BAE to cut almost 2,000 jobs as Eurofighter backlog dwindles

[LONDON] BAE Systems Plc will eliminate almost 2,000 jobs as it struggles to secure new orders for the Eurofighter Typhoon warplane and slims down its naval ships and cyber-security businesses.

Some 1,400 posts will go at the company's military-aircraft unit, which employs about 12,500 people, with a further 375 positions to be eliminated in the maritime division and up to 150 at the Applied Intelligence cyber arm, BAE said in a statement Tuesday.

While Europe's biggest defense company last month won an outline order for 24 Eurofighter jets from Qatar worth as much as £8.6 billion (S$15.4 billion), that deal may take months or years to seal. At the same time, a long-awaited follow-on contract from Saudi Arabia has so far failed to materialize.

BAE needs to align its workforce "more closely with near-term demand," Chief Executive Officer Charles Woodburn said in the release, adding: "Those actions are necessary and the right thing to do for our company, but unfortunately include proposed redundancies at a number of operations." The London-based company reiterated that full-year earnings per share are likely to be 5 to 10 per cent higher than 2016's 40.3 pence.

BAE had said in August it was reviewing output of the Typhoon, adding that even if a new order was placed it would take at least 24 months to boost production.

The Qatar order, announced Sept 17, came as a surprise, especially since the Gulf state had already agreed to buy 24 Rafale jets from Dassault Aviation SA and as many as 36 Boeing Co. F-15s. UBS analyst Celine Fornaro has said it's not clear what impact the putative deal might have on the anticipated contract from Saudi Arabia, which is seeking to isolate its neighbor over ties to Iran.

In addition to BAE, the Eurofighter consortium includes Rome-based Leonardo SpA, and the German and Spanish divisions of Toulouse, France-based Airbus SE. While the plane is priced at about £90 million, through-life servicing and other add-ons can quadruple that value.

BLOOMBERG