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UK TANKER DECISION IN JANUARY

16 Jan 03. The U.K. Ministry of Defence is close to picking its preferred bidder for a £13bn contract to provide new midair refuelling tanker planes for the Royal Air Force, according to a person familiar with the situation.

The MoD is on track to inform the successful bidder and make a formal announcement in late January, this person said. A decision had been expected late last year but Armed Forces Minister Adam Ingram indicated in December it would be made “as soon as possible” in 2004. Two groups are competing for the contract, under which the successful bidder will provide the RAF with a refuelling service over a 27-year period.

Tanker & Transport Service Co. Ltd. comprises Boeing Co. (NYSE:BA – News),BAE Systems PLC (BA.LN), Serco Group PLC and Spectrum Capital. Under its proposal it would use 21 Boeing 767-300ER planes that are now in service with British Airways PLC (NYSE:BAB – News).

The other consortium is AirTanker, which comprises EADS, Cobham PLC , Rolls-Royce PLC and Thales SA . It’s proposing to supply new or a mix of mainly new and used A330-200 planes made by EADS’ subsidiary Airbus. The MoD wouldn’t buy the planes, and the RAF would lease them when required.

Comment: As we said last year, it looks as if the EADS-led AirTanker consortium has pulled ahead in this requirement. The U.K. is set to benefit from Royalties received on the A330 and Rolls Trent engines. In addition with EADS pushing into the military market and setting its stall in the U.S. to bid for tanker contracts there, a U.K.-based tanker fabrication specialist with market leader Cobham in the team should create a force to be reckoned with in world markets. In addition it is unlikely that the U.K. MoD would like to get involved with the investigations to the Boeing deal in the U.S. and any effect the outcome of that would have on the U.K. requirement.

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