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PARIS (Reuters) - Competition is heating up for a $1.6 billion (1.23 billion pounds) deal to provide air combat training for Britain's military as arms firms look for stable revenues amid scarce demand for their hardware, despite an uptick in defence spending, industry sources said.
In a re-run of a recent duel over helicopter training, Italy's Leonardo (LDOF.MI) and Europe's Airbus (AIR.PA) are both preparing to enter the race to replace a mixture of private and military training for UK forces from 2020, the sources said.
Leonardo is considering an offer to supply its Aermacchi M-346 trainer for the competition known as 'Air Support to Defence Operational Training (ASDOT)' together with an unidentified British contractor.
Airbus, which recently won a major UK military helicopter training contract, defeating a bid from Cobham (COB.L) that included AgustaWestland aircraft from Leonardo, is considering bidding for the contract as part of a group-wide services drive.
Toulouse-based Airbus, which already provides training for the German air force with modified Bombardier (BBDb.TO) Learjets through its GFD unit, declined to comment.
A Leonardo spokesman said it would "evaluate a range of options" based on UK requirements that are in the early stages of being defined, and was in discussion with potential partners.
Britain's Ministry of Defence (MoD) is looking for a single company or consortium to fulfil the prestige contract to train its military pilots with methods including aggressor training, or simulating 'bad guys' in mock battles.
Those services are currently carried out by Cobham using target-towing business jets and Hawk T1 trainers from a naval air squadron managed by UK outsourcing company Serco (SRP.L).
"The MoD is pretty agnostic about platforms, but it is the training capability that is important to them," said Alexandra Ashbourne-Walmsley, associate fellow at the Royal United Services Institute, a UK-based think tank.
Securing local partners could be valuable for foreign bidders as they adjust to realities after Brexit, she said.
"You are going to see more of that emphasis on UK defence and jobs across the defence procurement process."
Leonardo and Airbus would join a growing field of competitors, highlighted by plans by several bidders to display planes at the July 14-16 Royal International Air Tattoo (RIAT) at RAF Fairford, England, the world's largest military air show.
They include Quebec-based Discovery Air Defence Services, which provides combat training for the Canadian air force and has teamed up to bid with UK military services provider Inzpire.
And at last year's RIAT event, Canadian air training company CAE (CAE.TO) agreed to bid jointly with Florida-based Draken International, which says it owns the world's largest fleet of tactical ex-military jets including Western and Soviet types.
A decision on the ASDOT contract, worth up to 1.2 billion pounds ($1.6 billion) over 15 years, is expected next year with services due to start in 2020, according to industry reports.
Reporting by Tim Hepher; Editing by Mark Potter