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BAE PULLS OUT OF UK FLIGHT TRAINING CONTRACT

22 Apr 02. BAE Systems (London:BA.L – News) has pulled out of a bid to be systems integrator for a UK military flight training programme, MFTS, worth up to £1bn($1.8bn).

Instead BAE will focus on securing a firm contract for Hawk jets to be used in the programme and on lucrative support work seen worth up to £3.5bn pounds.

“We are focused on putting together a competitive bid for aircraft and support,” a spokesman said. He said BAE pulled out earlier this month from bidding to be systems integrator on the programme, which will train air crews from all three arms of the UK military.

BAE’s withdrawal leaves bid members Bombardier (Toronto:BBDb.TO – News) and Serco (London:SRP.L – News) looking for a new partner as groups led by Boeing Co (NYSE:BA – News), Lockheed Martin Corp (NYSE:LMT – News) and Kellogg, Brown and Root (NYSE:HAL – News) remain in the running.

“We are in talks with potential partners to replace BAE and hope to conclude these shortly,” said Bombardier spokesman Alec McRitchie. “Given our experience operating the NATO flight training programme we run in Canada for six nations, we feel our consortium is strong,” he said.A winner is expected to be selected in March 2005.

Comment: This may be a smart move on BAE’s part given the current level of pilot training in the U.K. Sources close to BATTLESPACE suggest that only 15 fast jet pilots will graduate this year, with little indications of future growth. If, as suggested in BATTLESPACE ALERT (Vol.6 ISSUE 8, April 2nd 2004, SAVAGE U.K. DEFENCE CUTS EXPECTED), the numbers may not add up to give the Prime the required profit. The cuts in helicopter numbers will also mean a reduction in requirements for pilots. This is the second time that BAE has pulled out of a Prime bidding which may indicate a worry that current contract prices are unrealistic for an economy which promises inflation ahead and huge defence cuts.

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