This year’s Paris Air Show promises to be one of the most lackluster for the defense sector in at least a decade. America is sending virtually no military aircraft to fly the all-important afternoon displays: no F-22s, no F-35s, no C-17s, no C-130s. American companies have scaled back their executives’ participation, not because it saves any real money (one down day on the F-35 or USS Gerald Ford would cost a lot more than all the flights and hotel days and meals for all the American defense wallahs for the week-long Paris trip, I bet) but for the message it sends to Congress, the Pentagon and to stockholders in this time of sequestration and drawdown.

While America may be in a moderately tough spot, European aerospace/defense companies face a truly compelling scenario: unemployment, deficits, cracks in the European Union facade, and defense budgets that have been on the down side since 2001. When the mad Islamists flew into the World Trade Center, America and Europe contributed roughly equal shares to the NATO alliance. Today, Europe contributes less than 25 percent and that is shrinking. Given these circumstances, I asked one of Europe’s top defense analysts at the International Institute for Strategic Studies to offer readers a detailed look at the top issue of the continent’s aerospace future. Doug Barrie’s sobering take follows. The Editor.

With many European economies bumping along the bottom there is little to cheer their defense aerospace manufacturers on the domestic front at the 2013 Paris Air Show. Those problems, however, are not just short term. Long term structural issues trouble Europe’s defense aerospace sector. At its simplest, it’s a question of when the present generation of fighter aircraft cease production, and whether Europe has the will to remain long term in the combat aircraft business.

Several European nations are already purchasing the F-35, a U.S. fifth-generation fighter, although the F-35 has moved only slowly toward the in-service line. With Europe still in dire fiscal straits it might seem muddle-headed to even begin to ponder what comes next.

Given the gestation period of combat aircraft projects, occasional false starts, and actual program delays, it’s never too early to begin thinking about what – if anything – is to follow.

While the Pentagon and some parts of the defense industry have the buffer of the F-35, providing, hopefully, capability and industrial workload, the European position is more tenuous.

The Dutch do wiring and composite work on the F-35, Italy is building an F-35 assembly plant and most Italian defense companies do work for the plane, and Britain’s BAE Systems manufactures the F-35 rear fuselage and Rolls Royce builds the STOVL systems for the F-35B.

Beyond these industrial commitments to the F-35, the European industrial status quo is not sustainable. The internal market cannot support the present size of the sector, and even export success is unlikely to be able to take up all of the slack.

At some point over the course of the next decade or so all three of the continent’s fourth-generation fighter aircraft will cease production. Conceivably, at least one could be out of production by the end of this decade. So far there is no fully-funded European project to replace any, or all, of them.

It should not be taken for granted that a European project of some ilk will simply coalesce. There is the possibility that Europe exits the crewed combat aircraft market when the last Dassault Rafale, Eurofighter Typhoon or Saab Gripen is assembled.

Within the European ambit, Turkey has recently exhibited ambitions to further develop its own defense aerospace sector, with a nascent “fifth-generation” national combat aircraft project. While its ambition is to be applauded, Turkey’s industrial capacity might struggle to meet such lofty goals. Hence its decision to work with SAAB as a mentor for the project.

Does a European exit from the manned combat aircraft sector matter if either the future of combat air power is remotely piloted or if the continent can continue to buy into, or at least buy off-the-shelf, US projects?

Unmanned air vehicles will form a growing element of the air power inventory, but the extent to which unmanned systems replace or complement crewed aircraft remains contested territory.

Eminent military thinker Colin Gray suggests: “The new century plainly will be one friendly to unmanned aerial vehicles (UAV), but this condition does not mean that manned aircraft are facing, or will face, bloc obsolescence as yesterday’s technology. The manned aircraft simply is too useful, too adaptable and flexible, to be abandoned. The future of manned aircraft is completely secure, even though some of its roles in some political and military contexts increasingly will be assumed by UAVs.”

Buying from the Pentagon also has potential pitfalls, as is evident from the trials and tribulations the F-35 has faced — that now hopefully are all behind us.

There are three fundamental questions those European governments which now sport combat aircraft design and manufacturing industries face. First is the notion, however vague, of sovereignty; the second is the associated issue of sustaining key technologies within national – or at least European – boundaries, thus supporting local industry; and the third is, can it be afforded.

France, Germany and the UK all had nascent next-generation combat aircraft requirements beginning to emerge in the 1990s. London’s notional Tornado GR4 successor was to be subsumed within the F-35, though the latter was originally viewed as only a replacement for the air force and navy Harrier aircraft. French and German aspirations meanwhile fell victim to funding constraints.

The full impact of the F-35 selection on the UK sector was spelled out in the 2005 Defence Industrial Strategy – a bold effort to frame the then Labour government’s defense industrial policy for the long term. “ Current plans do not envisage the UK needing to design and build a future generation of manned fast jet aircraft beyond these types (Typhoon and F-35).”

The document did recognise that to support adequately these aircraft throughout their service lives would still require a skilled aerospace-engineering base, even if there was no “manned fast jet” to be developed.

The route identified to sustain the needed engineering capacity was unmanned systems, and in particular the potential for “targeted investment” in an unmanned combat aircraft technology demonstrator. This lead directly to the BAE Systems Taranis project, which also drew on still-classified BAE-lead research on behalf of the British Defence Ministry.

A parallel strand in this story was the growing defense relationship between London and Paris. This culminated in the 2010 Defense and Security Cooperation Treaty, a document intended to draw the two countries closer together across the defense sphere. In defense aerospace terms it identified UAVs and, more significantly, UCAVs (unmanned combat air vehicles), as areas of potential collaboration.

In July 2012 the two respective ministries awarded BAE and Dassault the Future Combat Air System Demonstration Program Preparation Phase. Irrespective of the tortured nomenclature, this was in many ways intended to simply see if the two countries and their industries could work together.

This element of the project will likely conclude in 2014, with the key decision point – which will require a substantial funding commitment – likely around 2015. This would be the launch of a demonstration phase, including the design and manufacture of a prototype of an operational UCAV.

A European UCAV development involving Britain and France – with the possibility of drawing in further partners – while obviously welcome for their respective industries, does not however represent a panacea. While such a development would sustain and continue to develop the desired engineering skills, the likely numbers of air vehicles required would not support the present manufacturing infrastructure.

A Franco-British UCAV would offer a program around which other European industry could coalesce. The German veto of the proposed acquisition of BAE by EADS last year, however, was a set back for advocates of European consolidation.

Presently the Franco-British UCAV project looks the best bet to secure at least one future combat air vehicle program within Europe. But there remain threats to this effort, including renewed anti-European rhetoric in the Conservative element of the British Government. Whether Franco-British defense collaboration could be sustained at the same level, or survive at all, should the UK’s relationship with the European Union change substantially with the most extreme option being withdrawal — is an open question.

There is also the potential for transatlantic cooperation beyond the F-35. The US Air Force and the US Navy have early work underway to consider combat aircraft needs beyond the Lightning II, though it is debatable whether the F-35 industrial model would be replicated. It is also worth considering that Boeing faces a similar challenge to European combat aircraft manufactures with the F/A-18E/F and the F-15 likely to end production during the end remainder of the course of this decade.

Douglas Barrie is senior fellow for military aerospace International Institute for Strategic Studies. He was European editor at Defense News when I was the editor in Washington.