(Bloomberg) -- Development of a future European fighter jet first mooted by former German Chancellor Angela Merkel and French President Emmanuel Macron in 2017 is paralyzed by a dispute between leading industry suppliers. 

The head of Dassault Aviation SA on Wednesday warned talks with the German arm of Airbus SE have been bogged down by a power struggle over “division of labor” that could threaten the project.

“We still have difficulties with Airbus,” Dassault Chief Executive Officer Eric Trappier said at a press conference in Paris. “It’s not always easy to negotiate with the Germans.”

The French maker of the Rafale combat plane and Airbus are in negotiations on the next development phase of the jet, known as the New Generation Fighter, that wouldn’t enter service until about 2040. Airbus must accept “the expertise will be in France rather than elsewhere,” Trappier said.

“What’s clear is that Dassault will be the leader,” he said. 

The possibility that Germany could order U.S. fighter jets to carry nuclear weapons as part of a longstanding NATO agreement is also weighing on the project, Trappier said.

The impasse comes nearly five years after the French and German leaders agreed on an air-combat alliance that included the new jet, leaving the U.K. in the cold in the wake of the country’s decision to leave the European Union. London-based BAE Systems Plc, Europe’s biggest defense firm, has gone on to develop a rival warplane, the Tempest, and recruited Italy’s Leonardo SpA and Sweden’s Saab AB to its camp.

Design Capabilities

BAE, Leonardo and Airbus collaborate on the current Eurofighter model, a rival to the Rafale. In forming a new alliance, Airbus had been seeking a more equal role in a successor aircraft, though Dassault has advanced design capabilities through its work on generations of warplanes including the Mirage, which it manufactured from the 1950s through the 1990s.

A run of success for Dassault’s Rafale -- including a bumper order of 80 from the United Arab Emirates -- may have strengthened the French company’s hand in the battle for supremacy over the project.

Should the collaboration founder, Dassault retains a plan B, Trappier said, without giving details. While he ruled out a collaboration with the U.K., saying talks with that country’s suppliers on the future European fighter have ended, he said Airbus doesn’t share his vision of how industry should be organized to develop the plane. 

A spokesman for Airbus wasn’t available for immediate comment. 

Dassault’s confidence has been buoyed by the UAE mega-order. The victory over rival European and U.S. suppliers capped a winning streak after agreements with Greece, Croatia and an add-on order with Egypt earlier in 2021. 

The shares rose 4.3% as of 5:25 p.m. in Paris, and have gained 22% over the past 12 months. 

Looking ahead, Trappier said he’s optimistic 2022 could yield additional contracts, citing ongoing talks with India and Indonesia for Rafale planes. 

Dassault struggled to sell the jets outside France for more than a decade after it first entered service in the French military in 2004.

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