The Canadian government has decided to continue delayed deliveries of the Sikorsky CH-148 Cyclone maritime helicopter.

The decision, announced on 3 January, ends months of internal debate over whether to cancel the C$5 billion ($4.7 billion) programme and perhaps acquire a new aircraft.

The government first decided to buy the military derivative of the S-92 helicopter in 2004 to replace Sikorsky CH-124 Sea Kings on Halifax-class ships. Sikorsky was originally due to deliver the first aircraft in 2008, but development delays and contractual disputes postponed the programme by several years.

A new agreement between Ottawa and Sikorsky on 31 December 2013 will allow the manufacturer to deliver enough aircraft by 2015 to allow the Canadian armed forces to retire the CH-124 fleet. Those aircraft will continue receiving upgrades until the CH-148 fleet is considered fully capable of meeting Canada's requirements, in 2018.

“Sikorsky has committed to deliver the needed helicopter capability at no additional cost to Canada,” says Diane Finley, minister of public works and government services. Moreover, Canada will only pay Sikorsky as aircraft deliveries are made, she says.

The airframer was due to deliver eight Cyclones to Ottawa in 2013, but has been so far unable to build a helicopter that the customer considers contractually compliant. The Canadian government is unable to say when the next tranche of aircraft will be handed over.

It says: "The parties will begin negotiations to amend the contract in early 2014 and hope to conclude in the first quarter. The principles of agreement will form the basis for formal contract negotiations to describe comprehensive definitions and detailed timelines for the project’s phases."

Sikorsky also has agreed to pay $88.6 million to the Canadian government as a penalty for delayed deliveries.

“We recognise that we and our sub-contractors must do better. We have completely restructured our approach, and added considerable new resources and technical expertise,” says Sikorsky chief executive Mick Maurer.

The agreement came after the Canadian government searched for alternatives to the CH-148. Hitachi Consulting was commissioned to determine the “viability” of the programme, and its report recommended a new structure and governance model.