Publication: Sapa Issued: Date: 2003-01-27 Reporter: Sapa

Britain to Announce Multi-billion Carrier Contract on Thursday




Date 2003-01-27


The British government is expected to decide on Thursday whether to hand a multi-billion-pound aircraft carrier contract to French defence group Thales or Britain's own BAE Systems.

Shares in Thales rose Monday after press reports indicated the French arms group would win most of the three-billion-pound (4.5-billion-euro, 4.9-billion-dollar) contract, before later succumbing to an overall market decline on Iraq war worries.

Britain's defence ministry asked for feasibility studies on two massive new aircraft carriers from both companies in 1999.

The government is reported to be hoping to reach a decision on a prime contractor on Thursday, less than a week before the annual Franco-British summit in the northern French town of Le Touquet.

Each weighing around 50,000 tonnes and capable of launching 50 military jets, the vessels would replace the Royal Navy's three smaller carriers after their delivery in 2012 and 2015.

Combined with a maintenance contract worth an estimated seven billion pounds, the overall deal could be worth as much as 10 billion pounds (15 billion euros).

Thales and BAE Systems recently refined their plans after the ministry announced its decision to equip its future carriers with the F-35 Joint Strike Fighter, a short take off and vertical landing (STOVL) aircraft still being developed by US company Lockheed Martin.

British Defence Minister Geoff Hoon requested that the two new carriers also be suitable for modification to accept standard military jets and the on-deck catapaults required to launch them. Britain has also demanded that the new carriers be non-nuclear powered, unlike their French and US counterparts.

Both groups have said they would build the vessels in several sections before bringing them together for final assembly at the Scottish Rosyth shipyard belonging to naval contractor Babcock. Both have also said the bulk of the work would be carried out in Britain, generating an estimated 10,000 new jobs.

There are understood to be some differences in cost and approach between the two companies, with Thales pledging cost-cutting tendering between competing subcontractors, while BAE Systems plans to use favoured partners.

But political considerations are likely to have a greater influence on the government's final choice.

Despite its 2000 acquisition of British firm Racal, making the French company the second-biggest player on the British defence market, Thales is still seen mainly as a French company in Britain.

Reports that it was poised to win the carrier contract have stoked nationalistic sentiments in the British press in recent days.

But France has indicated it too could be interested in ordering a new super-carrier, helping to bring down costs for London -- in a deal that could prove easier to negotiate if Thales is chosen as the prime contractor.

Other reports suggest Tony Blair's government may opt for a "third way" approach that would see the contract split between the two defence giants.

The Daily Telegraph newspaper on Monday said Defence Minister Hoon had asked the companies to work together to share the contract.

Thales shares bucked a broad market decline with a 0.22-percent rise during early trading on Monday, but later eased back 0.37 percent in the afternoon here to 26.80 euros while the CAC 40 index of leading French shares shed 2.31 percent.

Last December, analysts at Merrill Lynch calculated that Thales's share price would rise around four euros if the group won the entire carrier deal.

With acknowledgement to Sapa.