July 8, 2019 / 8:42 PM / 10 days ago

Exclusive: Airbus, Boeing indicate they may pull out of Canada fighter jet race - sources

OTTAWA (Reuters) - Airbus SE (AIR.PA) and Boeing Co (BA.N) may pull out of a bidding process to supply Canada with new fighter jets because they say the contest is unfairly tilted towards Lockheed Martin Corp (LMT.N), two sources with direct knowledge of the situation said on Monday.

FILE PHOTO: A real-size mock of F-35 fighter jet is displayed at Japan International Aerospace Exhibition in Tokyo, Japan, November 28, 2018. REUTERS/Tim Kelly/File Photo

The three companies competing with Lockheed Martin’s F-35 jet have already complained about the way the contest is being run, and expressed concern some of the specifications clearly favour the U.S. firm, industry sources have said in recent weeks.

Next week the government is due to release the so-called request for proposals - the final list of requirements - for the 88 new planes it wants to buy. The contract is worth between C$15 billion (£9 billion) and C$19 billion and the planes are due to be delivered between 2025 and the early 2030s.

Boeing and Airbus have now formally written to Ottawa expressing concerns about the current requirements, said two sources familiar with the matter who declined to be identified given the sensitivity of the situation. The fourth bidder is Sweden’s Saab AB (SAABb.ST).

Pat Finn, the defence ministry’s top official in charge of procurement, confirmed one of the four companies had sent a formal letter but gave no details. The final request for proposals is due out on July 17 and modifications are still being considered, he said.

“We continue to engage all four of them,” he said in a telephone interview. “We have had some comments (such as) ‘If changes are not made in such a place then we would frankly consider possibly not bidding.’”

“We are looking at those very seriously. I can’t say that we will make every change, but as far as we know we continue to have four bidders in the race.”

Airbus declined to comment. Boeing did not respond to a request for comment.

Canada has been trying unsuccessfully for almost a decade to buy replacements for its ageing F-18 fighters. In May, Ottawa changed the rules to allow Lockheed Martin to submit a bid, prompting Boeing to take the unusual step of announcing publicly it was surprised.

“Anyone who is not Lockheed Martin has expressed a very strong view,” said one of the sources. “We have been pretty clear with the government that this is not a request for proposals that lends to our participation.”

At least one firm has expressed unhappiness that the requirements emphasize the ability to carry out first strikes on targets abroad, a strength of the F-35, said the sources.

The government of Prime Minister Justin Trudeau insists the competition is not rigged. Finn said the defence ministry also had made changes to the requirements at the request of Boeing, Airbus and Saab.

Canada is part of the international consortium that developed the F-35. The former Conservative administration said in 2010 it would buy 65 of the jets but later scrapped the decision, triggering years of delays.

Trudeau came to power in 2015 vowing not to buy the F-35 on the grounds that it was too costly, but Ottawa has since softened its line.

Reporting by David Ljunggren in Ottawa; Editing by Matthew Lewis

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