Sikorsky accepts concessions to Canada after new CH-148 delays

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The Canadian government has extracted new concessions worth hundreds of millions of dollars from Sikorsky, after revealing a new delay for its C$5 billion ($4.84 billion) order for 28 CH-148 Cyclones.

Six interim CH-148 maritime helicopters scheduled for delivery in November will lack operational software, maximum engine power, full endurance and automated datalinks, the Department of National Defence says in a background document released on 26 July.

The interim Cyclone fleet - a maritime variant of the H-92 - is itself a legacy of a previous delay. Under its original contract signed in 2004, Sikorsky was supposed to deliver the first CH-148 five years later. But Ottawa agreed in December 2008 to accept six interim helicopters in November 2010.

As a result of the latest delay, the DND has agreed to accept the six interim helicopters with limited capabilities to begin training operations. The remaining 22 aircraft will start arriving in June 2012 with full capability, it says, with the interim examples to be retrofitted and returned to service by December 2013.

In return, Sikorsky has agreed to accept several major concessions. The DND says it has restructured the milestone payment schedule, which reportedly involves freezing C$250 million previously owed to Sikorsky before the new delays were announced.

Sikorsky also has withdrawn claims believed to be valued at up to C$100 million in an arbitration process about previous contract changes, the DND says.

Canadian industry, meanwhile, will receive another C$80 million in investments by Sikorsky, and the government in Ottawa could receive royalties worth more than C$30 million on future sales of maritime helicopters by the company.

With full deliveries delayed by four years, Ottawa also shifted its 20-year in-service support contract, which will now end in 2028.

Sikorsky has not commented on the details of the new agreement, but says it supports the new terms. "We believe it is equitable to both the Canadian government and to Sikorsky," it says.