BAE consortium strengthens bid for £13bn MoD contract

A consortium including BAE Systems and Boeing that is vying to win a £13bn contract to supply the RAF with new mid-air refuelling aircraft is strengthening its bid by recruiting three leading UK companies to the team.

British Airways, Smiths Aerospace and Marshall Aerospace are joining the Tanker Team as strategic partners for what will be the biggest contract ever awarded under the Government's private finance initiative.

The Tanker Team, whose other two members are Serco and Spectrum Capital, is in competition for the contract with the rival Air Tanker consortium whose members are EADS, Thales, Cobham and Rolls-Royce.

The Ministry of Defence is due to announce the winner of the contest at the end of the year. The winning consortium will own, convert, certify and maintain the refuelling tankers on behalf of the RAF, although they will be flown by RAF pilots.

BA is providing the 20 second-hand Boeing 767 aircraft which will form the Tanker Team's fleet. It will also support some of the civil operations required under the contract with the MoD.

Marshall Aerospace will convert the BA fleet of 767s into refuelling aircraft while Smiths will provide the actual aerial refuelling systems.

The Tanker Team claims its bid will save the UK taxpayer £220m over the 27-year life of the contract. It also says that 85 per cent of the value of the contract will remain in the UK while potential export orders could bring a further £1bn worth of work to UK companies.

However, the Air Tanker consortium argues its bid will result in a better deal for the RAF and the UK taxpayer because it is proposing to use at least 12 brand new Airbus A330 aircraft for its fleet. The wings for the A330 are built in Britain.

To help offset costs to the RAF, the winning contractor will operate the refuelling aircraft commercially when they are not needed for military use.

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