Despite challenges with subcontracting, the manufacturer is increasing production to assemble three fighter jets per month by 2025.
This is a critical issue for all aircraft manufacturers: the struggles of subcontractors to keep pace with rising production rates. “This is the major topic at the moment,” asserted Éric Trappier, CEO of Dassault Aviation, during the presentation of the first half of 2024 results on Tuesday evening. “These issues persist, especially among our aerostructure suppliers (fuselage components, editor’s note) and smaller suppliers. We are assisting them by sending teams to their locations and providing advance payments. However, we are facing delays that are impacting our assembly lines,” he explained.
In this context, “We are doing everything possible to ensure timely deliveries to our customers. I am relatively optimistic about our capacity to deliver. I am also prepared to accept new Rafale contracts,” added the CEO. With this goal in mind, and to fulfill a record order book valued at 41.1 billion euros—representing ten years of activity and consisting of 223 Rafale jets (along with 83 Falcon business jets)—Dassault Aviation plans to increase production to three combat aircraft per month starting in 2025, up from two per month this year. To facilitate this increase and to replace retiring employees, the manufacturer has already hired 1,000 of the planned 2,000 new employees for 2024.
Orders tripled in the first half of the year
Despite these challenges and the highly volatile geopolitical environment, particularly regarding conflicts in Ukraine and the Middle East, the manufacturer concluded the first half of the year with favorable results. All financial indicators are positive. Order intake more than tripled in value, reaching 5 billion euros, aided by the activation of the third tranche covering 18 Rafale jets as part of the order from Indonesia, as well as contracts signed for 11 Falcons, including the new 6X model, which entered service at the end of 2023. Supported by the delivery of six Rafale jets to the French armed forces and twelve Falcons, adjusted revenue rose to 2.5 billion euros, compared to 2.29 billion euros a year earlier. Adjusted operating profitability improved slightly to 6.7%, from 6.6% in the first half of 2023. Adjusted net income reached 442 million euros, resulting in a net profitability of 17.4%.
“Even though the situation is challenging, our outlook remains unchanged: we anticipate achieving a turnover of around 6 billion euros and delivering 20 Rafale jets and 35 Falcons,” specified Éric Trappier. Several issues warrant attention in the coming months, in addition to the consequences of the war in Ukraine and the conflict in the Middle East. The upcoming presidential elections in the United States are “distorted” since Joe Biden has withdrawn from the race. “We can expect an eventful period in the coming months,” believes the CEO of Dassault Aviation. These elections could also disrupt the American business aviation market, the largest globally. “The overall market is soft,” he summarized. This situation occurs while the manufacturer stands at a pivotal point, with new-generation jets—more modern, energy-efficient, and comfortable—set to replace older aircraft within the Falcon lineup, including the 6X and 10X, whose first deliveries are now expected in 2027.
Concerns about the “French local environment”
“But what worries me most is the local French environment,” confided Éric Trappier. “Industrialists are in a state of uncertainty: there is no absolute majority in the Assembly. What will the future government look like? What future measures and legislation can we expect? What changes in taxation, standards, and regulations?” he added, echoing the concerns of members of the Union of Metallurgy Industries and Trades (UIMM), the employers’ federation he chairs. “We are secure at Dassault Aviation with a family that invests its funds in the company. But the UIMM represents 90% of SMEs that are anxious, as are investors, particularly foreign ones,” he cautioned.
Another area of focus is the next steps for the Future Combat Air System (Scaf) project, which involves France, Germany, and Spain, with Dassault Aviation managing the new combat aircraft (NGF) project. “Currently, we are engaged with our partners in phase 1B of preliminary studies. We are preparing for phase 2, which involves constructing a demonstrator. We are still far from executing a full program,” explained Éric Trappier, stressing the need to agree on task distribution among manufacturers before proceeding to this new phase: “We must understand who does what.” With more elections approaching in Europe, “we will see what decisions the states make.” For now, “we have a substantial workload on the Rafale F5 standard and the combat drone proposal we have made to the French armed forces and the General Directorate of Armaments to support the Rafale F5 beyond 2030. Our combat drone project is separate from the Scaf, which itself incorporates small support drones,” concluded Éric Trappier.
*The Dassault group owns “Le Figaro.”
Despite Subcontracting Challenges, Dassault Aviation Aims to Ramp Up Fighter Jet Production
Introduction of Production Goals
In a bold move amid subcontracting challenges, Dassault Aviation is determined to escalate its production of fighter jets to three per month by 2025. The CEO of Dassault Aviation, Éric Trappier, emphasized the significance of overcoming subcontracting difficulties during the company’s presentation of first-half results for 2024. The struggle lies predominantly with suppliers of aerostructures and small equipment, essential components for aircraft assembly.
