Although the Government is placing a £1bn contract with Lockheed to buy 25 Hercules C130J transport aircraft, the remainder of the RAF's needs will be met by the FLA when it comes into production early next century.
BAe yesterday lifted the threat of job cuts hanging over its workforce after welcoming the Government's decision to rejoin the FLA programme and contribute to its future funding and design.
The company, which has been financing the development of wings for the FLA, said future funding "is something we have all got to sit down and discuss."
The commitment to buy about 50 FLAs is more aircraft than BAe expected the MoD to order. "We always feared that any order for Hercules would hurt us. But we would appear to be getting what we wanted," a spokesman for BAe said.
That was evident yesterday when Dick Evans, BAe's chief executive who warned that choosing Hercules would cause serious damage to UK aerospace technology, warmly praised the announcement.
"This is extremely welcome news for BAe, the UK aerospace industry, and for jobs in this vital high-technology industry. A share of the programme equal to our other partners will reaffirm our key role in the European aerospace industry and will be worth over £5bn to the UK, with exports outside Europe potentially taking that figure to £12bn.''
Mr Rifkind added a caveat saying the UK would only rejoin the FLA programme if it was put on a commercial footing in Europe's Airbus Industrie consortium.
Britain's antipathy towards state funding of capital projects led it to pull out of the FLA project after the initial study, leaving BAe to fund its own participation. BAe argues that without government support its own role in the development and production phases of the project would be put in jeopardy.
BAe had offered the Government a refurbishment deal for its existing military transport plane fleet provided it chose the FLA, but Mr Rifkind said yesterday that this would "provide poor value for money."
Some 7,500 UK jobs would be safeguarded by the FLA decision, BAe estimates. The company has already shed 750 jobs this year at its Airbus division at Bristol and Chester.
The plight of the European aerospace industry was demonstrated again yesterday when the German partner in the FLA project, Dasa's Deutsche Airbus, said it was cutting 3,000 jobs by the end of 1997.
Lockheed believes its own contract will safeguard about 3,500 UK jobs. The company has agreed to place contracts to the value of 100 per cent of the order with UK companies. At least 10 per cent of the value of these contracts will be for work directly on the C-130J itself. As a result, 36 UK companies will be participating in the production of C-130J not only for the RAF's order but also for aircraft supplied to other nations.
TI's Dowty Group is building propellors, Marconi is developing some electronics and Lucas is supplying engine components. Westland Aerospace, which will provide engine nacelles from its division on the Isle of Wight, said the deal would provide a £30m order boost in the short term.
But many UK companies will be involved in both projects. Rolls-Royce, through a joint venture with Germany's BMW, is building the engines that are likely to power the FLA. Rolls-Royce is in the process of paying $525m for Allison, the US company that builds engines for Lockheed. "Yesterday's announcement was a major procurement decision that we welcome very much," a spokesman said.
Matra Defense, the French aerospace company, is talking to BAe and GEC over possible collaboration to build a missile for the British government.
Matra, part of the Lagardere Groupe, added that it expects to merge its missiles business with that of BAe after a restructuring during the first half of 1995.Reuse content