Boeing on the lookout for a merger in the UK

The chairman of Boeing has sparked fresh speculation that the US aerospace and defence giant is interested in merging with BAE Systems by confirming that it is on the lookout for acquisitions in the UK.

Phil Condit told the German newspaper Die Welt that BAE was an "interesting candidate" for a merger. Mr Condit, who is on a tour of Europe this week, also told a gathering of UK journalists that Boeing was keen to expand its presence in Britain where it has a long history of collaboration with BAE.

"It may mean partnering with industry or it may mean acquiring companies," he said. "Our strategic intent is to build key capabilities in a number of countries and obviously the UK is one of those. I do know that we want more presence on the ground here."

In his interview with Die Welt on Tuesday, Mr Condit is reported to have said: "We have looked at several possibilities in Europe. BAE Systems is an interesting candidate for a merger."

However, speaking to UK journalists later that day Mr Condit maintained BAE was "not a merger opportunity" at the present time. "I am not over here to do a deal," he added. The biggest stumbling block to a deal with BAE is its depressed share price which would require Boeing to pay a huge premium in any merger. Yesterday shares in BAE were up 4p at 116p, less than a third of their value last July.

Mr Condit said that in the long term there needed to be greater collaboration between US and European defence companies as military technology became more sophisticated. He also indicated that Europe risked being left in the cold by the pace at which the US defence industry was extending its technological superiority with the aid of experience gained from conflicts such as the 1991 Gulf War and Afghanistan.

Sir Dick Evans, the chairman of BAE and a long-time advocate of an eventual merger with a US partner, drove home the message that the future of the European and American defence industries lay together in a speech in London. "There's no getting away from the fact that, with few exceptions, the US looms large in most defence companies' business strategies. European companies – Rolls-Royce, GKN, Thales, BAE Systems, MBDA to name but some of them – have all reshaped their strategies to a greater or lesser extent to capitalise on this where they can," he said.

He also asked whether, in the context of the looming war in Iraq and with Europe split, there would be "a realignment around different political axes" and what that would mean for pan-European defence industry alliances.

Mr Condit said he believed there would be a war with Iraq but that it would be "relatively short". He estimated it would depress world air travel by less than 2 per cent but he also warned there was a grave threat to a number of US carriers with American Airlines at risk of entering Chapter 11 bankruptcy protection and United Airlines in danger of filing for insolvency.