The manufacturer of products for the defence industry has had a multi-billion pound proposal to supply the Royal Airforce of Oman with 12 Typhoon fighter aircrafts.
BAE Systems anticipates contract negotiations for 12 aircraft to begin shortly and this will determine the value of the contract.
However, it is widely known that a Typhoon aircraft costs around £70m, and with the contract set to include in-service aircraft support and maintenance as well as pilot training, the deal will surpass the £1bn mark by a significant amount.
The Manufacturer has been told by both sides of the negotiating table that the deal is expected to be concluded by the end of 2012, with price and the mixture of services the only points of discussion.
In a statement released today, the company said: “BAE Systems welcomes the release of a Request for Proposals (RFP) for the supply and support of Typhoon fighter aircraft for the Royal Air Force of Oman.
“This news underpins the long-standing defence and security relationship between Oman and the United Kingdom and between the armed forces in Oman and BAE Systems, a major supplier of equipment and services to the Sultanate.”
If the deal is concluded, Oman will become the seventh customer for the Typhoon fighter aircraft, the UK, Spain, Germany, Italy, Saudi Arabia and Austria being the existing customers. BAE Systems has been pursuing success in international markets for some time and views Oman is a promising export customer.
The company understands that the Royal Air Force of Oman expects first deliveries 36 months after contract signature. The Typhoons will be made at the company’s site in Walton, Lancashire, where hundreds of job losses were announced as BAE Systems restructured its military aircraft business in September 2011.
The company has said that today’s announcement will not save the jobs, but will provide a boost to the company’s operations in the UK and safeguard existing jobs.
Similarly to the recent £133m deal to supply Brazil with three patrol vessels, there will be an element to the deal that prepares Oman to take on more of its own defence training in the future.
As emerging nations begin to strengthen their ability to carry out high tech manufacturing in house, there is a trend emerging for highly profitable service deals that ensure there are indigenous skills to support the aircraft.
Although this is good news for the balance sheets in the short term, this type of deal is not sustainable as high growth states look to take increased control of supplying products and services for their militaries.