BAE secures $2.5 billlion Saudi jet deal

LONDON/DUBAI Wed May 23, 2012 1:30pm BST

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LONDON/DUBAI (Reuters) - BAE Systems has signed a 1.6 billion pound deal to supply Saudi Arabia with Hawk jets to train pilots to fly the Eurofighter Typhoon which it has already ordered from UK company.

The deal provides some welcome relief for the British defence giant, which is battling against shrinking European and American defence budgets and fierce competition.

The deal covers the supply of 22 new Hawk advanced jet trainer aircraft, which will be made in Britain, 55 Swiss made Pilatus turboprop aircraft as well as training equipment and other support services, BAE said on Wednesday.

Saudi Arabia's official news agency SPA quoted an unnamed official at the Saudi defence ministry as saying the Hawks would help train "the Saudi air force to be able to use the fighter jets ... efficiently".

The majority of the Hawks will be made at BAE's plants in Samlesbury and Warton in Lancashire, northwest England, with some to be built at its site in Brough, Yorkshire, which is due to close in 2014, according to BAE.

British trade union Unite said 218 jobs at the plant in Brough, where planes have been made for almost 100 years, would be saved as a result of the deal. BAE previously said 845 jobs at Brough would be cut.

Earlier this year, BAE said its chances of delivering profit growth in 2012 hinged on talks to finalise a range of contracts with Saudi Arabia in a year marked by tight government defence budgets.

In 2007 Saudi Arabia - the world's top oil exporter - signed the contract with BAE to buy 72 Typhoon aircraft, 24 of which have been delivered to the Royal Saudi Air Force. The Salam deal, as it is known, is worth around 4.5 billion pounds.

Britain's defence ministry said the deal would provide the Royal Saudi Air Force with "cutting edge officer and aircrew training ... to support the introduction and operation of its growing fleet of fourth generation Typhoon fighter aircraft."

Shares in BAE, which have fallen 15 percent in the last year, were flat in a weak broader market at 274.4 pence by 1130 GMT, valuing the company at around 8.9 billion pounds.

"The agreement on the Hawks and nod to the fourth generation fighters - the Typhoon - are another sign that all is well under the government-to-government Salam programme, with this contract potentially incrementally positive," said RBC Capital Markets analyst Robert Stallard.

"Agreement on the Typhoon price escalation remains BAE's key focus for 2012."

Earlier this year BAE's Eurofighter consortium lost out on the deal to supply 126 fighter jets to India, which chose France's Dassault Aviation, which makes Rafale jets, as preferred bidder. The setback came after Japan chose to buy 42 Lockheed Martin F-35 jets instead of the Eurofighter.

In December the United States signed a $29.4 billion deal to sell 84 new F-15 fighter jets to Saudi Arabia in a long-expected move that the Obama administration said would boost Gulf security amid tension with Iran.

(Editing by Greg Mahlich and Hans-Juergen Peters)

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