Go-ahead 'imminent' for £9bn Eurofighter deal

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The Independent Online

A £9bn order for Eurofighter aircraft - the biggest pan-European defence contract in history - could be sealed within the next fortnight, one of the lead companies involved in the programme said yesterday.

A £9bn order for Eurofighter aircraft - the biggest pan-European defence contract in history - could be sealed within the next fortnight, one of the lead companies involved in the programme said yesterday.

The chairman of the Italian aerospace and defence company Finmeccanica, Pier Francesco Guarguaglini, said he expected agreement from the UK Ministry of Defence "within a matter of days", paving the way for Britain, Germany, Italy and Spain to place an order for a second tranche of 236 planes. The four countries placed an initial order for 148 Eurofighters in the 1990s.

The Germans, Italians and Spanish have signed up to buy more Eurofighters but the formal go-ahead for tranche two has been held up by a tussle between BAE Systems and the MoD over the price and capability of the additional aircraft. At one stage it looked as if the impasse could lead to a hiatus in Eurofighter production, threatening more than 1,000 jobs. The likely go-ahead for tranche two will be a boost for north-west England and BAE's Warton factory near Manchester, where thousands of jobs are dependent on production of the aircraft.

But it is likely to re-ignite the debate over whether the aircraft is needed at all. The Eurofighter was conceived in the days of the Cold War and was designed to act in an air defence role against Soviet forces.

Mr Guarguaglini also said he expected Finmeccanica and BAE to agree to restructure their £2bn avionics and defence systems joint venture next month. The deal will involve a realigment of their shareholdings in the various businesses which make up Alenia Marconi Systems and is expected to result in Finmeccanica paying about €400m (£275m) to BAE.

The Italian company will take over the whole of their jointly owned air traffic control and communications interests as well as a controlling 60 per cent stake in their avionics business. BAE, meanwhile, will emerge with a 60 per cent stake in the jointly owned business that specialises in military command and control, intelligence and surveillance systems.

Finmeccanica, which is 32 per cent state owned, has embarked on its own strategy to shed its non-core activities in energy, IT and transport to focus on defence and aerospace. Mr Guarguaglini said the company had €1bn to spend on acquisitions and expected its defence and aerospace revenues to increase from €6.3bn last year to €10bn by 2006. Part of that growth will come from Finmeccanica's £1bn purchase of GKN's half of the helicopter manufacturer Augusta Westland, which was given UK Government approval yesterday.

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