BAE Systems Hawk…future uncertain

Hawk Jet Contract Delay Sees Bae Systems Suffer Fall

Birmingham Post – July 17, 2003

Shares in defence group BAE Systems fell yesterday after it emerged that the Government has not yet made up its mind whether to award the company a pounds 1 billion contract to supply the RAF with Hawk trainer jets, writes Steve Pain.

Tony Blair told the Commons that the Cabinet was still ‘in the course of making a decision’ on the deal.

But he warned that while the Government wanted to ‘do the best for the British defence industry’ any deal must represent value for money. The politically sensitive order to supply 31 jets to the RAF is being fought over by BAE Systems, US firm Lockheed Martin and Aermacchi of Italy.

The Government is said to be split on the issue, with Chancellor Gordon Brown believed to be against BAE’s pounds 1 billion price tag, while the Prime Minister wants the deal to stay in the UK because of its impact on jobs.

BAE Systems has already warned some 470 staff that they are likely to lose their jobs after July 31 should the contract for trainer jets be lost. And trade unions fear an estimated 2,500 direct jobs could go at BAE’s Brough site in the North East and the effect on the local economy could bring the total job losses to over 5,000.

Derek Simpson, joint general secretary of Amicus, said he was ‘rocked’ at Mr Blair’s failure to announce a decision. The delay was threatening highly-skilled jobs and could mark the ‘death knell’ for UK aerospace, he warned.

Industry sources have suggested that, although winning the contract is not crucial for BAE from a financial point of view, failure to secure the order could seriously jeopardize the group’s chances to win a pounds 1 billion Indian order for trainer jets.

India has been scouting for a trainer aircraft since the mid- 1980s and had begun negotiations with BAE Systems for its Hawk trainer after dismissing the Franco-German Alpha Jet and Russian MiG- AT.

However, the Indian government has repeatedly stalled on signing the deal, saying the Hawk is too expensive.

‘If the UK government decides against BAE’s Hawk, India is likely to follow suit and see if it can’t get a cheaper deal somewhere else,’ said one industry expert.

Analysts hope the Government will make a decision sooner rather than later, possibly before Parliament goes into Summer Recess later today.

But a BAE spokesman yesterday pointed out that Parliament does not have to be in session for a decision to be made, although he said that BAE, too, is hoping for a swift decision on the contract.