The Marmot's Hole

Korea... in Blog Format

Category: Korean Economy (page 1 of 28)

Koreans now drink more coffee than eat white rice.

The headlines are saying that Koreans drink more coffee than eat rice, a statement that’s patently false.

Screen Shot 2014-09-23 at 10.00.14 AM

(Graphic from I Am Koream)

White rice 7 + multigrain rice 9.5 = 16.5 total rice > 12.3 coffee, no?

However, there is very little doubt that total Korean intake of rice has been decreasing over the past few years, particularly among urban dwellers.

MBC says Korean Tourism is “Shameful.”

The blog koreaBANG comes out with some good stuff every now and then.  Added bonus?  They translate some Korean reader comments into English.  Yesterday they outlined MBC’s exposé on how some tourists (namely from that country just across the Yellow Sea) were being “taken for a ride” and how it could be damaging Korea’s long-term reputation as a tourist destination.

Korean tourism has made great strides over the past ten years, from 4.8 million tourists (or “number of arrivals”) in 2003 to 12.2 million in 2013.  However, despite the growth, there is some evidence that Korea may not be getting a lot of value from the increased numbers.  Part of it is structural (i.e. lower income of Chines visitors vis-à-vis Japanese tourists, the rising value of the won, etc.), however, some of it may be due to unscrupulous Korean merchants.  According to the MBC report a lot of tourists are getting scammed, leaving a bad taste in tourists’ mouths and threatening Korea’s long-term tourism growth:

However, Korea may not be drawing as much value from their tourist numbers than they perhaps should.  According to the MBC report a lot of tourists are getting scammed, leaving a bad taste

The shop owner: “This jacket is 120,000 won. The price is so cheap compared to its high quality.” The Chinese man paid about 210,000 won for 3 pieces of clothing.

The journalist tried buying the same clothes in the same shop.

(Journalist: “How much is it?”)
Shop owner: “You can take it for 55,000 won, if you pay cash.” When the journalist bought the same clothes that the Chinese man did, the price was about 100,000 won cheaper.

[...]

… Police investigated a Korean restaurant for Chinese tourists only, qualified as an outstanding restaurant by Tourism Board Organization. In the kitchen they found food that had passed the expiration date, and even leftovers that had been stored in the freezer.

Police: “3 years has passed (since the expiration date), 3 years.”

The same problem is occurring with accommodations. Among 70% with quality credentials have been reported for not meeting the requirements of a quality guarantee. Organizations awarding these credentials can also not be trusted…

The government has decided to loosen many regulations in order to raise the number of foreign tourists to 20 million by 2017. However, people point out that the government should combine all the quality assurance systems into one, and run it well.

So, there could be some long-term issues with Korean tourism and greater infrastructure integrity needs to be maintained while the industry continues to grow.  So, who has Korea decided to have helm the ship in these challenging waters?  Well, one important appointee is a former actor named Johnny Yune.  Ah, Johnny.  A very colorful guy who’s Korean-American (i.e. he’s got a U.S. passport), got his big break when he appeared on The Tonight Show Starring Johnny Carson in the 1980s and starred in the comedy movie “They Call Me Bruce?” (a surprising hit movie making almost $17M in only 325 screens in 1982).  He also had his own talk show on some UHF channel called “The Johnny Yune Show.”  Wow, can’t make this stuff up!  Well, there’s always a chance that Johnny will pull a Reagan (another former actor) and perform better than expected.

A couple more interesting Korean tourism factoids:

  • Russians apparently spend a lot of money in Korea while they are visiting.  Apparently for “medical tourism” (yes, plastic surgery is counted in those “medical tourism” numbers).
  • As far as Korea’s tourism has come, its overall size is still small compared to the rest of the OECD. Korea’s direct tourism industry accounts for about 2% of the GDP, whereas the OECD’s average is 4.7%.  However, that isn’t the median (which is probably somewhere around 3.8 to 4.0%).  The outlier Greece has skewed the average a bit with its whopping 16% of GDP.  Wow, they sure are getting all they can out of some warm weather and some ancient ruins.