Current Challenges in Subcontracting
Éric Trappier acknowledged the ongoing issues with subcontractors, stating:
“These problems persist, particularly among our aerostructure suppliers and small equipment. We help them by sending teams to them and giving them advance payments. But we are experiencing delays, which are reflected on the assembly lines.”
The repercussions of these delays manifest in the production timelines and delivery schedules, prompting Dassault Aviation to take proactive measures to mitigate issues while still enhancing production capabilities.
Strategic Planning for Increased Production
To effectively respond to a record backlog valued at €41.1 billion, Dassault Aviation aims to increase the assembly of Rafale fighter jets from two to three per month by 2025. This increase is in response to an unprecedented order book that includes 223 Rafale fighters and 83 Falcon business jets. To realize this ambitious target, the company has initiated significant recruitment efforts, having already onboarded 1,000 new employees out of a planned 2,000 for 2024.
Financial Performance Amidst Challenges
Despite the obstacles faced with subcontractors, Dassault Aviation reported impressive financial performance for the first half of 2024. Order intake surged, surpassing expectations with triple the value compared to previous periods. In particular, the Indonesian order for 18 Rafale jets contributed substantially to this growth.
| Financial Metrics | First Half 2024 | First Half 2023 |
|---|---|---|
| Order Intake | €5 billion | €1.7 billion |
| Adjusted Revenue | €2.5 billion | €2.29 billion |
| Adjusted Operating Profitability | 6.7% | 6.6% |
| Adjusted Net Income | €442 million | NA |
Market Landscape and Future Projections
Despite the prosperous first-half results, Éric Trappier remains cautious about the future. Conditions in the global market, including geopolitical tensions and uncertainties surrounding the US elections, could pose challenges that impact both the production and sales forecasts.
“The general market is soft,” he remarked. “Even though the situation is difficult, our guidance is unchanged: we expect to achieve a turnover of some 6 billion and deliver 20 Rafale and 35 Falcons.”
Benefits of Increased Production Rates
Increasing the rate of fighter jet assembly has several advantages:
- Meeting Demand: As international defense needs evolve, ramping up production allows Dassault Aviation to meet demand from various countries.
- Economic Growth: Higher production rates contribute to job creation, directly benefitting the local economy and supporting suppliers.
- Innovation Acceleration: Faster production leads to quicker implementation of technological advancements in newer aircraft models.
Analyzing the Local Industrial Environment
Éric Trappier expressed concern regarding the French local environment, particularly the uncertainties stemming from the political landscape. These issues have led manufacturers to grapple with potential shifts in policy and regulation, which could impact the overall industrial ecosystem.
“Industrialists are in a state of uncertainty: there is no absolute majority in the Assembly. What will the future government be? What future measures and laws?”
This uncertainty poses challenges for not only Dassault Aviation but also other small to medium enterprise suppliers who form the foundation of the aerospace manufacturing ecosystem.
The Future Combat Air System (FCAS) Initiative
Looking beyond immediate challenges and production goals, Dassault Aviation is actively involved in the Future Combat Air System (FCAS) initiative alongside German and Spanish partners. The project’s scope includes developing next-generation combat aircraft, which represents a significant shift in the landscape of European defense spending and technological capabilities.
Project Milestones
- Phase 1B: Upstream studies currently underway.
- Phase 2 Preparation: Plans to construct a demonstrator are in development.
- Collaborative Efforts: Ongoing discussions regarding task sharing among partner nations are crucial to ensure smooth project progression.
Technological Advancements and New Jets
As part of the modernization efforts, Dassault Aviation is also working on new-generation jets that are more efficient and comfortable. The Falcon family is set to welcome advanced models such as the Falcon 6X and 10X, with deliveries expected by 2027.
Operational Enhancements
- Rafale F5 Standard: Improvements incorporate advanced technology to enhance operational effectiveness.
- Combat Drone Development: A project that supports the Rafale F5 beyond 2030, independent of the FCAS initiative.
In conclusion, while challenges from subcontracting persist, Dassault Aviation’s commitment to ramping up production reflects its resilience and strategic foresight. By focusing on recruitment, leveraging strong financial performance, and engaging in next-generation aircraft initiatives, the company prepares itself for a competitive future in the global aerospace industry.
