* U.S. spying on Brazilians helped to derail Boeing bid
* Saab jets cheaper than rivals' as defence budgets cut
* Saab to face stiff competition in seeking further orders
* Other export deals may raise ethical dilemmas
* More sales would help to spread development costs
(Adds reaction, quotes, background, updates share)
By Simon Johnson and Niklas Pollard
STOCKHOLM, Dec 19 Shares in Swedish aerospace
firm Saab leapt by a third on Thursday after it beat
U.S. and French rivals to win a $4.5 billion fighter deal with
Brazil, strengthening its hand in competing for export orders
for years to come.
Brazil's choice of Saab's Gripen single engine jet over
Boeing's F/A-18 Super Hornet and Dassault Aviation's
Rafale showed the Nordic group could beat global
aviation heavyweights, securing development of an aircraft that
has been surrounded by doubts.
Saab pulled off the surprise coup on Wednesday after news of
U.S. spying on Brazilians helped to derail Boeing's chances.
Analysts said it would still face stiff
competition for export orders elsewhere, and deals with some
buyers could raise ethical dilemmas for Swedish leaders who
traditionally champion democracy and human rights.
So far only the Swedish air force has bought new generation
Gripens, with fellow neutral nation Switzerland poised for a
deal and Brazil opting for a similar model. However, Saab was
offering a cut-price deal at a time when many governments are
slashing their defence budgets.
"If Brazil, Sweden and Switzerland choose Saab, that makes
it easier for other countries to select the Gripen as it removes
the uncertainty surrounding the project," said Stefan Cederberg,
analyst at SEB.
"If you are going to invest in new aircraft for the coming
30-40 years, the probability has increased considerably that you
will do it with the Gripen system."
Saab said it would begin final negotiations on Friday for
the Brazilian contract which prompted celebrations in the
southern city of Linkoping, where Saab has its main Gripen plant
and 10,000-15,000 work in companies connected to the aerospace
At 1300 GMT Saab shares were up 31.8 percent at 175.30
Swedish crowns ($26.84) but others urged caution. "A
breakthrough like this deal and the Swiss selection certainly
may help further deals along, but the competition is very hard,"
said Siemon Wezeman, senior researcher at the Stockholm
International Peace Research Institute.
"In addition, several of the potential markets are in
regions of tension or to governments that are not very
democratic. Marketing and selling the Gripen there may need some
serious soul-searching by Swedish political decision makers."
Saab, which has about 14,000 employees and annual sales of
about 24 billion crowns ($3.67 billion), started developing the
Gripen in the early 1980s with deliveries to the Swedish air
force beginning in the following decade.
An early version crashed in central Stockholm during a 1993
air display, although no one died in the accident. Saab has
developed several versions of the Gripen, which can fly twice
the speed of sound, but since the fall of the Soviet Union
scepticism has grown about the need for Sweden to keep making
The Swedish air force is small and closer ties with NATO, of
which Sweden is not a member due to its neutrality, have made
the export market vital for Saab. Success has been limited, with
fewer than 100 planes sold or leased overseas.
But with regional powers from Africa to Asia looking to arm
themselves relatively cheaply against new threats and top
Western fighter projects struggling to contain costs,
second-tier firms such as Saab may score some more wins against
bigger rivals such as Boeing and Lockheed Martin.
"Everywhere I go around the globe, almost everyone brings up
the fact that they have a challenge, they have a budget that
does not support the capabilities they want," said Lennart
Sindahl, senior executive vice president at Saab.
"We have shown that we can provide the capabilities while
not totally destroying the budget for the customer, and I think
that's a winning factor for success now."
Saab's Gripen was the cheapest choice for Brazil, well under
the $8 billion cost reported in media for Dassault's Rafale and
the more than $5 billion for Boeing's Super Hornet.
Saab, whose biggest shareholder is the Wallenberg family's
Investor AB with a 30 percent stake, also says its
planes are 50 percent cheaper to maintain than rivals.
The order will secure development of the new generation
Gripen which Sweden has said it would not support unless another
country bought it. In September, the Swiss parliament approved a
purchase of 22 Gripens but the $3.4-billion deal is subject to a
Earlier generations of Gripen have been sold or leased to
South Africa, Hungary, Thailand, the Czech Republic and Britain
as well as being used by Sweden's own air force.
Brazil's choice means Sweden can share costs of developing
the new plane and future upgrades with other buyers.
"This doesn't just open things up on the fighter side," said
Mats Liss, analyst at Swedbank. "It strengthens Saab's
credibility as a supplier of defence materiel."
Saab said parts of the aircraft will be built in Sweden and
others in Brazil, where officials said domestic manufacturer
Embraer SA would be its main local partner.
Swedish Metall union chairman Goran Gustafsson said the
order was good news for employees at Saab, which has been
cutting staff for much of the last two decades. "This secures
the future for the workers who are already here," he said.
"Then... we will see if we will need more personnel, but we
won't know that until the contract is signed."
Founded in 1937 as an aerospace group, Saab ventured into
cars and trucks after World War II, but sold off these
businesses more than a decade ago. Today, fighter jets make up
about 25 percent of Saab sales, with the rest coming from
weaponry and defence electronics.
($1 = 6.5315 Swedish crowns)
(Reporting by Mia Shanley, Olof Swahnberg, Oskar von Bahr,
Bjorn Rundstrom, Johan Sennero and Sven Nordenstam.; Editing by