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BOEING TEAM OFFERS BIG BENEFITS TO UK

22 Oct 03. Boeing Co (NYSE:BA – News) ,and its TTSC partners, bidding on the UK air tanker contract said on Wednesday benefits for Britain would include exports of up to £2.3bn($3.9bn)and create new jobs.

“(This) offers British companies industrial benefits in two stages,” TTSC Managing Director Keith Archer-Jones told a news conference, referring to jobs from the UK programme and from U.S. plans to use the Boeing 767 model for tankers.

TTSC said its own company, its partners and its suppliers would see more than 5,000 jobs created or sustained over the course of the contract.Britain’s privately-held Marshall Aerospace, which would convert almost all the TTSC planes, would benefit.

“This would support 400 jobs,” said Michael Milne, marketing director at Marshall, which employs 1,700. UK engineering firm Smiths (London:SMIN.L – News) has already been chosen to build the refuelling systems for the planned U.S. tankers and said it would expect more exports if TTSC wins the UK bid.

“This has significant export potential,” Neal McKeever, Smiths’ managing director for international military business, told the news conference.Smiths shares were down 1.13 percent at 699 pence at 1259 GMT to outperform a London market off 1.59 percent.

BAE was down 3.49 percent at 173-1/4 pence but off early lows hit after a newspaper report said merger talks with U.S. defence firm General Dynamics (NYSE:GD – News) had failed.

The TTSC bid is up against one backed by European aerospace leader EADS (Paris:EAD.PA – News) which is offering Airbus A330 aircraft and foresees as many as 7,500 jobs being created or sustained. The bid is expected to include fewer than 19 planes, but the A330 is larger than the 767. The size of the bid would depend on whether the UK selects all new A330s or a mix of new and used. EADS’ partners are Thales (TCFP.PA.), Rolls-Royce (London:RR.L – News) and Cobham (London:COB.L – News).

The Ministry of Defence is expected to announce its choice by the end of the year in what will be its largest ever privately-funded initiative.

Each consortia would own the aircraft but provide them for tanking and troop transport services for the Royal Air Force for 27 years. They hope to raise additional revenues by leasing the planes to third parties while not in use by the RAF.

“We’d be looking to achieve financial close by the end of 2004,” TTSC’s Archer-Jones said of his consortium’s financing.TTSC was working with HBOS Plc (London:HBOS.L – News), Lloyds TSB Group Plc (London:LLOY.L – News), National Bank of Australia (Australia:NAB.AX – News) and Royal Bank of Scotland (London:RBS.L – News), he said.

Comment: TTSC appears to be pulling ahead of its rival in this tanker race. Former BAE man, Robin Southwell has been putting out mixed messages from the EADS-led consortia. First he stuck by his offer of ‘new-build only fleet’ stating reliability and through life costs as key and then changed to a mixed fleet of used and new. Both consortia have made new UK job projections in their bid but with Patricia Hewitt at the DTI examining the evidence, Southwell and his team must come clean on whether the integration will be done in the UK or Spain, both countries have been given assurances! In terms of UK jobs for the ‘new build’ aircraft, BATTLESPACE believes that there is a large overhang of unused A330 aircraft, estimated to be 150, in the world’s leasing inventory, these would surely be mopped up prior to any new build aircraft?

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