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EADS WINS AUSTRALIAN AIR TANKER DEAL

16 Apr 04. Reuters reported that Australia has selected Airbus parent EADS (Paris:EAD.PA – News) on Friday to supply tanker aircraft worth US$1.5bn, moving to extend its military reach and boosting the Franco-German company’s efforts to develop its arms business. Three months after beating Boeing Co (NYSE:BA – News) for a British tanker order, EADS again defeated its U.S. rival for the deal to supply the Royal Australian Air Force with five tankers for refuelling other aircraft in flight.

The win by European Aeronautic Defence & Space Co NV (XETRA:EAD.DE – News; EADS) deprives Boeing of an order for its dwindling 767 airliner production line, which the Chicago-based company is hoping to keep going with orders for the plane’s tanker version, especially from the U.S. Air Force.

EADS’s tanker-transport aircraft based on the Airbus A330 wide-body airliner offered the best value for money, Defence Minister Robert Hill said.

“We’ve no doubt over the years this will become an aircraft of choice for the particular capability,” he told reporters, adding negotiations with EADS would be sealed later this year.

“In terms of capability the advice was that the Airbus won the contest. In terms of value for money the Airbus also won the contest over Boeing.”The new aircraft, to be delivered from 2007, would be capable of refuelling Australia’s current fighter jets and the Joint Strike Fighter aircraft currently being developed in a U.S.-led project, the minister said.

It could also carry 293 passengers and substantial volumes of cargo. EADS, based in Germany and France, owns 80 percent of plane maker Airbus SAS but has been trying to develop its relatively small defence business, which could offer more stable profits as well as additional revenue. The company makes about six billion euros or 20 percent of its annual revenues from defence and plans to increase that to 10 billion next year.

AFGHANISTAN, IRAQ EXPERIENCE

Australia currently relies on ancient Boeing 707 tankers converted from retired airliners. The new planes will carry more fuel, supporting more Recent operations in Afghanistan and Iraq had highlighted the importance of multi-role aircraft to keep air operations going around the clock, Hill said.

Qantas Airways Ltd (Australia:QAN.AX – News), which operates A330 airliners, will fit the new planes with their tanker equipment and later maintain them for the air force.

Defence analysts said the government had been expected to choose the Airbus plane, because it was larger and more versatile than the 767, even though that model might become a standard tanker for the country’s most important ally, the United States.

“The Australians tend to buy the thing that suits them best in terms of equipment, and the more versatile the platform the more likely they are to buy it,” said Neil James, executive director of the Australian Defence Association. The A330 won Britain’s endorsement in January when that country chose an EADS-led consortium for a 13 million pound ($24 billion) contract to replace the Royal Air Force’s tankers with A330s. Hill valued the Australian contract at A$2.0 billion (US$1.5 billion). EADS is building another tanker model for Germany and Canada and aims to win at least 30 percent of the market. ($1=A$1.37) ($1= .5413 pound)

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