LONDON — BAE Systems is halving Typhoon combat jet production in order to keep assembly lines working beyond 2018 when delivery of current orders come to an end, the company said in a trading update issued Nov 12.
On the upside, Europe's largest defense contractor also announced it is in discussion with the Saudi air force over a potential order for a further 22 Hawk jet trainers to add to the 72 it has delivered or has under contract.
The company declined to detail current or projected production numbers resulting from the slow-down, but said the financial impact would see Typhoon sales revenues reduce from about £1.3 billion (US$1.97 billion) this year to around £1.1 billion in 2016.
Industry sources said reduction would halve current assembly and parts manufacturing rates at BAE.
BAE said the short-term slowdown was being implemented to "ensure production continuity at competive costs over the medium term."
The Eurofighter Typhoon is built by a consortium of Airbus Defence & Space, BAE and Finmeccanica for core customers Britain, Germany, Italy and Spain.
The jet has also won export contracts in Austria, Oman and Saudi Arabia and been selected by Kuwait, although that deal is not yet signed.
The slowdown will allow production to bridge the gap between the end of delivery of current orders in 2018 and the upturn in assembly work generated by the expected order for 28 Typhoons from Kuwait.
Kuwait and the Italian government agreed to the deal in the summer. The expectation is work on the Gulf states jets will pick up around the turn of the decade.
The British jet maker had been expecting to book an order for around another 48 Typhoon's this year to add to the 72 combat aircraft it is already producing for Saudi Arabia under an earlier contract.
That deal has failed to materialize so far but could emerge in 2016.
Saudi's neighbour, Bahrain, could also be a near-term customer, although the numbers would likely be small.
"Although there can be no certainty as to the timing of orders, discussions with current and prospective operators of the Typhoon continue to support the Group's expectations for additional Typhoon contract awards in the months ahead," the company said in its trading statement.
BAE executives speaking at the UK Royal International Air Tattoo in July signaled they were investigating manufacturing options ahead of the potential 2018 closure date, including allowing the line to go cold for a short period.
Under the slowdown plan, manufacturing of major structural items for the Typhoon at BAE's Samlesbury plant in northwest England will be impacted first, although that will feed through to the British assembly line at Warton.
BAE produces structures like the forward fuselage for the assembly lines of all four Typhoon partners. It is not known at this stage whether the BAE low down decision will have a knock-on effect elsewhere in Europe.
The slowdown will result in the loss of 370 jobs, most of them at Samlesbury.
On a possible extension of Hawk sales to the Saudi's, BAE said it had confirmed the requirement for 22 Hawk jet trainers and associated ground equipment and training aids as part of an enhancement of pilot training capacity in the country.
The Saudi's ordered 22 Hawks in 2012 to add to the 50 delivered between 1987 and 1997. The first aircraft from the 2012 order is due to be handed over from the Warton assembly line next year.