Correction: Australia is not an importer of the K9 tank. This story has been updated to reflect that.

SEOUL — The U.S. Air Force’s latest decision to award a multibillion-dollar trainer jet contract to a Boeing-Saab partnership seems to have slashed hopes for Korea Aerospace Industries to surge as a world-class aircraft maker.

Moreover, the loss in the trainer jet competition has apparently dejected the South Korean defense sector, which believed a massive export of T-50A trainer aircraft would provide a major boost to its arms export drive and help burnish its reputation as a top weapons exporter.

“It’s an upset,” said Ahn Sang-nam, head of the Korea Defense Industry Association’s public affairs office. “We thought KAI’s potential win of the U.S. Air Force trainer contract would give a big momentum for the whole local defense industry.”

The sole aircraft maker in South Korea, KAI was the subcontractor to supply parts to Lockheed Martin. The consortium offered the T-50A supersonic trainer jet to replace the aging fleet of T-38 Talon aircraft as part of the U.S. Air Force’s Advanced Pilot Training, or APT, program.

“KAI has dozens of suppliers and other industrial partners regarding the supersonic trainer aircraft, and they believe the APT program would be the key source of their businesses over the next decade,” Ahn said. “We saw the T-50A has better price competitiveness than its competitors because the aircraft was the only candidate already in production without development costs, but it was a long shot in the face of price dumping.”

As a result of the Boeing-Saab partnership’s aggressive low price to produce the U.S. Air Force’s next-generation training jet, the T-50A is now “portrayed as a relatively expensive model,” said Shin Jong-woo, a senior analyst at the Korea Defense and Security Forum, a Seoul-based private defense think tank.

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“We participated in the price competition strategically in collaboration with Lockheed Martin, but we were not selected due to the wide gap from Boeing low-price offering,” KAI said in a Sept. 27 release, when the contract award was announced.

The T-X contract awarded to the Boeing-Saab team is worth $9.2 billion, about $7 billion less than the originally estimated budget. The partnership beat out both Leonardo DRS and a Lockheed Martin-KAI partnership.

“Undeniably, the T-50 is an older model compared to Boeing’s prospected T-X aircraft. Some of the T-50 parts were even discontinued, so the price of parts could go up inevitably,” Shin noted. “Against this backdrop, the U.S. Air Force seems to have believed the Boeing aircraft would have more bang for its buck.”

The analyst said the local defense industry painted too rosy a picture of a potential T-50 export to the U.S.

KAI has been a vanguard of South Korea’s arms exports since the early 2000s due to sales of T-50s and the aircraft’s light-attack variant, the F/A-50, to southeast Asian and the Middle Eastern countries. The aerospace firm anticipated that, should 350 T-50As be sold to the U.S. with a price tag of some $16 billion, it could capture an advantageous position in the global trainer aircraft market, valued at about $90 billion.

“Theoretically, it was a Lockheed Martin game, not KAI. A main supplier, KAI was supposed to gain only around 30 percent of profits from the T-50A sale,” Shin said. “The impact of the failed APT bid, however, is more on KAI apparently, as the company has promoted the aircraft as a classic Korean-made product with big pride.”

A KAI source said his company would regroup its forces to export its F/A-50 aircraft.

“We’ll try to explore international markets requiring F/A-50 aircraft as successfully done with southeast Asian and Middle Eastern customer nations,” the KAI source said, speaking on condition of anonymity.

The failed trainer bid came on the heels of a KAI-built utility helicopter’s fatal crash in July. The cause of the crash of the Marineon, a military variant of the Surion KUH-1, was found to have been a defective rotor mast imported from France, but KAI’s Surion export drive has halted since the accident, including talks over its export to the Philippines.

Export setbacks

Other South Korean arms producers are struggling to sell their products overseas, as the reliability of their weapons systems are in doubt following a series of system failures.

Hanwha Group has heavily focused on exporting its K9 self-propelled howitzer. The 155mm, 52-caliber howitzer, originally built by now-defunct Samsung Techwin, was sold to Turkey, India, Poland, Finland, Norway and Estonia. However, the artillery system’s reputation has been bruised by the deadly explosion of a K9 howitzer in August last year. The accident left three soldiers dead and four others wounded.

The howitzer blew up at a military shooting range in Gangwon Province, as the detonator ignited by itself and some components functioned abnormally, according to a joint investigation team consisting of military and civilian experts. The investigation indicated a mechanical flaw had triggered the explosion but failed to reveal the exact cause of the accident.

Hanwha’s ambitious effort to export products to the United States has not made notable progress. Earlier this year, the company launched a U.S. office to tout its defense systems, including the K9 and Hybrid Biho 30mm complex gun and missile air defense system.

South Korean Army K9 self-propelled howitzers fire rounds during air and ground military exercises on Dec. 23, 2010. (Dong-a Ilbo/AFP via Getty Images)

“It’s just the beginning, and we’re keep focusing on promoting our defense systems in the U.S. market,” a Hanwha spokesman said on condition of anonymity. “For the U.S. military, in particular, we’re exploring ways to sell the technology of the K9 howitzer in partnership with BAE Systems involved in the U.S. Army’s artillery modernization program.”

Meanwhile, LIG Nex1, a precision-guided missile developer, is upset over repeated test failures of its sea-skimming anti-ship cruise missile, dubbed Haeseong (Sea Star), which was in recent years sold to a South American nation.

According to South Korean Navy sources, a Haeseong missile fired from a frigate off the southwestern waters of the Korean Peninsula in May, but fell after 35 seconds of flight. A similar accident occurred in June 2016 when the missile crashed just 16 seconds after launch.

“The cause of the failures are closely examined with the help of the Agency for Defense Development, main developer of the anti-ship missile,” a LIG Nex1 source said, declining to elaborate.

Furthermore, the export bid for Hyundai Rotem’s K2 Black Panther main battle tank has long been delayed by problems with a locally built transmission system.

Following the first batch of 100 K2s equipped with the German MTU 883 diesel engine and RENK transmission system, the second batch of 100 additional K2 tanks was to be fitted with a locally built power pack. But the plan hit a snag, as the automatic transmission developed by S&T Dynamics failed six times in durability tests.

As a result, the field deployment of K2 tanks equipped with the domestically developed power pack has been delayed for four years.

In February, the Defense Acquisition Program Administration decided to temporarily equip the K2 with the RENK transmission for the production of a second batch of some 100 K2 tanks, but the production is still on hold due to a feud over who should be held accountable for the defective S&T transmission system.