So, a 41 trillion won stimulus? How do I get some of that action, huh?

Korea’s economic growth over the last year and a half hasn’t been great.  It’s been average at best and hasn’t been up to expectations or projections.  From a some perspectives, the Korean economy isn’t employing enough young people coming out of college and isn’t creating a lot of wage growth for many of those who are employed.  Well, it’s fair to say that Korea isn’t the only country suffering the same woes, but any ways.

So, the natives are getting restless and something needs to be sacrificed to the volcano god.  Madame Park pounded her fist on the table in a recent cabinet meeting and demanded ideas to “revive the economy no matter what.”

What’s the old standby when you need instant economic gratification?  Pump cash into the economy! So, Finance Minister Choi Kyung-hwan came up with the (sarcasm on) brilliant idea (sarcasm off) to dump 41 trillion won ($39.8 billion USD) into the economy through three ways:  1) make buying homes cheaper 2) make capital cheaper for some businesses and 3) give households more spending power.

Choi Kyung-hwan has dubbed this policy “Choinomics.”  Many people (including this writer) are skeptical that it is the panacea that many in the Korean press is making it out to be.  Short term stimulus, whether by fiscal (Choinomic) or monetary (Abenomics) means, are a temporary fix.  It’s kind of like cocaine, makes you feel like you are on top of the world for a few hours, but it’s not real medicine.  Structural reform is the real medicine.  But, like in Japan, structural reform is tedious and sometimes hurtful (in the short term) to the immediate electorate, so it is often the economic weapon of last resort.

If Choinomics is just a morale saving measure to counteract the artificial temporary decline in GDP caused by the Sewol disaster, then I would be more supportive.  Given the modest improvement in GDP estimated by Choi (estimated at only 0.1% GDP improvement for this year and 2015) I suspect that’s all it is, despite the enthusiasm for it demonstrated in the Korean press as some sort of counter to the equally futile Abenomics.  So, my qualms are not in the actual policy itself, but in the manner in which it is being marketed by the government and the press as a “do all” and “save all” genius economic miracle policy.

Something Wicked This Way Comes . . .

There has always been this fear that Chinese technology firms will knock-off major Korean businesses like Samsung or LG and now, these concerns seem to be coming closer to realization: Samsung has lost its top spot in cellphone manufacturing, in China, to an upstart Chinese firm Xiaomi – which makes an android-varient OS and gear that looks a whole lot like Apple’s.

Oddly enough, even their founder looks like a Steve Jobs knock-off.  Can’t he manage something original!?

A Steve Jobs knock-off?

A Steve Jobs knock-off?

Update

Right on the heels of this news, Samsung and Apple have called a truce to their legal pugilism outside of the US.  I suspected that something of this sort would happen and, yep, it certainly did.

Paris Baguette goes to… Paris?

In a move that can be determined as either the height of hubris or the proverbial roll of the dice, the parent company of Paris Baguette has decided to open up its newest location in the heart of Paris, France.

(Photo from Korean Herald)

Ah, notice the “Boulangerie” (French for “bakery”) sign a bit more prominently displayed than the “PB” or “Paris Baguette” signage.  Personally, I question the attempt to bring croissants infused with hot dogs to a population as finicky with their pastries as the French.  Then again, it couldn’t have been more offensive as opening up a Taco Bell in Mexico or a Pizza Hut in Italy.  Wait, there are no Pizza Huts in Italy.  Good thing too as it might create some anti-American backlash.

Asia observer Donald Kirk pens an interesting article over at Forbes with his take:

[SPC Group is]… opening a Paris Baguette, mais oui, in the heart of the city that provides its name.  Along with French restaurants that are truly French, Paris Baguette decided to compete where it’s likely to attract the most scrutiny and appraisal by knowledgeable customers.

[...]

