AirTanker tries to save £13bn deal

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The Independent Online

The consortium led by the European aerospace giant EADS filed a revised proposal last night in an attempt to save its £13bn British military aircraft deal that is under threat of cancellation.

The consortium led by the European aerospace giant EADS filed a revised proposal last night in an attempt to save its £13bn British military aircraft deal that is under threat of cancellation.

The AirTanker consortium confirmed it had met a deadline set for revised proposals set by Sir Peter Spencer, the Ministry of Defence's procurement chief.

"We have done what we said we would do, which was to deliver what the head of the defence procurement agency required," said Robin Southwell, the chief executive of AirTanker, which is a consortium led by EADS, the parent of the civil aircraft giant Airbus.

However, Mr Southwell, who delivered the document by hand, said he could not disclose any of the details of the revised offer because of its commercial and political sensitivity.

According to a letter leaked earlier this week, Sir Peter threatened to scrap the deal unless changes were made, including a reduction in price of up to £230m - or 1.75 per cent.

The leaked letter indicated Sir Peter was concerned the terms offered by EADS would not fit within a private finance initiative model and allow the MoD to keep the planes off its balance sheet.

Sources close to the talks said AirTanker is expected to have answered all of Sir Peter's demands, including the price reduction.

The UK wants to replace its ageing fleet of tanker planes, which include TriStar and Vickers VC-10s. In what would be its largest outsourcing programme, AirTanker would own and maintain the converted Airbus A330 planes for the RAF for 27 years. When the planes were not required by the RAF, the consortium would be free to lease them to third parties. Virgin Atlantic has already held talks with the group about leasing the planes.

The award was a huge coup for AirTanker, which is trying to establish itself in the refuelling market. It has since beaten Boeing for a similar order for the Australian government and is in the running for a giant US government order.

The first AirTanker plane is due to be delivered to the RAF in 2008. An MoD spokeswoman yesterday said: "Our negotiations continue."

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