BAE clinches new £2.5bn Tornado deal with Saudis
By Rupert Steiner – City Editor
10 September 2006BAE clinches new £2.5bn Tornado deal with Saudis
BAE SYSTEMS, Europe’s largest defence company, has won a major new contract worth £2.5bn (E3.7bn, $4.6bn) to upgrade Saudi Arabia’s ageing fleet of Tornado fighter planes.
The deal comes just three weeks after the British government announced the sale of 72 Eurofighter Typhoons to Saudi Arabia in a deal worth an initial £10bn.
The good news comes in a difficult week for BAE’s chief executive, Mike Turner, who has been under intense pressure after agreeing to sell BAE’s 20% stake in Airbus for £1.9bn.
The figure is a half of the £3bn-£4bn analysts had expected for the stake and follows a difficult year for Airbus. The France-based planemaker had announced in June that deliveries of its new A380 plane would be delayed because of wiring problems.
The new contract to upgrade the 80-strong fleet of Royal Saudi Airforce Tornados will further reinforce BAE’s move to become a more defence-focused business.
The Business has learned that the upgrade contract will involve all attack versions of the Tornados flying in the Royal Saudi Airforce which its government intends to keep on until 2020. They will be kitted out with advanced electronic warfare systems and state-of-the-art technology, effectively rendering them brand new Tornados.
One Saudi source said: “This will add a lot to the Tornados. The old ones with the new technologies will become de facto new aircraft. They will be the new generation of Tornados with the inside configuration completely changed.
“It will mostly be done in the UK and then all the know-how will be passed on to the Saudis. And with such a cost, it makes sense.”
A second source familiar with the situation confirmed the deal had been signed between the two governments last week. “It’s a very valuable contract for BAE,” he said.
A spokesman for the Ministry of Defence said he was unaware of any new deal: “We continually discuss the best ways of supporting and maintaining the capability of the Saudi’s aircraft and this process is ongoing.”
BAE spokeswoman Lisa Hillary-Tee said: “It is not appropriate for BAE Systems to make any comment on discussions between these two parties.”
It has also emerged this weekend that there are moves to lose the controversial Al Yamamah name which has been attached to most of the previous arms deals between the Kingdom and the UK *government.
The Al Yamamah programme has become mired in controversy after suspected accounting irregularities in one of the contracts. In 2004 the Serious Fraud Office opened a probe into Al Yamamah, which means “dove” in Arabic.
The last Al Yamamah contract was signed in 1994 and involved BAE supplying the kingdom with aircraft and ships. BAE has always denied any wrongdoing; a report by the National Audit Office into the deal remains unpublished and the SFO has been denied access to it.
The new name, which it is hoped will create distance from the previous deal, is expected to be announced at the end of the month when Des Browne, the UK defence minister, visits the Kingdom for a ceremonial signing of the latest deals.
Nice! I think a Hawk deal should be next. 😀
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September 10, 2006 at 6:39 am