The idea is to go beyond the chain’s Korean roots, to show it’s truly French, to match the most sophisticated, subtlest tastes of any French restaurant. In keeping with that approach, Paris Baguette is a little reluctant to publicize its history as a Korean company in the hands of a Korean billionaire, Hur Young-in,  chairman of  SPC

So, to “show it’s truly French” to French people in Paris, huh?  Okay, good luck with that Mr. Hur.

Korean beer consumers voting with their feet

Many foreign beer drinkers complain that Korean beers suck.  Comments range from donkey piss to kinda drinkable if really, really cold.  Personally, I like Korean beer with spicy Korean food and have never really thought of Korean beers as terrible.  However, there is nothing like the free market to bring out a little objectivity to the debate.

According to data from the Korea Customs Service consumption of imported beer has risen sharply:

South Korea’s beer imports reached a record-high level in the first half of this year, exceeding the nation’s beer exports.

Beer imports to the country surged 28.5 percent on-year to US$50.8 million during the January-June period, the highest figure since comparable numbers were first made available in 2000…

[...]

Imported beer['s] tonnage has increased more than 15 times since 2000…

So, are the Koreans flocking to British stouts or American lagers?  No.

Imports of Japanese beer came to 13,818 tons, accounting for the largest portion of the figure at 25.8 percent. The list was trailed by the Netherlands, Germany, and China at 8,887 tons, 7,825 tons and 5,067 tons, respectively.

Nippon number one!  At least in beer imports.

Netherlands?  Would that mean Heinekens are popular in Korea?

A different kind of Chinese invasion

Tourists and RMB.  Yep, Korea is becoming awash in both.  Quartz article sums it up nicely:

Chinese tourists are heading to South Korea more than any other destination this year, according to travel agency Ctrip. That’s because political instability has turned many off Thailand, and China’s ties with South Korea have been warming.

Invasion central?  Jejudo.

But most of all there is the undeniable appeal of JejuThe resort island off the South Korean coast is drawing Chinese tourists with its subtropical climate, visa-free status, and attractions like casinos and an erotic-sculpture theme park known as Loveland.

[...]

In 2013, almost four million mainland Chinese tourists visited South Korea, and 1.8 million of them went to Jeju…If Ctrip’s predictions are correct, the number of mainland tourists visiting South Korea will rise to 5.6 million this year—equal to over 10% of South Korea’s population.

Chinese tourism for 2014 may equal 10% of the ROK’s population?  Holy cow!

 

A New Era in Korea – Minus the American Influence

President Xi of the People’s Republic of China, and a large entourage of Chinese businessmen (Alibaba, Baidu), are currently visiting South Korea. The PRC is hoping for improved business ties but this time, there is, IMHO, the possibility of a sea change on the Korean peninsula.

Why and how?

China wants to change that status quo – they want to do so through money and through a redefinition of regional security – without American influence.

First, in business, China is proposing the foundation of a $50 billion “Asian Infrastructure Investment Bank”, first proposed by President Xi in October 2013, during a tour of Southeast Asia. This bank would have the PRC holding a fifty-percent stake in this bank and has hinted at benefits to those nations that participate and Xi’s visit to Seoul, currently under way is very much about the benefits to South Korea. (we will get to what South Korea might actually want from joining this venture shortly). South Korea has expressed an intent to become an offshore trading centre in Chinese currency (renminbi) and this current meeting is expected to address this as well.
For South Korea, this is useful and important since South Korea’s two-way trade with China was $229 billion last year, exceeding the combined value of South Korea’s trade with the U.S. and Japan. Xi told reporters after the 2013 summit that the two countries will strive to boost their trade to top $300 billion (cite). This trade has been hampered by the fact that both countries transactions have been based in US Dollars (because the Yuan and Won are not directly traded) which costs more and reflects the indirect influence of things American in Asia. A statement from South Korea’s finance ministry and central bank said the South Korean won will become directly exchangeable with the yuan, joining major currencies such as the U.S. dollar, Japanese yen and euro that are convertible with the Chinese currency. The decision also makes the yuan only the second currency after the U.S. dollar that is directly convertible with the won. (cite)
China has also given consent to South Korea’s investment of tens of billions of yuan (billions of USD) in Chinese bonds and stocks. The PRC Government is encouraging businesses to invest in Korea as well. Chinese investors are highly interested in cultural content, software and real estate development, thus would explain the drive by the Korean side to have Chinese investment in the so far failed Saemangeum Project (cite) or the attempt at luring Chinese investment in the Yeosu – Dadohae Haesang National Park area, as well as some yet to be announced projects.

