BAE Systems has been awarded a £1.3bn order to support the production of 38 Eurofighter Typhoon aircraft for the German Air Force.

Work will commence in 2021 at BAE Systems’ sites in Lancashire, maintaining continuity of Typhoon production through to the mid-2020s and sustaining high-value engineering roles in the North of England. The roles will be key to securing the UK’s sovereign skills and capabilities which are central to realising the Government’s future combat air ambitions. More than 5,000 BAE Systems employees directly support the Typhoon programme in the UK, supporting a further 10,000 jobs in the UK economy as a whole.

The Eurofighter Typhoon is the most advanced multi-role combat aircraft in operation, supporting European security and defence objectives. BAE Systems will deliver more than a third of the components for each of the new Typhoons ordered by the German Air Force including the aircraft’s front fuselage and tail. Final assembly will be undertaken by Airbus in Manching, Germany.

Programme supports more than 15,000 jobs

Charles Woodburn, Chief Executive BAE Systems said: “Germany’s decision to purchase additional Typhoons reinforces the aircraft’s position as one of the world’s most successful combat military aircraft. The Typhoon programme makes a significant contribution to the UK economy, generating billions of pounds through exports and supporting more than 15,000 jobs across the UK including thousands of highly skilled roles in the North of England.”

The new aircraft will join the existing German Air Force Typhoon fleet from the mid-2020s and will be equipped with the latest technology, including an advanced electronically-scanning radar.

BAE Systems issued optimistic full year guidance this week for 2020 following the Typhoon and other contract wins. Sales and cashflow remains unchanged from the 2020 interim results. The guidance states: “Demand for our capabilities remains high with order intake expectations for the Group ahead of our original pre COVID planning for the year.”

Earnings per share higher than previous guidance

Around 90 per cent of BAE’s business is government defence orders, with the balance consisting of work for companies such as airlines and aerospace equipment makers. Underlying earnings per share are now expected to be slightly higher than previously guided and an expected lower tax rate offsetting the negative foreign exchange impact. The guidance added that the company had “a large order backlog and incumbent programme positions” which were expected to lead to strong and profitable top line growth with increasing cash conversion in the coming years.

The report added that within Europe, a number of nations were increasing their defence budgets to address the threat environment and move towards two per cent of GDP NATO commitments. The guidance added: “We remain well placed through our positions on the Eurofighter Typhoon, our shareholding in MBDA and our BAE Systems Hagglunds Swedish based land vehicles business.”

Woodburn said: “We have continued to deliver a resilient performance in line with our expectations for a strong second half, thanks to the outstanding efforts of our employees in these challenging times. From a position of strength, the actions we took in quarter two to enhance our resilience are working well as reflected in our guidance, ensuring we continue to deliver on our customer priorities, whilst keeping our employees safe. Demand for our capabilities remains high and we recognise our role not only in supporting national security, but also in contributing to the economies of the countries in which we operate.”

He added: “We are being agile as we address the challenges arising from the global pandemic with employee safety and wellbeing at the forefront. Collaboration and communication across our many stakeholders, particularly in our supply chain and with our Trade Unions, gives us high confidence in our ability to deliver across our defence programmes.”

BAE Systems will announce its financial results for the year ending 31 December 2020 on 25 February 2021.

Subscribe to the FINN weekly newsletter