British firms lose out in $170bn deal for stealth jet fighters

By Christopher Bellamy, Ian Griffiths and Paul Farrelly

A consortium containing British Aerospace was the big loser last night as the Pentagon chose two other contenders for the biggest military hardware deal in history. The prize is an order for 3,000 warplanes worth at least $100bn (pounds 166bn), a figure which could rise in the future to $170bn or more.

The ultimate winner, to be chosen in four years' time, is likely to assume the dominant role in fighter aircraft construction well into the next century. Also at stake are tens of thousands of future jobs.

The two combines which have survived into the final round, Lockheed-Martin and Boeing, will build prototypes of a new supersonic stealth jump-jet for the US military and Britain's Royal Navy. The Joint Strike Fighter (JSF) is scheduled to enter service in 2008-2010 and replace seven existing types of aircraft, including Britain's Harrier jump-jet. To help keep the cost down, the same basic aircraft will be made in three variants. Each of the successful teams will build prototypes of two.

The third consortium, in which BAe was partnered by McDonnell-Douglas and Northrop-Grumman, was knocked out of the bidding process. It is effectively being excluded from the tactical aircraft market and analysts believe it will now have to exit from that business unless it can find some way of joining with the remaining consortia to try to secure access to the deal. The $170bn long-term figure is based on customers being found outside the US and Britain for another 1,000 warplanes.

The co-operation between European and US aircraft manufacturers shows that top-of-the-range military aircraft have become so expensive and complex that even the mighty US may not be able to build them alone. Whoever ultimately wins the contract, British technology is bound to play a key part.

British Aerospace had already been invited to join the other consortia if it lost, because of its expertise with the Harrier. Other British aviation companies are also expected to be involved in the project when the final winner is known. Rolls-Royce engine technology was being used by all the bidders. GEC is providing avionics for the Boeing consortium, but was in contact with the other two in the hope of supplying the fly-by-wire systems and cockpit display technology. Lockheed has already promised a 10 per cent British input if it wins.

The Royal Navy's commitment to buy the new fighter means guarantees will be sought on a pre-determined level of British content in the aircraft which is finally selected.

A bigger threat to British industry is the competition the JSF represents for the pounds 40bn Eurofighter. It is scheduled to come into service in about 2005, some five years earlier than the JSF. However, the two jets will ultimately be contesting lucrative export markets.

British Aerospace, the UK's leading prime defence contractor, and its partners advanced a radical design without the usual tail fin, which the consortium claimed would make it almost invisible to enemy radar. The plane was designed to be turned instead by "vectoring" the thrust of the engine, turning the outlet nozzle in the direction the pilot wants to go. BA brought stealth technology developed for the Eurofighter to their design, although the new JSF will be a more advanced aircraft.

Boeing put forward a huge-bellied fuselage with a delta wing, with GEC avionics, based on the B-2 stealth bomber and its 777 jetliner. Lockheed- Martin's design was the most conventional of the three, with twin tails and extra lift for the jump-jet version through a new engine design with Rolls-Royce, which also has long expertise with the Harrier.

The Pentagon wants three variants of the JSF: a conventional take-off and landing aircraft for the US Air Force, a carrier-based aircraft for the US Navy and a jump-jet for the US Marines, which will also replace the Royal Navy's Sea Harriers. The planes ordered by the US will replace Air Force F-16s, Marine F/A-18 Hornets and AV8B Harriers, and Navy F- 14 Tomcats and F-15 Eagles.

So far, the British Ministry of Defence has invested $250m in development of the JSF, which it wants as the replacement for the RN's Sea Harriers. It might also replace RAF Harriers, although another plane under development - the Future Offensive Aircraft, which is also planned to replace Tornado bombers - might be chosen instead. That aircraft will probably have two engines, which the RAF prefers for going over hostile territory.

But either way, the number of aircraft types in service with both the British and US armed forces will shrink dramatically. Building three different variants from the same production line should reduce costs. Years ago inter-service rivalry in the US would have put paid to such a lofty idea, but the end of the cold war has put pressure on budgets, and service chiefs are more willing to compromise to get a new plane.

The Pentagon hopes the aircraft from this huge production run will be as little as $30m (pounds 18m) each - the same price as present military aircraft. But the history of military aviation - including the Eurofighter - suggests they will be more expensive than that.