Thursday March 27, 02:59 PM
EADS Airtanker consortium awarded 13 bln stg MoD air refuelling contract UPDATE
(Adds EADS, Thales (Paris: FR0000121329 - news) estimates of share in contract value)
LONDON (Thomson Financial) - The UK government confirmed it has decided to award a 27-year contract worth an estimated 13 bln stg to replace Britain's air refuelling tanker fleet to the European AirTanker consortium led by aerospace group EADS (Paris: NL0000235190 - news) .
AirTanker was selected as preferred bidder for the Future Strategic Tanker Aircraft (FSTA) programme in 2005 and today's announcement follows the expected completion of a financing package worth approximately 2.5 bln stg.
Under the contract, AirTanker's shareholders -- Cobham PLC (LSE: COB.L - news) , EADS, Rolls-Royce Group, Thales UK and VT Group (LSE: VTG.L - news) -- will replace the RAF's fleet of refuelling tankers with a new fleet of Airbus A330 aircraft.
The Ministry of Defence said the aircraft are expected to enter service around 2011, and serve for three decades.
EADS CEO Louis Gallois said: 'This win further demonstrates the A330 as the platform of choice for the world's refuelling fleets and comes on the back of our recent success in the US market. This award strengthens our ongoing commitment to grow our business in the UK in the long-term.'
A spokesman for EADS said it expects to receive around 40 pct of the sales of the contract. The figure of 13 bln stg is based on an estimate by the MoD and will vary depending on the level of consumption of the services provided under the deal, the spokesman said.
In response, Rolls-Royce said the contract will be worth 700 mln stg to it over the lifetime of the programme. The engine-maker said it will build the Trent 700 engines which will power the fleet of 14 Airbus A330-200 tanker aircraft, as well as providing Mission Ready Management Solutions support for the propulsion system in service.
In a separate statement, VT Group said it expects to benefit from business worth over 1 bln stg through a combination of its 22.33 pct shareholding in the operating company Airtanker Services Ltd and direct sub-contracts with VT Group units.
It (Frankfurt: A0MLX5 - news) added it expects to create more than 200 jobs at RAF Brize Norton through the construction phase and subsequent support activities.
A Thales UK spokeswoman said the company is expecting to receive around 285 mln stg on contract award, while the value of the contract over its 27 year timeframe to Thales is expected to total around 900 mln stg.
Meanwhile, Cobham, which holds a 13.3 pct stake in the Airtanker consortium and a 5 pct stake in Airtanker Services, said it has contracts with EADS and AirTanker services with a total value of some 150 mln stg.
The MoD said up to 600 jobs are expected to be created by Airtanker Ltd, with up to 3,000 jobs directly safeguarded at UK sites and thousands more sustained indirectly.
The Minister for Defence Equipment and Support, Baroness Taylor, said: 'Achieving a satisfactory outcome to this complex, high value, PFI deal has been challenging, particularly given the factors currently affecting the financial markets.'
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