BAE sees strong Mid East, Asia demand

By Rhys Jones and Andrea Shalal-Esa

FARNBOROUGH, England (BestGrowthStock) – British defense group BAE Systems is seeing unprecedented levels of interest from Middle East and Asian customers and is close to sealing a 500 million pound ($765.2 million) deal to sell Hawk jets to India, its group business development director said.

BAE’s view is in stark contrast to the doom and gloom surrounding domestic defense spending across Europe as governments look to cut costs to rein in spiraling deficits.

“With oil at $70 plus a barrel all of our Middle Eastern customers are awash with money and they’re buying,” BAE’s Alan Garwood told Reuters at the Farnborough airshow Wednesday.

“We’re seeing unprecedented levels of interest from Qatar, Oman, Abu Dhabi, Saudi Arabia and Singapore as well. There’s real evidence of growth in this market and a lot of people whose budgets have not been cut,” he added.

Europe’s largest defense contractor also said it was close to finalizing an order from India for Hawk trainer aircraft.

“The deal with India is for 57 hawk aircraft and the contract is almost done and dusted,” said Garwood, who added that a value of 500 million pounds for the deal would “not be far off the mark.”

BAE’s ground vehicle business recently lost some key orders in the United States and Britain, prompting layoffs, cutbacks and moves aimed at improving the division’s profitability.

“What we’re doing there is getting the business to be super efficient so that when the upturn comes we’ll be in great shape,” said Garwood.

BAE lost a $3 billion contract last August to Oshkosh Corp

for work building thousands of medium-sized trucks for the U.S. Army, while U.S. firm General Dynamics recently beat BAE to a huge contract to build a new light tank for the British army.

Britain is reviewing its defense budget as part of a broader move to cut a massive budget deficit.

Analysts said the Strategic Defense and Security Review (SDSR) will lead to cuts of up to 15 percent in the defense budget — 36.9 billion pounds ($56.4 billion) for the current financial year — with major procurement programs set to be scaled back.

However, Garwood praised attempts by Britain’s new coalition government to increase exports.

“The UK is only 20 percent of our turnover but in the rest of our main markets there are no budget cuts and an awful lot of growth,” said Garwood.

“We’re seeing an unprecedented level of support from the British government who are committed to exportability.”

Washington’s plans to start scaling-back troops from Afghanistan and its reduced presence in Iraq is also expected to hit some parts of the defense industry.

Demand for Mine Resistant Ambush Protected (MRAP) vehicles, which is used heavily by U.S. Army and Marines, is expected to wane, as troops on the ground decrease from next year.

“The downturn in Afghanistan and Iraq has only really affected (MRAP) vehicles but we knew that was going to be a bubble,” said Garwood. “We invested at the right time and rode the wave through the peak and now there are other programs and upgrades coming up in the U.S.”

Garwood added that deals with Qatar and India were also progressing.

“We’ve had huge interest from India — they currently buy 70 percent of their defense equipment from Russia and they want to turn that into indigenous supply and we can do that by transferring production,” said Garwood, who added that it had held “positive talks with Qatar about Typhoon.”

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(Editing by Elaine Hardcastle)

BAE sees strong Mid East, Asia demand