There is also the issue of the recent Conference on Interaction and Confidence Building Measures in Asia (CICA) and the PRCs desire to exclude powers – such as the U.S. – from regional security, suggesting an arrangement, guided by the PRC that is more than a little reminiscent of the Greater East Asia Co-Prosperity Sphere plan of Showa Japanese origin. As reported in The Diplomat:

Xi called for the creation of a “new regional security cooperation architecture.” He proposed that CICA become “a security dialogue and cooperation platform” for all of Asia, from which countries can explore the possibility of creating a regional security framework. He further indicated that China would take a leading role in exploring the creation of a “code of conduct for regional security and [an] Asian security partnership program.”
In promoting China’s vision for a new regional security framework, Xi took specific aim at the basis for the current status quo: military alliances. Xi tied such alliances to “the outdated thinking of [the] Cold War.” “We cannot just have security for one or a few countries while leaving the rest insecure,” Xi said. “A military alliance which is targeted at a third party is not conducive to common regional security.” Xi in turn offered an alternative vision for Asia, one based on an all-inclusive regional security framework rather than individual alliances with external actors like the United States.” (cite )

The real horse dealing that is not hinted at in the Korean press (which has been very quiet yet unmistakably pro-Chinese) is how will the PRC, under Xi, will resolve the issue of reunification between the two Koreas. The South Korean Government reportedly wants substantial help from Xi for making reunification a reality – in both financial aid and in the momentum that can only come from the DPRK’s only substantial supporter. Though many believe that the PRC will likely not destabilize the DPRK, if the ROK buys into the Chinese sphere of financial and political influence, rejects the American presence in the region and further guarantees their responsibility in dealing with the potential North Korean refugee problem, I honestly don’t see how a belligerent DPRK could possibly avoid change and reunification with the southern half since it would be a matter of survival to do so.

I suppose this is logical; solving Korea’s problem long-standing problem with the north and the cost of unification, while resulting in the exit of America’s influence in Korea and pushing the US further out of the region and likely gaining more support for the egregious regional claims made by the PRC. There is little America can do about this too, since the Chinese have the means to deliver the reality of unification to South Korea and whereas the U.S. can not.

Looking into a Sino-Korean future; also worrisome is the shortage of personnel to staff the larger Korean projects and the increased likelihood that more Chinese will see living and working in Korea as business ties and opportunities grow in the future. What impact this will have on Korean society remains to be seen and considering the tremendous potential influx of money into Korea, the Korea of fifty years from now will likely be a very different one from what we observe today in terms of world view and its relationship with Europe and the US.  Some may even talk about Korea as being a Chinese colony, wistfully remembering the days when their elders talked about how Korea was really an American colony.

Paris Baguette and Caffé Bene. Will they play in Peoria?

Ah, Paris Baguette.  The ubiquitous Korean bakery, with the strange name, serving Asian inspired and decidedly non-French pastries everywhere from the plush streets of Gangnam, to the shigol to even the doomed Sewol.  They, along with Caffé Bene and Tom N Toms,  are expanding into ‘Murica.  Their foray into the land of the free and the home of the brave is highlighted in this recent Fast Company article:

Three of South Korea’s biggest coffee shop chains, Paris BaguetteCaffe Bene, and Tom N Toms, have all embarked on American market expansion over the past several years….  Bene and Paris Baguette, especially, play down their Korean origins–and are planning to ramp up even more U.S. market expansion over the next two years. In a vivid example of 21st-century globalization, both chains are bringing South Korean-style customer service and corporate organization to the United States–except they are serving French- and Italian-style pastries and sandwiches instead of Korean food. 

