Saudi Arabia Agrees to Buy More Typhoon Combat Jets

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 [e-mail]

(END) Dow Jones Newswires

March 09, 2018 12:58 ET (17:58 GMT)

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