BAE Systems and Lockheed Martin maneuver for $3 billion fighter contract
Despite another delay last week of a government tender to supply the air force with 60 modern jet fighters, rival aircraft manufacturers BAE Systems and Lockheed Martin (LM) are positioning themselves to win the $3 billion contract.
U.K.-based BAE Systems and its partner Raytheon Aircraft Co., a Michigan-based jet manufacturer, announced last week that it had signed a 10-year, $30 million contract with state-owned Polskie Zaklady Lotnicze (PZL Mielec) to manufacture and assemble parts for Raytheon 800 corporate jets.
According to Ray Lomas, BAE's managing director in Poland, the company is now in a better position to win the fighter tender because the deal with PZL Mielec reinforces its partnership with one of Poland's top aircraft manufacturers. "The deal with Mielec is the next piece in the jigsaw puzzle to win the fighter contract," Lomas said.
According to BAE, the company and its Swedish partner Saab Aerospace are planning to shop their new generation Gripen fighter to the Polish government in the tender, which will likely happen later this year.
Meanwhile, U.S.-based LM is also angling to get a foothold in Poland's lucrative aircraft market. LM is said to be offering the government its new F-16 jets, and used F-16s until production begins. In addition, Daniel Romanski, the president of PZL Mielec, said LM had approached the firm last year about upgrading Poland's fleet of F-16 fighters. "But so far the company has not struck a deal with Lockheed Martin," said Boguslaw Grzejszczak, the deputy chairman of the PZL Mielec supervisory board.
To emerge as the winner, aircraft manufacturers are required to offer extensive "offset packages" to the government, meaning that foreign firms selling aircraft to Poland have to place orders of equal value with Polish defense companies.
Both Lockheed Martin and BAE-Saab Systems have pledged their commitment to the 100% offset-package rate. "Due to the large scale of the contract, not only (PZL) Mielec will profit," Lomas said, adding that other companies affiliated with Saab and BAE, such as Ericsson, Electrolux, Volvo, ABB or General Electric, will also likely increase investment in Poland.
BAE's deal with PZL comes on the heels of a government announcement last week that it had approved a zl. 105 billion ($26.3 billion) draft bill to modernize the army in line with NATO standards by 2006. The bill does not include funding for the 60 fighters.
Where that money will come from has yet to be determined, the Defense Ministry said.
