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BAE Expects More Gulf Orders for Typhoons

Aug. 1, 2013 - 05:17PM   |  
By ANDREW CHUTER   |   Comments
BAE Systems has raised prospects of a further sale of Eurofighter Typhoon jets to Saudi Arabia.
BAE Systems has raised prospects of a further sale of Eurofighter Typhoon jets to Saudi Arabia. (Adrian Dennis / AFP)
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LONDON — BAE Systems has raised prospects of a further sale of Eurofighter Typhoon jets to Saudi Arabia as the British-based defense giant unveiled first half 2013 results that again showed the importance of the Arabian Gulf region to business growth.

CEO Ian King said there is an “increasing appetite to talk about the next batch of [Typhoon] orders” for the Royal Saudi Air Force, but that negotiations over the pricing of the first batch of aircraft being delivered must be completed first.

King said a new order could be for 48 to 72 aircraft, but gave no time frame.

Saudi Arabia has already received 28 Typhoons from a 2007 order for 72 aircraft.

The delivery number is expected to grow to 34 aircraft by the end of the year, King said.

BAE has been in extended talks with the Saudis over a price escalation for the first tranche of jets, caused in part by changing requirements, but King said he was confident the deal could be agreed upon by the end of the year.

“We have had confirmation no further questions are required in terms of content and substance of our claim,” King said.

Price escalation details for the first order had to be agreed upon before discussing a new aircraft order, he said.

BAE’s chief executive also said the company is poised to submit a bid to the United Arab Emirates (UAE) for 60 aircraft.

Securing the UAE order “would be a game changer” for Typhoon, King said.

Together with a second Saudi order, a deal with the UAE would push production of Typhoon out from its current end point of 2018 to 2022, if the annual assembly rate remains 30 aircraft.

Oman signed a 2.5 billion pound (US $3.8 billion) deal for Typhoon and Hawk jet trainers last year and Qatar, Malaysia, Kuwait and South Korea are other potential export candidates for the Typhoon.

India might also come back into the mix if Dassault Aviation fails to hammer out an agreement with New Delhi to deliver its Rafale jet. Dassault was given preferred bidder status in 2012.

Britain, Germany, Italy and Spain are partners in a Eurofighter consortium, which is led industrially by BAE, Finmeccanica and EADS, which this week announced it will change its name to Airbus Group.

Saudi Arabia was also at the center of a 4.8 billion pound intake for BAE outside its US and UK market in the first half of 2013. That’s 10 percent up on the same period last year.

Australia was another bright spot with a 206 million pound Hawk jet trainer support contract and an aviation technical training deal being the main contract wins.

BAE signed a 1.8 billion pound Typhoon support program with the Saudis during the period, along with a 600 million pound weapons contract to equip Tornado strike aircraft in the kingdom’s inventory.

Other smaller contracts were also agreed with the Saudis.

No details of the weapons package have been made public by BAE, but the French newspaper La Tribune said in May that the deal included MBDA-supplied Storm Shadow and Dual Mode Brimstone missiles, along with weapons from other European suppliers. Deliveries are scheduled to commence next year.

BAE’s first half report said a current round of deliveries of the Storm Shadow cruise missile is underway and scheduled to complete by the end of the year.

Middle East export business helped offset declining order backlogs elsewhere in key sectors of BAE Systems operations.

The 4.8 billion pounds’ worth of orders contracted for in the first six months of the year were a “continued sign of the momentum in international activity” outside of the US and UK, King said.

BAE reported a rise in its international platforms and services order backlog to 11.9 billion pounds, up from 9.3 billion pounds at the end of last year.

By contrast, electronic systems, land and armaments, US and UK platform and support and cyber and intelligence backlogs all declined relative to the year-end position.

The US support business backlog was given a boost just ahead of the results announcement with the Pentagon declaring BAE the winner of a $534.8 million deal to support Minuteman III ballistic missiles.

BAE figures for the six months showed sales 1 percent ahead of last year at 8.4 billion pounds with a total order backlog up at 43 billion pounds. Earnings before interest, tax and amortization dropped 6 percent to 865 million pounds.

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