Surprisingly, there are already 35 Paris Baguette locations and 99 Caffé Benes in the States.  Here are some boots on the ground reviews:

No word on if “A Twosome Place” (투썸플레이스) would be making the Transpacific plunge.  If they did, one would most certainly think they would have to consider a name change.

Hyundai does well in latest JD Power survey of initial quality

The annual JD Power & Associates survey of automotive initial quality places the Hyundai brand 4th, the highest non-luxury brand in the survey.

The rankings are below:

jdp-iqs-survey-1

(Photo from egmcartech.com)

Hyundai’s ranking in initial quality has gone up and down over the last decade, peaking at #4 in 2009, but spiking to has high as #25 the following year (2010).  According to this graph from the JoongAng, Hyundai’s ranking has improved for three year’s straight:

Hyundai scored number one in three product categories: small car (Accent), compact car (Elantra) and midsize premium car (Genesis).  It scored number two in two categories: midsize sedan (Sonata) and midsize SUV (Santa Fe).

Who else did well?  Kia, surprisingly at #7, ahead of BMW and gasp, Honda.  Chevy also did well at #4, welcomed news I’m sure given GM’s tough year of mass recalls and Congressional inquiries of potentially life threatening defects.  Bringing up the rear?  Fiat.  How does a car so small have so many problems?  Yes, I’m sure YangachiBastardo would be proud.

How do Koreans handle a foreign work environment?

Here at TMH we often get “colorful” commentary on what foreigners think about their Korean places of work and their bosses.  With that in mind, I’ve often wondered how the rank and file Korean felt about working in foreign owned companies and with foreign bosses.  Would Koreans be happier in a Western work setting vs. a Korean work environment?  Conventional wisdom may indicate that a Korean might be less stressed in Western work culture where there could be less emphasis on leadership hierarchy, expectation of face time, and perhaps the ability to exercise a bit more creativity and/or independence.

According to the JoongAng Daily, employment website Job Korea surveyed 942 Korean workers in both Korean and foreign owned (i.e. mostly Western) companies and government agencies with questions on their job satisfaction.  The results were not as clear as the expectations may be and point to there being a fair amount of stress and frustration for Koreans at foreign companies.

Unlike people working at Korean companies, who said their jobs caused them stress because they were concerned about their future and job stability, those employed by foreign companies said that they felt stress when senior workers gave them too much work and had unreasonably high expectations.

The survey results are ironic because many first-time job seekers consider foreign companies their top choice because of good benefits and a horizontal corporate culture.

“In Korean corporate culture, senior workers become a guardian when a junior first joins the team,” [Jung Joo-hee, a spokesperson for Job Korea] said. “Even though they nitpick or scold the juniors .?.?. the seniors have the intention to guide them to learn job tasks more efficiently and to help them become part of the team quickly.”

She explained that the absence of such guidance, which puts full responsibility for a task on a junior worker, may make Koreans feel even more pressured and isolated.

Here’s a summary of the findings:

(Source: JoongAng Ilbo)

Interesting.  Everybody got the same number 2, however foreigner bosses appear to be piling it on more than the others (32.1% vs. 28.9%, 28.7% and 27.4%).  Relationship ambiguity with their foreign seniors also appears to be scaring the crap out of Koreans.

And then there’s Samsung

If you haven’t read it yet, Kurt Eichenwald’s piece on the Great Samsung—Apple War in Vanity Fair is a MUST READ.

Samsung does not come off very well at all, but to be honest, my impression after reading the story is that the Korean electronics giant should count itself lucky—it could have come off much, much worse.

And that’s all I’m going to say about that because, well, not to put too fine a point on it, but Samsung scares the shit out of me.

