Paris International Air Show

This week saw the 54^th annual Paris Air show at Le Bourget airport. This is the first show after a four-year hiatus due to the COVID pandemic. There were 2,453 exhibitors from 49 countries, including four from Australia. Professionals visiting the show numbered almost 140,000 people. On display were 140 aircraft. Official delegations from governments counted 98 countries. This is the biggest airshow of its kind in the world, and there was a strong focus on defence in the context of the Russian war on Ukraine.

Orders announced at the show reached near-record highs. Airbus and Boeing showed off commitments for around 1,100 jets. Airbus announced a deal for 500 aircraft with the Indian low-cost airline IndiGo. With such orders proliferating, analysts quickly raised concerns about a strained supply chain that will be creaking under immense pressure. The aerospace industry is one of the most fragmented industrial sectors, with reliance on small manufacturers of highly specialised parts, there will be challenges for any buyer bidding for engines and fuel cell systems. Airbus was operating at maximum capacity even before this order.

Reuters analysts observing these massive procurement announcements stated that the Ukraine conflict has put pressure on Europe's broader arms industry to become more nimble and hold more stocks of weapons and munitions. The war has seen ballooning defence budgets as the West rushes arms to Ukraine and boosts funding for future development programmes for their own forces. The same experts question whether funding – or indeed industry output – can stay at levels high enough to restock munitions while simultaneously developing a new generation of fighters, drones and precision weapons.

Back home, Australia continues to rely on mining, agriculture and services for most of its economic activity, our shortfall in manufacturing capacity is striking, especially in defence. Australia, in its isolation and with a lack of an industrial or manufacturing base, is especially vulnerable to supply chain bottlenecks, as evidenced during the COVID pandemic. We have no leverage with the big manufacturers as they have no skin in the game on Australian territory. The AUKUS agreement goes some way to recognising our supply vulnerability by promoting knowledge sharing, training and industrial investment in the nation. The Albanese government has made budgetary commitments to support our people to address these goals. However, the country needs these pledges on education and training to be matched with support to our small and medium enterprises.

Despite the promise of AUKUS for Australian industry, until agreements are reached on technology transfer outside the US, there will be no investment in Australia. Raytheon and Lockheed Martin were announced in 2022 as partners for The Guided Weapons and Explosive Ordnance (GWEO) Defence priority but this  partnership will likely be sorely affected by delays, and timelines will almost certainly blow out. To compound the bureaucratic bilateral issues, the Australian Government is reportedly showing reluctance to provide adequate financial support to US companies that might invest here. They need tax and employment incentives before they will consider implanting a site in Australia. The consequence is that even were the bilateral agreements on technology transfer signed today, US companies see no incentive to investing in Australia. If this remains the case, Australia’s manufacturing base will continue to lag behind similar-sized countries.

Clearly Australia can’t manufacture everything it needs to support  defence. However, some carefully chosen sovereign capability that can be linked to our national and university research structures would be well-advised. Quantum computing is one area where Australia could specialise, prosper, and support our Defence people. The Modern Manufacturing Strategy, replaced by the National Reconstruction Fund has seen the allocation of $15 billion for partnerships with the private sector to support the economy and regional development. Only a part of this will go towards our national defence.

The war in Ukraine is demonstrating increased demand for new rocket artillery on the continent. MBDA, the arms manufacturer (part-owned by Airbus) signed with four EU nations to launch a concept stage of Europe’s first hypersonic interceptor. Lockheed Martin and Rheinmetall launched a new partnership to offer a European-made rocket launcher based on Lockheed’s High Mobility Artillery Rocket Systems (HIMARS). Defence manufacturing is booming.

Government support is key to supporting achievements in technology and infrastructure. In a landmark move, seven of the world’s major aviation manufacturers released a joint statement calling for political support for decarbonisation of the aviation industry, including the defence sector. These statements are rare in a highly competitive sector, and it proves the compelling need for greater government intervention. They called on policy-makers to condition the environment for production and use of sustainable aviation fuels. They stated that government investment is necessary due to the technical challenges in decarbonising aviation and a pressed for ramping up of public-private partnerships. They also called for the establishment of joint standards between the civil and defence applications to ensure compatibility and manufacturing efficiency in sustainable aviation fuels.

The smaller French firms at the show expressed interest in working with Australia. Some already have had contracts here with the ADF, such as ARESIA, a specialist in carriage and ejection systems. Further cooperation with us would be welcomed, though they express concern about what is perceived as a gap between excellent relationship management with the military, and an inability to follow through with discussions at the Department of Defence.

The Defence Strategic Review identifies that Australia’s region, the Indo-Pacific, faces increasing competition that operates on multiple levels – economic, military, strategic and diplomatic – all interwoven and all framed by an intense contest of values and narratives. The Government has given licence for innovation, sovereign capability, increased munition holdings and accelerated delivery. The challenge is how does Australia compete in the global arena with the escalating pressure on the supply chain, brought about by the conflict in Europe, to ensure it is not caught short if the time comes.