.
Kuwait and Malaysia are among those shopping for more air power.
Still, there is huge pressure on Western budgets, with U.S.
companies bracing for more cuts even if a threat of $500 billion
in emergency reductions is lifted.
"Price pressures are steadily increasing as defence
production lines are getting very thin and that is a concern for
the industry," Teal Group analyst Richard Aboulafia said.
South Korean officials are due to visit the F-35's factory
and test base in the coming weeks, sources familiar with the
plans said. They will also visit Boeing's F-15 plant.
Lockheed says more than 25 countries have expressed interest
in its stealthy new jet. Its executives hope
Japan's order of the F-35 will persuade Seoul to follow suit.
Boeing, which has invested in adding some limited stealth
capability to its F-15, is counting on nearly 40 years of ties
with Seoul, and the plane's lower cost, to prevent that.
The stakes are high not only for Boeing. Lockheed's F-35 is
likely to be the West's "dominant combat aircraft for decades to
come," Britain's Institute for Strategic Studies said on Friday,
presenting Europeans with a dilemma on the eve of the Berlin
Airshow.
They can partner with the F-35, thereby accepting greater
reliance on the United States, or commit to building new
aircraft despite the region's budget crisis.
Six European countries including Eurofighter consortium
members Britain and Italy are already F-35 partners, while
France and Sweden have so far remained aloof from alliances.
Meanwhile, a big Russian presence at the recent Farnborough
Airshow reminded the industry that Russia, whose arms makers
often compete on price, are willing to fight for new markets.
(Additional reporting by Andrea Shalal-Esa; Editing by Daniel
Magnowski)
