BAE Systems fails to win £6bn contract to supply Typhoon fighters to UAE

[xinhui]

BAE Systems fails to win £6bn contract to supply Typhoon fighters to UAE
Failure is a blow to the company and to David Cameron, who intervened personally to try to secure the order

BAE Systems fails to win £6bn contract to supply Typhoon fighters to UAE | Business | The Guardian

Eurofighter Typhoon
BAE Systems had been in talks with the UAE for more than a year to supply 60 Typhoon jet fighters. Photograph: Rui Vieira/PA

BAE Systems has missed out on a £6bn contract to supply fighter jets to the United Arab Emirates, in a blow to British export hopes and David Cameron's own attempts to secure a deal.

The UK arms manufacturer revealed on Thursday that more than a year of talks to supply 60 Typhoon aircraft to the UAE had failed. It also said vital negotiations with the Saudi government over the pricing of an existing Typhoon contract, keenly anticipated by shareholders, will drag into next year.

The news is a serious setback for BAE as it seeks to reduce its reliance on US and British defence markets that have been hit by government spending cuts. BAE's search for new sources of revenue has seen it pursue a failed merger with the Airbus owner Eads and launch a major push into emerging defence markets such as the UAE and India.

In its statement, BAE said: "BAE Systems and the UK Government have been in discussions with the Government of the United Arab Emirates regarding a range of defence and security capabilities including the potential supply of Typhoon aircraft. The UAE have advised that they have elected not to proceed with these proposals at this time."

The news is a blow not only to BAE but also to the prime minister, who intervened personally last month to try to secure a deal that would have represented a significant boost for British exports. During a visit to the UAE, Cameron urged Sheikh Mohammed bin Zayed Al Nahyan, the crown prince of Abu Dhabi, to opt for the Typhoon over a rival fighter produced by France's Dassault Systemes. Analysts thought the prime minister's move could have swung the deal for BAE, raising hopes that the UK will meet George Osborne's target of doubling exports to £1tn by 2020.

Analysts at JP Morgan had estimated that a deal to supply fighters and other equipment to the UAE could have been worth 45p a share to BAE, which closed at 442p. The company said yesterday it had not built the prospect of a successful outcome into its financial plans.

"BAE Systems stands ready to work with the UAE to address any future requirements," the company said.

BAE also said that it was still in talks with the Saudi government about the terms of its contract to supply 72 Typhoons to the country. A deal was signed in 2007 but it included provisions for renegotiation as economic conditions changed. The Saudi negotiations are being followed closely by investors. The company is buying back £1bn of its shares to boost investor returns but has said completing the buyback depends on the Saudi talks being resolved.

The company said: "Whilst good progress has been made, a definitive agreement has yet to be reached. A timely agreement in the new year would be reflected in trading for 2013. The group's focus in these negotiations continues to be on agreeing appropriate terms and not the timing of such an agreement."

The company said in October that its 2013 earnings would be reduced by 6p or 7p a share if there was no agreement. It stressed that it had won major new business from Saudi Arabia this year, including £1.5bn for guided weapons and Tornado maintenance.

BAE said it had a long-standing relationship with its "much valued customer in the Kingdom of Saudi Arabia", suggesting it expected to strike a deal.¬

[lemontree]

The UAE AF has 80 F-16 Block 60 and about 40 upgarded Mirage-2000-9s. All these were purchased in the last 7 years.

My guess is that they do not need such an expensive jet fighter at this stage. Besides the UAE economy has been quite slippery since the past 3-4 years. The gulf state is quite broke.

[xinhui]

well, there is a rumor going on suggesting that this has to do with the greater Geopolitics back drop of the Syrian civil war (support Sunni or we won't buy). we should see.

[Doktor]

Someone should kindly ask Mr Cameron to not lobby for UK companies in the future.

[Firestorm]

Someone should kindly ask Mr Cameron to not lobby for UK companies in the future.

Then he will be accused of not doing enough by someone else. This is not Cameron's fault. Like Capt. Lemontree said the UAE simply does not need the Typhoons when they have several squadron's of upgraded F-16s and M2Ks. Their F-16s are in some ways, more advanced than the ones in the USAF (they sport an AESA radar for instance). Their M2K's are also the -9 versions on par with or better than the -5's in the Armee de l'Air.

The Sheikh's have also probably realized belatedly that they currently lack loads of extra cash to splurge on shiny new toys that they don't need and will never use. When they need any actual fighting done, they'll call the Americans for help anyway.

[Blademaster]

Then he will be accused of not doing enough by someone else. This is not Cameron's fault. Like Capt. Lemontree said the UAE simply does not need the Typhoons when they have several squadron's of upgraded F-16s and M2Ks. Their F-16s are in some ways, more advanced than the ones in the USAF (they sport an AESA radar for instance). Their M2K's are also the -9 versions on par with or better than the -5's in the Armee de l'Air.

The Sheikh's have also probably realized belatedly that they currently lack loads of extra cash to splurge on shiny new toys that they don't need and will never use. When they need any actual fighting done, they'll call the Americans for help anyway.

And they would be more better off with more AWACs planes and drones and ECM warfare suites. Sometimes more sexy toys is not the answer when more training and exercises with other world air force would do the job.