Ukraine/Warplanes: wings for defense company stocks

Volodymyr Zelenskyy’s tour of European capitals could bring Ukraine closer to acquiring fighter jets. That would give freedom wings — and a helpful boost for defense contractors. They are already benefiting from Ukraine-related orders: Saab, maker of the Gripen fighter jet, rose 10 percent on Friday as sales forecasts were accelerated.

The Ukrainian president’s campaign to acquire jets faces a number of obstacles. He is still building the necessary Western consensus. The US has so far opposed the transfer of widely used F-16s built by Lockheed Martin. The Eurofighter Typhoon that Britain is considering was developed by BAE in a consortium, so a nod from Italy, Spain and Germany is likely to be required.

There are numerous operational difficulties – from the training required, to the logistics required to operate and maintain a fleet, to the local terrain. According to think tank Royal United Services Institute, Typhoons are not designed to be operated from short or uneven runways, as is the case in Ukraine.

These difficulties may not be insurmountable. Political red lines in delivering ever more sophisticated equipment to Ukraine tend to shift. And it may be possible to operate vehicles in sub-optimal conditions – or even send in aircraft that are better suited for the purpose. Saab’s Gripen jets – specifically 80 older ones held by Sweden, the Czech Republic and Hungary – have been touted as a cheaper and more maneuverable option.

It is still unclear whether Zelenskyj’s plea will be successful. If so, it would give further impetus to Europe’s rearmament supercycles. But not all planes sent to Ukraine would have to be replaced with newer models. Some could be older planes already earmarked for retirement. And jets are long-lead items, taking several years from order to delivery.

The exercise would still feed into the modernization of Europe’s combat aircraft fleets. This is a long-term project. Agency Partners’ Sash Tusa estimates that the European air force will need to purchase up to 350 more fighter jets in addition to existing orders over the next decade. The expected costs amount to up to 50 billion euros. Zelenskyy’s wings would speed up this process.