Embattled BAE Systems is expected to learn this week whether it has lost a crucial £3 billion ($4.9 billion) contract to build two aircraft carriers for the UK Royal Navy.
A failure would add to a recent run of bad news for the UK-based defence contractor. BAE's shares have lost roughly a third of their value since the company announced cost overruns in December on two key projects. Other defence prime contractors have meanwhile managed to sustain their high valuations on the back of continuing war fever.
Most recently, BAE announced 1,000 job losses at its shipyards, citing a lack of new contracts. Its stake in Airbus exposes it to the civil aviation downturn and it is suffering multiple delays in its defence contracts. Future international production contracts, such as Eurofighter, are mired in European politics (Flight International, 31 December-6 January).
The UK Ministry of Defence is due imminently to award the CVF aircraft carrier contract either to BAE Systems or its French rival Thales.
Thales is believed to have beaten BAE to the deal and recent developments appear to suggest the MoD may be attempting to sweeten the pill for both BAE and UK taxpayers. As a result, work could be split between the two contractors as part of a face-saving deal.
At the same time, rumours of a possible merger with Boeing have failed to lift BAE's shares.
BAE expects to reveal the total cost of its programme delays along with its annual results on 20 February, but is still trying to persuade the MoD to cap its future risks on troubled projects such as the Nimrod MRA4 to prevent a further collapse in its market value.
Source: Flight International