EADS chief hails air tanker deal with Britain

The head of Airbus parent EADS yesterday hailed a deal to supply aerial refuelling tankers to Britain as another victory over rival Boeing.

The £13-billion deal follows weeks of suspense over financing, according to sources close to the talks, and EADS chief executive officer Louis Gallois effectively confirmed the deal in a French newspaper interview yesterday.

"It is a new demonstration of the quality of our product, which has won five competitions in a row, including in the US. We are very proud," Mr Gallois told daily Le Figaro, asked about reports of an announcement yesterday.

Airbus and Boeing compete to supply converted passenger jets to win lucrative contracts for refuelling planes.

Britain's purchase of European tankers comes on top of orders from Australia, the UAE and Saudi Arabia and most recently the US Air Force, which selected Airbus over Boeing, sparking a row in Congress over security and jobs.

Boeing and EADS partner Northrop Grumman submitted rival filings to the US government's accountability office on Wednesday as Boeing contests the validity of the decision.

Britain selected Airbus A330 passenger jets as far back as 2005, but talks over funding dragged on longer than expected.

The deal was secured after a bank loan replaced plans for a bond, which fell victim to market turbulence, the sources said. The deal's completion coincides with a state visit to Britain by French President Nicolas Sarkozy.

Britain is buying the planes under its Private Finance Initiative, a controversial funding scheme used in the past to lease public services such as hospitals from the private sector.

Officials say the deal, put together by Deutsche Bank, is the world's biggest public-private partnership.

The first phase of the project calls for total capital investment of £2 billion. The project is seen worth an estimated $26 billion over its 27-year lifetime.

Critics of the PFI, pioneered by the Conservative party government in the 1990s, say private companies may cut corners to maximise profits, and that the long-run costs to the taxpayer are greater than if the deals were kept within the public sector.

The refuelling tankers will be owned and leased out by a consortium called AirTanker that includes EADS, Cobham, Rolls-Royce, VT Group and Thales TCFGP.PA.

The planes will be able to carry up to 300 troops and their equipment, combining refuelling and transport missions previously split between decades-old VC-10s and Tristars.

Airforces worldwide are racing to renew their aerial refuelling fleets as military planners adapt to more dispersed threats to their security further away from their home base.