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Expected Deals With Oman, Saudi Arabia Help BAE Project Strength

Oct. 11, 2012 - 07:47AM   |  
By ANDREW CHUTER   |   Comments
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Expectation that it is within weeks of completing a deal to sell Typhoon fighters to Oman and of possible Saudi contracts worth in excess of 7 billion pounds has helped BAE Systems claim the business remains strong and financially robust in the wake of Oct. 10’s collapse of merger talks with EADS.

The British-based BAE said in an interim management statement Oct. 11 that it expected to conclude contract negotiations with Oman for the supply of 12 Typhoon Tranche 3 aircraft and an associated support package by the end of this year.

BAE said it remains in price negotiations with Saudi Arabia over the delivery of Typhoon fighters as part of the Salam program.

The group has been negotiating since 2010 regarding changes to the Salam program. The proposed changes relate to final assembly of the last 48 of the 72 Typhoon aircraft ordered by the Saudis, the creation of a maintenance and upgrade facility in the kingdom, initial provisioning for subsequent insertion of Tranche 3 capability in respect to the last 24 aircraft of this order, and formalization of price escalation.

BAE secured a 1.6-billion-pound aircrew training deal with the Saudis earlier this year. Together with the Typhoon talks and ongoing discussion on the Saudi British Defence Co-operation program, the negotiations cover contracts worth in excess of 7 billion pounds, said the company.

Chief Executive Ian King said that despite the failure to reach an agreement with government stakeholders over the merger, BAE “remains strong and financially robust.”

The company statement said it was on track to meet profit targets and continues to forecast modest growth in earnings, assuming the Typhoon negotiations with the Saudis are concluded by the end of December.

Some “limited trading disruption” is likely in the last quarter of 2012 as the U.S. government operates under a continuing resolution from the start of this month and as possible sequestration continues to cloud future defense spending levels, the company said.

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