Dogfight Over Skies of Central Europe

Andrzej Karkoszka’s impish grin does not exactly evoke images of Tom Cruise, but he gave a dazzling “Top Gun” performance anyway at a military air show here.

Karkoszka suited up in a sleek flight uniform, snatched a kiss from his wife and mounted the cockpit of an F/A-18 Hornet fighter jet on loan from the skies above Bosnia-Herzegovina.

“You have a great plane. I wouldn’t mind going back up again,” he gushed after a 40-minute tour de force over Poland’s central plains. “I hope to repeat it when we have our own.”

Karkoszka isn’t an actor; he isn’t even a pilot. He is a deputy defense minister doing some serious aircraft shopping. His F/A-18 excursion several months ago was the supersonic version of a spin around the block--the ultimate test drive courtesy of McDonnell Douglas Corp., the jet’s manufacturer.

With members of the former Warsaw Pact military alliance lining up for entry into the North Atlantic Treaty Organization, the skies over Central Europe have been transformed into a heavenly showroom for advanced aircraft from the United States and Western Europe.

“It has been all big smiles. They love it,” said Ben Park, the F/A-18 program manager in Central Europe, who books VIP demonstration flights. “We even got a cosmonaut up there.”

Poland, Hungary and the Czech Republic--among the front-runners for NATO membership--want to acquire several billion dollars’ worth of new jet fighters to bring their aging air forces up to NATO standards. Though none of the prospective Atlantic alliance members has begun formal entry talks, the quality of aspiring armed forces has been identified as a “relevant factor” in choosing countries in July that qualify for expansion.

The most pressing question confronting government officials in all three countries: which aircraft to buy?

Friendly advice has not been hard to come by, particularly from U.S. manufacturers of the competing F/A-18 and F-16 combat planes. If you want to please NATO’s preeminent partner on the eve of accession talks, the message goes, buy American.

“The lobbying is going on every day,” said Karkoszka, a regular guest at American functions in Warsaw.

Entering New Markets

For Western aerospace giants, the prospect of jetting into once-forbidden markets in the former Soviet bloc has turned the politically delicate question of NATO expansion into a spectacular marketing free-for-all.

Indeed, this sort of overseas opportunity--here and in Asia--is driving rapid growth throughout the aerospace industry. And it helped make McDonnell Douglas an attractive acquisition for Boeing Co. of Seattle, which announced Sunday that it will take the maker of the F/A-18 under its wing in return for stock worth $13.3 billion.

Until now, the region has been the exclusive domain of the Russians, who during the Soviet era were the sole suppliers of sophisticated combat aircraft and who are now striving to renew those relationships before Western competitors lock them out.

“This market is like a snowball,” said Michel Meriac, an engineer with Dassault Aviation, the French manufacturer of the Mirage 2000 jet. “If one country buys your aircraft, they will talk about it to the others. It is like getting a new car. You always think the one you bought is the best in its class.”

And like good car salespeople, aerospace officials are leaving nothing to chance in Central Europe.

At the air show here, a dashing French general was showing off the wizardry of a Dassault fighter to a Polish pilot, who was then invited for an in-flight demonstration. Across the vast military airstrip, U.S. Air Force and Lockheed Martin Corp. officials were treating Polish aviators to hair-raising sprints on a pair of F-16s borrowed from a U.S. base in Germany.

For the entry price of a dollar, ordinary Poles were also able to test an F-16 on a flight simulator, stock up on souvenir posters of the world’s most advanced combat aircraft and watch a glitzy aeronautics performance in which U.S. and French jets curled through the clouds and playfully popped the sound barrier.

Sales Opportunities

Similar extravaganzas have been presented elsewhere in Poland, Hungary and the Czech Republic.

On a global scale, the expected Central European contracts are modest. Estimates range as high as $8 billion for several hundred planes; by comparison, the new combat aircraft the Pentagon wants developed for the 21st century could generate revenues of several hundred billion dollars.

But with big-ticket arms procurements vanishing almost everywhere, every corner of the world market has become a battleground.

Big aerospace companies are reluctant to concede any territory to competitors, especially in a region such as Central Europe where outmoded armed forces are being rebuilt from scratch and relationships developed now will determine sales for decades to come.

“If you are a major aerospace contractor and you are looking into the future, you are seeing an increasingly shrinking pie,” said Daryl Stephenson, who was among 40 officials from McDonnell Douglas and its subcontractors recently on tour in Poland. “To get your share of the business, you have to fight harder. The Central European market is a new opportunity for everyone.”

Sales opportunities in about 10 formerly Communist countries officially opened for U.S. defense manufacturers early last year when the Clinton administration eased restrictions on the sale of sophisticated offensive weapons to the region. So far Poland, Hungary and the Czech Republic have been approved for the jet fighters.

