Saudi Arabia Agrees to Buy More Typhoon Combat Jets
10 March 2018 - 5:13AM
Dow Jones News
By Robert Wall
LONDON -- Saudi Arabia and the British government reached a
preliminary agreement on a long-stalled, multibillion-dollar deal
for 48 Eurofighter Typhoon combat jets, boosting the prospects for
BAE Systems PLC, Europe's largest weapons maker.
Saudi Arabia, which bought 72 Typhoon aircraft in 2007 made by
BAE Systems, agreed in principal to acquire the additional planes
in a deal estimated at more than $5 billion. Talks on a follow-on
deal were ongoing for years but stalled amid periods of falling oil
prices and political upheaval, including Saudi Arabia's war in
Yemen that has been controversial in Britain.
The memorandum of intent for more planes came during the first
visit of Saudi Crown Prince Mohammed bin Salman to the U.K. British
Defense Secretary Gavin Williamson said the deal marked "a vital
step towards finalizing another order for Typhoon jets that will
increase security in the Middle East and boost British industry and
jobs."
BAE Chief Executive Charles Woodburn called the deal "a positive
step towards agreeing a contract."
The deal cements Saudi Arabia's role as one of the world's
biggest arms buyers. The kingdom last year agreed more than $100
billion in arms purchases from the U.S.
BAE Systems, which builds Typhoons in conjunction with Airbus SE
and Italy's Leonardo SpA, for years has struggled to win big export
deals for the plane, a scenario that threatened its future. But
demand has picked up, particularly in the Middle East, where
regional tensions have spurred arms deals. Kuwait has agreed to buy
28 of the jets for delivery starting in 2020 and Qatar last year
signed a commitment to take 24 of the planes with shipments
beginning in 2022. Boeing Co. also has won big combat jet deals in
the region in recent years.
Details of the Saudi deal are under negotiation, including when
the Typhoon planes would be delivered. It typically takes at least
two years after contract signature for planes to be handed
over.
BAE Systems may assembly some of the planes in Saudi Arabia. The
country sought local production on the original Typhoon contract
but later backed off that request. Riyadh has signaled it still has
the ambition to assemble planes domestically. Mr. Woodburn said BAE
would support Saudi's industrial ambitions laid out in the
country's Vision 2030, an economic transformation plan to make the
kingdom less dependent on oil revenue.
For BAE, a Saudi contract opens the door to keep Typhoon
production going well past 2022 and buy time to win additional
orders. It also is a vote of confidence from a big buyer while the
company pursues export deals in other markets such as Belgium and
Finland, where it faces stiff competition from the likes of the
F-35 jet made by Lockheed Martin Corp., the world's largest weapons
maker by sales.
A dearth of orders in recent years had forced BAE to announce
last year it would shed about 1,400 jobs at its military plane
division and build fewer planes. The move allowed the company to
sustain a production slowdown and position itself to offer to sell
planes to Qatar and Saudi Arabia.
Dimitrios Kontos contributed to this article.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
March 09, 2018 12:58 ET (17:58 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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