U.K. Prime Minister David Cameron said Oman agreed to buy 12 Eurofighter Typhoon fighters and eight Hawk 128 advanced trainers, both made by BAE Systems Plc. (BA/)
The contract is part of a drive to secure sales of more than 100 jets to the Gulf region that could total 6 billion pounds ($9.8 billion) to British firms over coming years as Cameron puts trade at the heart of foreign policy. The deal, signed in Oman today, is valued at 2.5 billion pounds, BAE said in a statement.
“Boosting exports is vital to economic growth and that’s why I’m doing all I can to promote British business in the fastest-growing markets, so they can thrive in the global race,” Cameron told reporters yesterday before traveling to Oman from Afghanistan, where he was visiting troops. Britain’s defense industry supports 300,000 jobs locally, he said.
The deal comes as BAE considers which one of its three U.K. shipyards to close in the face of declining orders. Cameron is trying to limit the political fallout of job losses by helping seal export deals for other parts of the London-based company. He visited the United Arab Emirates and Saudi Arabia last month to promote Typhoon jets.
The Typhoon is built by Eurofighter GmbH, made up of BAE, Finmeccanica SpA (FNC) and European Aeronautic, Defence & Space Co. The deal announced today also supports Rolls-Royce Holdings Plc (RR/), the U.K. partner in the Eurojet consortium building the fighter’s engines and for the trainer aircraft. Deliveries of jets to Oman will start in 2017, BAE said.
Middle East sales are critical to BAE as defense spending slumps in its two largest markets, the U.S. and Britain. BAE, which is working to win a follow-on Typhoon contract in Saudi Arabia, says earnings could be hurt because of delays in concluding price negotiations with the kingdom over a contract for the combat jet first signed in 2007.
“The Typhoon fighter jet performed outstandingly in Libya, and so it’s no surprise that Oman want to add this aircraft to their fleet,” Cameron said. “It’s testament to Britain’s leading aerospace industry and the deal will safeguard thousands of British jobs across the U.K., not just at the BAE Systems factories in Lancashire and East Riding in Yorkshire, but at many more small businesses up and down the country that play a vital role in delivering these aircraft.”
In the aftermath of the failed EADS merger, BAE pledged to conclude the Omani contract before 2013. Talks slowed earlier this year because Oman was dissatisfied with progress on a delayed naval-vessel contract and recently centered on resolving differences over support conditions for the fighter.
“This agreement builds on a long history of close cooperation between BAE Systems and the Omani armed forces,” the company said.
The Middle East order comes after setbacks for the Eurofighter consortium in India, Japan and Switzerland where it lost competitions to rivals from France, the U.S. and Sweden. Production of Typhoons could end this decade without further commitments.
Exports are becoming increasingly important for U.S. and European defense companies as efforts to tackle budget deficits erode military spending. Fighter competitions to be decided next year include the battle between Typhoon, the Lockheed Martin Corp. (LMT:US) F-35 and Boeing Co. (BA:US) F-15 in South Korea and a pending contest in Malaysia.
BAE said it expects to resume deliveries of Typhoons to Saudi Arabia next year even as discussions over pricing of the combat aircraft continue. The company, which had hoped to conclude those talks this year, said Dec. 19 that discussions over “acceptable pricing” may not be completed in 2012, reducing full-year earnings per share by 3 pence.
Separately, Cameron said the U.K. will spend an extra 230 million pounds on new equipment for armed forces in Afghanistan. The money, which will come from Treasury reserves rather than the defense ministry’s budget, will be spent on tackling roadside bombs, force protection and intelligence and surveillance alongside target acquisition and reconnaissance.
Cameron said this week that the U.K. will bring home 3,800 troops from Afghanistan next year. The partial withdrawal will leave the U.K. force at 5,200 by the end of 2013, paving the way for the removal of combat personnel as planned by the end of 2014.
To contact the reporters on this story: Svenja O’Donnell in Oman at firstname.lastname@example.org; Kitty Donaldson in London at email@example.com
To contact the editor responsible for this story: James Hertling at firstname.lastname@example.org