Saudi Arabia is taking to the skies. The foundations of a Saudi aerospace industry have been laid with a $40 billion deal to buy 72 Eurofighter Typhoon jet planes from the UK’s BAE Systems. The deal goes much further than the SR7 billion Yamamah Offset Program springing from the deal 20 years ago to buy Tornado fighters and other aircraft from what was then British Aerospace. This time it is not sugar or cement factories that the British are to invest in to offset the multibillion Saudi order of fighter aircraft, it is to be an aircraft assembly factory. Half of the 72 jet fighters will be assembled at an as yet undecided site in the Kingdom. Site studies are currently being evaluated according to European diplomats. The project is expected to provide employment opportunities for more than 15,000 Saudis when up and running.
In December last year, the Saudi and British governments signed the initial understanding covering the sale of Eurofighter Typhoon aircraft to replace the Royal Saudi Air Force’s Tornados and other aircraft. That was followed this August with the announcement of a deal. No price has officially been put on the deal but the cost of the 72 aircraft is estimated to be SR40 billion with another SR35 billion expected to be spent on missiles, spare parts and training. The higher $40 billion tag (SR150 billion) suggested in media reports is based on the expectation that, like the earlier Tornado Yamamah deal which initially was for SR140 billion, it will expand with further orders. Last year, BAE said that it and its predecessor British Aerospace had earned SR260 billion in 20 years from the Yamamah deal. In the UK, it has already been suggested that the new deal may climb to 100 jet fighters and could include upgrading the RSAF’s Tornado IDS aircraft bought in the 1990s, as is being done to the British RAF’s Tornado IDSs. In its 2005 Interim Report, BAE Systems said that three RSAF Tornado IDSs had arrived at their Warton facility in the northwest of England for tests “to improve serviceability, address obsolescence, and enhance and sustain the capability of the aircraft.” It has also been mooted that the deal will be extended to cover the replacement of Hawk 65/65As with a new fighter trainer.
In its latest report on operations in Saudi Arabia, BAE Systems says that it is investing in the Kingdom to develop “an engineering and manufacturing footprint.” It says it plans a “strong engineering capability” to aid the Kingdom’s drive for self-sufficiency in the industrial sector of the aviation industry. The “ultimate” outcome, it says, will be “growth in original equipment manufacturing — thereby providing the platform for exports to the international marketplace.”
The deal to replace the aging Tornados with Eurofighter Typhoons is a blow to France which had hoped that the Saudi Royal Air Force would choose its Dassault-built Rafale fighters. In fact, as its name suggests, the new fighter is far from entirely British. There are three partners in the Eurofighter consortium (originally four but two have since merged): British defense contractor BAE Systems, Airbus parent firm EADS and Italy’s Alenia Aeronautica.
BAE Systems makes the front and rear fuselage, while European aviation and defense consortium EADS and Italy’s Alenia build the wings. Because the consortium is based in London and the planes for the Saudi order will initially be assembled in the UK, it is classed as a British export.
The Saudi order is particularly important for BAE. It is the first order outside the EU and shows there is international demand for the fighter. Although the Typhoon is now in service with the German, British, Spanish and Italian air forces, there have been major headaches with European orders being cut back for budgetary reasons. Initially, 620 aircraft were planned, of which 232 were to be built for the UK’s Royal Air Force, 180 for Germany, 121 for Italy and 87 for Spain. Austria and Greece also put in orders. Two years ago, the Greeks canceled their order for 60 aircraft because of financial cutbacks in the wake of the Athens Olympics. Austria’s socialists, victorious in the recent general elections, campaigned on canceling the order and insist they will do so. But Eurofighter says they cannot because four of the 18 Austrian aircraft are almost ready. It is threatening to sue; Austria faces possibly having to pay $2 billion in compensation with no aircraft whatsoever to show.
Saudi Arabia has a long history of procuring arms from Britain dating back to the 1960s when the Kingdom bought British-made Lightning and Strikemaster aircraft and Thunderbird surface-to-air missiles. The move to buy American jets in the 1970s with the purchase of F-5s and F-15s proved short-lived because of concerns about pro-Israeli sentiments in Congress and the Jewish lobby’s efforts to ban further sales. Saudi Arabia turned instead to Europe for future arms supplies, the UK for aircraft, France for the navy.
In 1985, the landmark Saudi-UK multibillion agreement was signed covering supply and support of Tornado, Hawk and PC-9 aircraft and at a later date mine hunter ships. The deal was signed by the UK’s then Defense Secretary Michael Hesseltine and Prince Sultan, minister of defense and aviation. British Aerospace was appointed prime contractor, working in close cooperation with the Royal Saudi Air Force and Royal Saudi Naval Force. The deal was hailed in the UK at the time as “the biggest sale of anything to anyone.”
As a result of that deal, BAE Systems, based in Riyadh, is now a major employer in Saudi Arabia with a work force of 4,800, of whom Saudis now constitute more than 50 percent. In addition to the Yamamah Offset Program which involved brokering the establishment of new industries in Saudi Arabia, BAE Systems is pursuing a policy of transferring work to companies in the Kingdom. Maintenance of Tornado aircraft is carried out by the Alsalam Aircraft Company, overhaul of Tornado undercarriages is carried out at Aircraft Accessories and Components Company.
Another joint venture, Saudi Development and Training, was set up in the 1990s and together these entities are seen to represent a strong base for the development of a Saudi aerospace industry — which this latest deal now envisages. BAE Systems also runs a training program to produce aircraft technicians of the future. Introduced in 1995, over 350 Saudis have either qualified from this five-year program or are at various stages of training.
It is also involved in the training of pilots, ground crew and technical staff for the Royal Saudi Air Force. Over the past 33 years, BAE Systems has been solely responsible in training nearly 2,000 pilots and other crew, about the same number of ground-based officers and 18,700 young graduates of the Technical Training Studies Institute in Eastern Province. Spending in the local market place by BAE Systems has been highly significant. By the end of 2005, SR41 billion had been paid by BAE Systems for goods and services to Saudi firms. Another SR1 billion had been invested in local Saudi engineering firms.
