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BAE Systems agrees long-awaited Saudi order of 48 Typhoon jets

BAE Systems has agreed a provisional sale of 48 Typhoon jets to Saudi Arabia – a deal which would secure thousands of jobs at the defence giant and its suppliers well into the next decade.
Company chiefs, Defence Secretary Gavin Williamson and officials from the Gulf state have revealed a memorandum of intent as part of an inter-government deal for the ?10bn-plus arrangement to supply the multi-role aircraft at the end of a controversial trade mission by Saudi Arabia to the UK.
The agreement – the final terms of which will now be negotiated – is a long-awaited follow-on order for Typhoons after BAE sold 72 of the jets to the Saudi air force in 2007. 
The final price of this deal was only agreed in 2014 after years of wrangling.
BAE has slowed the production rate of the Mach 2 fighter because of a lack of orders, and cut hundreds of jobs from the line as anticipated demand failed to materialise.
Factfile | Typhoon jets
Charles Woodburn, BAE Systems chief executive, said: “Today’s news is a positive step towards agreeing a contract for our valued partner, the Kingdom of Saudi Arabia. We are committed to supporting the Kingdom as it modernises the Saudi Armed Forces and develops key industrial capabilities.”
Until a ?5bn order from Qatar for 24 Typhoons in December, BAE had not secured a contract for the supersonic jets for two years. Prior to the Qatar agreement, the production line at BAE’s base in Warton, Lancashire had been expected to close in 2022.
Mr Woodburn had hinted the Saudi order – which has been delayed by concerns about cost, competition from rival manufacturers, development of newer aircraft with “stealth” technology, and political obstacles – was getting close in the company’s annual results.
BAE systems
While warning that sales will be about 5pc lower in the coming year as current contracts to build Typhoons close, Mr Woodburn said the “opportunity pipeline is as good as it’s been in quite some time, which does give us confidence around additional Typhoon orders”.
Gavin Williamson, Defence Secretary, said the memorandum signed by Crown Prince Mohammed bin Salman and the visit had "opened a new chapter in our two countries' historic relationship". He added: "We have taken a vital step towards finalising another order for Typhoon jets that will increase security in the Middle East and boost British industry and jobs in our unrivalled aerospace sector.”
With maintenance and support for the new aircraft, the contract could be worth several times the actual value of the jets.
As well as securing jobs at BAE, other major defence companies with UK operations are set to benefit from an agreement with the Saudis.
Rolls-Royce is part of the consortium that builds the EJ200 engines that power the Typhoon, while Leonardo, the Italian defence group, builds the jet’s advanced radar at its Edinburgh base, along with avionics systems at its Luton plant.
BAE Systems agrees long-awaited Saudi order of 48 Typhoon jets

BAE currently assembles the Typhoon at its base in Lancashire

Credit:
Reuters
In total BAE Systems employs about 5,000 people on the Typhoon programme, covering production and support, with a further 9,600 jobs through the wider UK supply chain.
BAE, Airbus and Leonardo each have a one-third share in the Typhoon programme.
However, Mr Woodburn's choice of words about BAE being committed to helping Saudi Arabia develop key industrial capabilities – part of the Kingdom's "Vision 2030" plan to expand its economic base and lessen its dependence on oil – will inevitably fuel speculation about where the aircraft will be built.
It has long been rumoured in defence circles that at least part of the work on the Typhoons might be done in Saudi Arabia, as part of Vision 2030. Assembling or producing key components for the new jets would give Saudi Arabia a headstart in an intensely complex sector.
When the company agreed in 2012 to sell Hawk training jets to Saudi Arabia, part of the deal was that the Gulf state would get the capability to assemble them in the country, using sub-assemblies from the UK.
It is thought that as well as pricing, discussions about where assembly of the second batch of Typhoons would take place contributed to the long delay in placing an order.
Speculation about the order caused BAE shares to rise in afternoon trading, and they closed up 2.2pc at 601.8p. 
Hopes of further orders for Typhoons were further lifted on Friday, with speculation that Malaysia could also purchase the jets. The South East Asian nation is looking to update its air force and wants to buy about 20 new aircraft. 
France’s Rafale jet had been seen as a frontrunner, along with the Typhoon, but a row about the possibility of the European Union introducing controls on imports of palm oil – a major export commodity for Malaysia – could put the Paris-based Dassault’s aircraft at a disadvantage.
BAE Systems agrees long-awaited Saudi order of 48 Typhoon jets

Dassault's Rafale fighter, pictured, could lose out to the Typhoon in a sale to Malaysia
The Malaysian defence minister said that because of a European Parliament resolution that would, if implemented by the EU, see reduced palm oil imports from Malaysia to Europe, the country might overlook a French bid and buy British aircraft instead.
According to reports last month, a BAE Systems official in Kuala Lumpur said that the UK Government’s offer to help Malaysia finance a purchase of Typhoons remains in place. Under the export credit scheme, the UK Government would guarantee to pay for the Typhoons if Malaysia reneged on the deal or was unable to pay.
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