Meanwhile, earlier this week, Samsung rather unexpectedly apologized to workers who contracted cancer at the company’s semiconductor factories and their surviving family members (read that Businessweek piece in full). Of course, there’s still negotiating to do before Samsung, like, compensates anyone, but I suppose a start’s a start.

(HT to KB, Colin)

Samsung Selfie-Gate

So, Samsung arranged for some guy who plays for the Red Sux to take a selfie with President Obama. Samsung Tweets photo, which subsequently goes viral. White House gets angry:

The selfie was taken during a visit to the White House this week by the 2013 World Series winners. Ortiz, who has an endorsement deal with Samsung, put the photo on Twitter, and the electronics company re-tweeted the post to its 5.2 million followers.

But turning the event into a promotional exercise for Samsung was apparently not on the White House’s agenda.

“I can say that as a rule, the White House objects to attempts to use the president’s likeness for commercial purposes,” White House press secretary Jay Carney said Thursday. “And we certainly object in this case.”

HT to Anonymous Joe and others.

As you probably know, the record-setting Ellen DeGeneres selfie at the Oscars was also a Samsung marketing stunt.

Well, anyways, White House lawyers are now involved. Great.

Say what you will about the Samsung Selfie Strategy, but give credit where credit is do—Samsung’s marketing has come a long, long way.

The Philippines officially orders 12 F/A-50s

The Filipino air force is a joke.  The last jet fighters they had were the old F-5 Freedom Fighters that they retired in 2005.  Even their Defense Secretary teased, “Our Air Force… [is]… all air without force.”

China lays claim to much of the South China Sea (particularly the Spratly Islands) and have routinely violated the Philippines’ territorial claims with both military aircraft and ships.  As of now, the Filipinos have nothing to send in response, other than unintimidating prop planes, patrol boats and antiquated destroyers.  Although the Filipinos do not officially acknowledge they are seeking weapons to counter Chinese incursions, they are essentially trying to obtain specific weapons to counter Chinese incursions.

Yesterday, the Philippines and Korea signed a contract to provide 12 F/A-50 light fighter-bombers, within 38 months, for about $420 million.  As both a war capable plane and a trainer is it the be all and end all for what the Philippines needs to counter China?  No.  But, the Philippines is not a rich country and cannot afford to buy and maintain more capable planes such as Saab’s Gripen, the F-16C (Block 40 or better), the Sukhoi Su-27, etc.  Plus, they are nine years out of practice in flying jet fighters and probably couldn’t use top-of-the line planes to their fullest capabilities because they have no training infrastructure.  The Filipinos themselves acknowledge that the F/A-50 was the best they can do for now.

Manila buys fighter jets worth $520m

(Photo credit: Oman Daily Observer)

Predictably, the Chinese were not happy with this news.  Rumor has it (from the Chosun Ilbo via the Yomiuri Shimbun) that a “Chinese official” made a request to the Park administration to not sell the jets, which Korea reportedly ignored.

So, what could the Chinese hypothetically send against Filipino F/A-50s?  It would have to have long range, so probably Sukhoi Su-27s or Sukhoi Su-30MKK.  Head to head does an F/A-50 have a snowball’s chance in hell against an Su-30MMK?  Most likely not.  An Su-30 is faster, more powerful, has advanced beyond visual range (“BVR”) missiles and sensor driven helmet mounted displays that control “off-boresight” weapons.  However, the F/A-50 has something that may save it: Link-16.  The Philippines are buying long range ground based radars that they will station near the Spratlys.  If linked with the F/A-50s then they can see Chinese planes before Chinese planes can see them, thus giving the F/A-50s a fighting chance, particularly if they are armed with their own BVR missiles.

Lastly, as I had mentioned before, the procurement pattern for the T-50 family of jets appears to belie the fact that it was originally designed as a trainer.  The customers (namely Iraq and the Philippines) want this supposed “trainer” to fight.  As a cheap jet fighter in a “stop gap” role it may not be all that bad.  Smaller and poorer nations don’t have a lot of choices.  Back in the Cold War the Soviets and the Americans sold their poorer client states cheap and easy to maintain Mig-21 Fishbeds and F-5 Freedom Fighters.  America and Russia don’t offer these planes (or modern facsimiles) anymore so there is a market need.  At the end of the day the T-50 family might be a better 21st century F-5 than a 21st century version of a T-38.

