The British government has snubbed the country's leading defence contractor BAE Systems over a huge contract to provide the Royal Air Force with refuelling aircraft, preferring the pan-European EADS group instead, it was announced Monday.
The 27-year-long deal is worth 13 billion pounds (18.8 billion euros, 23.7 billion dollars).
The defence ministry said it had rejected BAE's bid, made in conjunction with US aviation giant Boeing, and that a consortium led by EADS was considered "most likely" to offer the best value.
The ministry would now enter into "detailed negotiations" with the EADS-led AirTanker consortium, which also comprises Rolls Royce, Cobham and Thales, over the contract, it said in a statement.
"A final decision on whether or not to proceed with a... contract will not be taken until these discussions have been successfully concluded - a process that is likely to take a number of months," it added.
There was some consolation for BAE in that it holds a 20-percent stake in Airbus, which represents the lion's share of activities by EADS, and will build wings for the adapted Airbus A330-200 airliners EADS plans to supply for the RAF.
However BAE spokesman Richard Coultart said the company was "disappointed" at Monday's announcement.
"There is some benefit, but it's not the same as a 27-year contract," he told AFP.
Any eventual contract will be made on the basis of the so-called private finance initiative (PFI), a method the British government uses in an attempt to cut costs by bringing commercial business practices into government.
Under a PFI deal, AirTanker would own and maintain the aircraft and provide training, infrastructure and some personnel, whilst the RAF would use the planes for military operations.
This would allow AirTanker to use any aircraft not needed by the RAF during peacetime to generate revenue through commercial use, keeping down costs.
The RAF is seeking to replace its decades-old fleet of VC10 and Tristar refuelling aircraft. BAE and Boeing had planned to supply Boeing 767 planes.
According to a defence analyst, the EADS deal was very likely to go ahead, despite the Ministry of Defence's caution.
"I think it's a full victory. I think all they are saying is we haven't signed the contract, we still have things we have to iron out," said David Mulholland, chief editor of the Jane's Defence Weekly periodical.
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