The Italian aerospace company Alenia is today expected to announce that it is joining the Franco-German dominated European Aeronautics Defence and Space Company (EADS), leaving BAe Systems further isolated in Europe.
BAe Systems had been competing fiercely with EADS to secure an alliance with the Italians but Finmeccanica, Alenia's parent company, is thought to have selected the pan-European grouping instead.
In a last-ditch bid to sway Finmeccanica, BAe offered to give Alenia a share of its combat aircraft programmes, including Tornado, Hawk, Harrier, Gripen and the Eurofighter. BAe would have controlled two-thirds of the joint venture and Finmeccanica one third.
Finmeccanica has also been offered involvement in the Airbus civil aircraft programme by both BAe and EADS. The three companies forming EADS - DaimlerChrysler Aerospace of Germany, Aerospatiale Matra of France and Casa of Spain - are all members of Airbus, as is BAe.
BAe's failure to bring Alenia into the fold is likely to deliver a blow to its European ambitions and couldhasten the company's moves to forge a transatlantic alliance.
There has been widespread speculation for the last six months that BAe is seeking a merger with Boeing or Lockheed Martin. A senior BAe executive denied earlier this week, however, that it was preparing to announce a tie-up with Boeing. Harry Stonecipher, the Boeing president, also refused to comment on whether merger talks were going on.
BAe sources maintained last night that failure to agree a deal with Finmeccanica would not be a "disaster". One said: "It would have been nice to have done a deal with Alenia but it is not essential."
BAe will still have an alliance in missiles with Alenia through its Matra BAe Dymanics joint venture.
It has also been suggested that if EADS forged an alliance with Alenia it would gain control of Eurofighter. But BAe sources said that, excluding the engine, BAe would still have 45 per cent of the programme including radar and avionics.Reuse content