Next up?  KAI is pitching the T-50 family to the UAE, PeruBotswana, Thailand, not to mention the U.S. T-X program (in conjunction with Lockheed).

Quest for the T-X Holy Grail

The original rational for Korea Aerospace and Lockheed’s cooperation in developing the T-50 was to build a trainer that could qualify for the “whale” or “mother lode” account: America’s replacement for the venerable, but older than dirt, T-38 Talon.

KAI and Lockheed’s chief rival has always been Alenia Aermacchi’s M-346 Master.  In the global pre-battles between KAI and Alenia Aermacchi there have been wins and losses.  Alenia drew first blood with a win in Singapore.  Then KAI won an order from Indonesia.  Alenia won Israel.  KAI got a big order from Iraq.  Alenia won a modest order from Poland.  KAI is apparently dotting the i’s and crossing the t’s with the Philippines.  It’s been back and forth for the past four years.

However, all this is early dress rehearsal for the estimated 350 new jet trainers that the U.S. Air Force will need.  This is, to say the least, a huge account, that neither side can afford to lose, thus both are playing to win.  Alenia has partnered with General Dynamics, one of the largest U.S. based aerospace companies, and has offered to manufacture the M-346 at General Dynamics’ plants in Arizona and North Carolina.  Needless to say the Koreans and Lockheed are probably dreaming up the same manufacturing arrangement in order to buyrecruit the support of influential Congressman.

Today’s Flightglobal has an excellent summary analysis (with a lot of pretty pictures) of the upcoming battle:

Richard Aboulafia, vice-president of analysis at Teal Group, calls the KAI/Lockheed T-50 Golden Eagle the “most capable” option – but also probably the most expensive to buy and operate. Lockheed declines to discuss prices, but Aboulafia estimates the T-50’s flyaway cost will be $26 million per aircraft.

[...]

The T-50, which has been in service since the mid-2000s, can reach Mach 1.5 and pull 8g, Lockheed says. The type’s single General Electric F404 engine also has an afterburner. “If the [USAF] has the budget, and they want [pilots] to [transition] easily into an F-22 or F-35, the T-50 is the choice,” says Aboulafia.

The BAE/Northrop Hawk option is the cheapest at an estimated $21 million per, but they are clearly the dark horse in this fight.  The Alenia Aermacchi option is in the middle at an estimated $24 million per.

Aboulafia says Alenia Aermacchi’s T-100 – a derivative of its M-346 trainer – holds the middle ground. The aircraft are “very modern”, have “great flying characteristics” and will likely cost about $24 million each, he estimates. The M-346 (below) is powered by two Honeywell F124-200 turbofans, can pull 8g and reach 590kt at 5,000ft (1,520m), according to Alenia Aermacchi.

[...]

“It’s a good compromise,” says Aboulafia of the T-100. “The market has spoken to that. Israel and Singapore [are] two of the most prestigious militaries around.”

Here is a blog with an interesting (but technical) specification comparison between the two jets.

It will be an interesting, hard fought battle between the two.  I am not normally a betting man, but looking at the selection process I would say that the M-346 Master has the edge if a pure trainer is what you are looking for.  Key U.S. allies with similar air power doctrines have the M-346 or have it on order (Singapore, Poland and Israel).  Out of all the KAI wins, only Indonesia has selected the T-50 as a pure trainer.  The procurement history would favor the M-346 and imply that the T-50 a bit of an underdog.  However, as it often happens, the USAF may want the “Cadillac” option and if so, then that would give the T-50 the edge.

USAF%20T-50.jpg

(Photo credit: Flightglobal)

Older posts

© 2014 The Marmot's Hole

Theme by Anders NorenUp ↑