At the same time, a new policy was set that requires U.S. embassies to help promote military exports, assuring a full-court diplomatic press on behalf of U.S. aircraft.

There was some concern among U.S. officials about diverting precious resources from the struggling market economies of the three countries for showy military purchases inspired more by national prestige than defense needs. Of the 1,500 or so NATO standards that new members would probably have to attain, none specifically requires aircraft purchases.

But in the end, the U.S. determined that the countries should decide for themselves.

“We are the largest country in NATO, and we selfishly want all the business for ourselves,” said a U.S. official involved in promoting the American aircraft. “We say, ‘If you are going to buy, buy American all the way.’ ”

The lifted restrictions opened the Central European sales door to McDonnell Douglas and the U.S. Navy, which under American export law acts as the official government interlocutor for the F/A-18, and Lockheed Martin and the U.S. Air Force, which play the same role for the F-16.

In their journeys around former Warsaw Pact countries, the Americans have found the sales trail heavily traveled by Russian, French and Swedish aerospace executives and military officers.

The American Cause

But the intensity of the U.S. blitz has made up for its late start.

Scores of military officials, corporate executives and industrial consultants have flooded the three countries over the last year.

Polish, Hungarian and Czech officials, meanwhile, have been treated to demonstration flights, production tours and nights on the town in Washington, St. Louis and Fort Worth. With Boeing now in the picture, they can count on future trips to Seattle.

“The last time I went to Budapest, I encountered 30 U.S. Air Force officials, and the lowest rank among them was a colonel,” said Jan Hammarstrom, marketing director for Saab Military Aircraft, the Swedish manufacturer of the Gripen jet fighter. “I could never bring 30 air force officials from Sweden. We don’t even have that many.”

Outgoing U.S. Defense Secretary William J. Perry was enlisted for the American cause, as was Gen. Joseph W. Ralston, deputy chairman of the Joint Chiefs of Staff. In Warsaw last spring, Ralston met with Polish President Aleksander Kwasniewski.

The U.S. sales pitch is simple: If you want to join NATO, it makes sense to equip your armed forces with the jets of its most important member. Although the Americans are careful not to explicitly link U.S. purchases to speedy NATO membership, the connection is obvious.

“We make the point that the U.S. government would like to have a U.S. product flown by these nations,” said Mac Stevenson, Central European director for Lockheed Martin. “It just helps relationships--military to military, business to business and government to government--when you do business on this scale.”

European Competition

The French and Swedish pitches are variants of the theme with an added dose of Pan-European sentiment. They promise to help their Central European neighbors in their bids to join the European Union, something the Americans cannot match, while also assuring a strong NATO connection.

The Swedes are not members of NATO, but they have teamed up with British Aerospace to provide a NATO link. They have even explained away commonly raised fears about alienating the world’s only superpower: About 30% of the Gripen fighter is built with American parts.

But already there is speculation, especially in Poland, that the dogfight has become essentially an American one. A top aide to Kwasniewski openly praised the F-16 during a meeting last summer and identified the competing American jets as “the most important” offers under consideration.

Hungarian officials--once wedded to the Swedish Gripen--have recently made it clear that other aircraft are being seriously entertained. The Hungarians said they would consider teaming up with the Poles on a joint purchase.

“The U.S. has been Big Brother for a long time, and it wants these countries to buy from Big Brother,” said Hammarstrom of Saab. “It is a powerful argument.”

The selection, meanwhile, has become intertwined in the complex political question of how and when to expand NATO.

Hungarian Prime Minister Gyula Horn has said a final decision on aircraft purchases will come only when the terms of Hungary’s entry into the Atlantic alliance have been set--something not expected before the end of next year.

Officials in the other countries have also signaled that military considerations have taken a back seat to political ones. None of the three countries has yet announced a formal tender for the combat jets, and the Polish Ministry of Defense has hinted that the process could be extended over several years.

The delays have allowed critics in the three countries to assess the huge financial commitment aircraft purchases will require--and to insist upon equally huge incentives from the aerospace companies.

The manufacturers, in turn, have come up with lower-cost alternatives to conventional purchases, including leasing used aircraft, offering generous credits and moving production facilities to Central Europe.

Once the political details of NATO membership are worked out, analysts say, the aerospace company that offers the best package of so-called industrial offsets--opportunities for buyers to pay in ways other than cash--will emerge the winner. The Central European countries are particularly interested in attracting foreign investments in troubled domestic defense industries so that new technologies are imported with the aircraft.

“We simply cannot afford to buy arms in such a way that we just take cash out of the bank,” said Krzysztof Wegrzyn, a top Polish defense official. “The euphoria of suddenly getting modern aircraft has subsided. We have now become very calculating.”