UK snubs BAE to hand EADS defence deal

LONDON, Jan 26 (AFP) – The British government has snubbed leading British defence contractor BAE Systems over a huge contract to provide the Royal Air Force with refuelling aircraft, preferring the French-German consortium EADS.

The contract is worth GBP 13 billion (EUR 18.8 billion, USD 23.7 billion)..

The defence ministry said that it had rejected BAE’s bid, in conjunction with US aviation giant Boeing, and that a consortium led by Franco-German defence group EADS was considered “most likely” to offer the best value.

The ministry would now enter into “detailed negotiations” with the EADS-led AirTanker consortium, which also comprises Rolls Royce, Cobham and Thales, over the contract, it said in a statement.

“A final decision on whether or not to proceed with a… contract will not be taken until these discussions have been successfully concluded – a process that is likely to take a number of months,” it added.

However BAE Systems has a 20-percent interest in the Airbus consortium which represents the giant’s share of activities by EADS. BAE builds wings for Airbus aircraft and therefore stands to benefit from the contract indirectly.

Any deal on the overall contract will be done on the basis of a so-called private finance initiative (PFI), a method the British government uses in an attempt to cut costs by bringing commercial business practices into government.

Under a PFI deal, AirTanker would own and maintain the aircraft and provide training, infrastructure and some personnel, whilst the RAF would use the planes for military operations.

This would allow AirTanker to use any aircraft not needed by the RAF during peacetime to generate revenue through commercial use, keeping down costs.

Defence Secretary Geoff Hoon said that the EADS-led proposal “offers the best prospect of securing a value for money PFI service”, although “a number of important issues remain to be resolved”.

The RAF is seeking to replace its decades-old fleet of VC10 and Tristar refuelling aircraft, which under the AirTanker deal would see adapted AirBus A330-200 airliners used.

BAE and Boeing had planned to use Boeing 767 aircraft.

Subject: France news