BAE poised to seal Saudi Typhoon deal

BAE Systems, Europe’s largest defence contractor, on Thursday said it expected to agree a multi-billion pound deal to provide support and weapons systems for the 72 Eurofighter Typhoon aircraft to be bought by Saudi Arabia this year.Ian King, chief executive, said the company was “in active discussions on the next phase” of a contract, signed between the UK government and the Gulf kingdom in 2007.

Saudi Arabia buys arms from Britain under government-to-government deals and BAE then acts as the prime contractor to the UK. The most lucrative contract so far, the al-Yamamah deal, under which Britain supplied Tornado and Hawk aircraft in the 1980s, has been dogged by allegations of corruption and bribery. The 2007 contract – Project Salam – is worth an initial £4.3bn. The first deliveries of the jets are due to begin this year and Mr King said he expected to be “on contract” in 2009 to provide support and spares packages.If agreed, a deal would provide a significant boost BAE’s sales this year. Analysts have estimated that other orders for armaments and weapons systems on the jets could be worth £5bn, with a further £10bn being spent on maintenance, training and support for the aircraft over their lifetime.

Mr King said he saw “no evidence at this time” of a slowdown in potential orders from the Middle East on the back of the recent drop in the oil price.Overall, he said the company expected another year “of good growth” in 2009.BAE reported a 31 per cent surge in underlying pre-tax profits to £1.9bn in 2008 on sales 18 per cent higher at £18.5bn.It ended the year with net cash of £39m and by the close of play yesterday, its shares were up 3.56 per cent at 400p.Its forward order book rose 20 per cent to £46.5bn.

BAE said it had benefited from the weakness of the pound against the US dollar – which accounted for £5.9bn of the increase in the order book – as well as awards of new contracts, including a 15-year partnering agreement with the Ministry of Defence to supply munitions.The company also said it would pump an additional £200m into plugging the deficit in its UK pension schemes this year and $250m into its US pension schemes. It is increasing its full-year dividend to 14.5p from 12.8p.

Posted in: Fighter jet,Saudi Arabia