Combat Jet Gets Lift From Saudis -- WSJ

By Robert Wall 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 10, 2018).

LONDON -- Saudi Arabia and the British government reached an agreement on a long-stalled, multibillion-dollar deal for 48 Eurofighter Typhoon combat jets, boosting 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 principle to acquire the additional planes in a deal estimated at more than $5 billion. Talks on a follow-on deal started years ago but stalled amid periods of falling oil prices and political upheaval, including Saudi Arabia's war in Yemen, which has been controversial in Britain.

A dearth of orders in recent years forced BAE to announce last year it would shed about 1,400 jobs at its military aircraft division and build fewer planes.

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 it "a positive step towards agreeing a contract."

The deal cements Saudi Arabia's position 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, which builds Typhoons in conjunction with Airbus SE and Italy's Leonardo SpA, has struggled for years to win big export deals for the plane, putting its future at risk. 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 Typhoons with shipments beginning in 2022. Boeing Co. also has won big deals for its combat jets 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 a contract is signed for planes to be handed over.

BAE may assemble some of the planes in Saudi Arabia. Riyadh, which sought local production on the original Typhoon contract before dropping the idea, has signaled it still has the ambition to assemble planes domestically.

Mr. Woodburn said the defense contractor would support Saudi's industrial ambitions laid out in the country's Vision 2030, a plan to make the kingdom's economy 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.

Dimitrios Kontos contributed to this article.

Write to Robert Wall at [e-mail]

(END) Dow Jones Newswires

March 10, 2018 02:47 ET (07:47 GMT)

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