Thursday, 13 September 2007

Who will be first?

It has long been an open secret in defence circles that there is only one thing stopping the UK cancelling the last tranche of the Eurofighter order. That is the knowledge that, while all the other "partners" want to do likewise, the first to do the deed will bear the bulk of cancellation costs and compensation – estimated at billions of pounds – almost as much as buying the remaining aircraft.

However, such are the pressure on the defence budget that the need to rid themselves of the burden is becoming intolerable, hence a piece in The Times today, announcing: "MoD seeks a way out of Typhoon contract".

Having already bought 144 of the aircraft, the MoD is still committed to buying another 88 – the so-called "tranche 3", at an approximate cost of £5 billion, but it is now negotiating with the four-nation manufacturing consortium over how much it would cost to cut or reduce the order.

The pressure apparently comes for the Treasury, which is looking ahead at the forthcoming Joint Strike Fighter contract and asking why the RAF needs two types of strike fighter – the latter being the dedicated role of the tranche 3 machines.

The need for the tranche 3 version is, in any event, being reduced by current developments, with the introduction of an "austere" air-to-ground into all new RAF aircraft coming off the production line, and plans to retrofit all existing aircraft with that capability.

One option thus being explored is a deal with would enable the MoD to count 72 Typhoons that it is about to sell to Saudi Arabia as part of its 88 commitment. But, predictably, this is not being met with any enthusiasm by the UK Eurofighter builder, BAE Systems.

Meanwhile, the cracks are showing up elsewhere. Last month, the Italian defence ministry stated that it would "probably" cut its order of 121 Eurofighters "because the planes have become more expensive". It has already bought 75 aircraft and is expected to take delivery of another 46 after 2012, but that is now in doubt.

With 236 aircraft so far bought, from the 620 to which the four-nation partnership have committed to buy, if the UK does manage to pull out, with Italy following, this will almost see the end of the long-running multi-national project. It will also mean the end to any potential export orders – not that there is anything substantial in the offing apart from Saudi. With it will die the fond dream of European aerospace integration, leaving the US-designed Joint Strike Fighter to hoover up the orders for the next generation.

Then, the ghost of Heseltine will finally be dead.