Saudi Typhoon Deal Could Open Door To Further Sales

 - February 19, 2014, 10:33 AM
The conclusion of long-running price escalation negotiations should smooth the water for follow-on Typhoon sales to Saudi Arabia. (Photo: BAE Systems)

After more than two years of negotiation, the governments of the UK and the Kingdom of Saudi Arabia have agreed new terms covering the delivery of 48 Typhoon fighters. Under the original 2007 Project Salam contract, Saudi Arabia ordered 72 Typhoons, with BAE Systems acting as lead company for the Eurofighter consortium. The first 24 aircraft were delivered without issue, but the remaining 48 aircraft became the subject of debate.

At the heart of the disagreement lay the issue of contract price escalation. The initial contract was signed according to the economic conditions that prevailed in 2005, and the UK government and BAE Systems were seeking additional payments to make good a shortfall caused by both the change in economic conditions and the decision to retain final assembly in the UK, rather than at a new facility in Saudi Arabia.

Revised pricing terms have now been agreed, although no details have been released. “This is an equitable outcome for all parties,” said BAE’s chief executive, Ian King. “I am pleased that we have been able to conclude this negotiation, which builds on our long-standing relationship with this much valued customer.” The announcement was made a day before the company released its full-year figures.

Ongoing pricing negotiations had put the brakes on further Typhoon sales to Saudi Arabia, but now that the roadblock has been removed it is expected that BAE Systems will renew its efforts to sell more Typhoons to the Royal Saudi Air Force. The agreement may also help with the BAE Systems bid to sell the Typhoon to the Kingdom of Bahrain. A number of sources have suggested that Saudi Arabia would fund a Bahraini Typhoon buy. A reinvigoration of Gulf sales potential is an encouraging sign for the four-nation Eurofighter consortium following the disappointment of last December, when BAE Systems announced that negotiations to sell the aircraft to the United Arab Emirates had come to an end.

Despite the ongoing pricing negotiations, and in advance of a settlement, BAE Systems has continued to deliver Typhoons to Saudi Arabia from its final assembly line at Warton in Lancashire. At least 10 of the second batch of aircraft are thought to have been completed and delivered. This batch comprises 24 Tranche 2 Typhoons and an equal number of Tranche 3 machines, and an upgrade plan for the earlier aircraft is thought to be part of the revised agreement. At the same time, the company has also signed a number of Typhoon-related contracts, including the provision of follow-on support and training.