* Decision causes jitters at Farnborough air show
* Industry to pay for new radar to boost exports
(NSI News Source Info) FARNBOROUGH, England,- July 21, 2010: Italy upset Europe's defence industry on Tuesday by announcing plans to axe its share of the final production run of the Eurofighter combat jet at the Farnborough air show where foreign rivals were sh
owcasing their own jets.
The unexpected announcement by one of four nations involved in the project highlighted the pressures being put on European defence budgets and came hours after reluctant arms firms agreed to cough up the funds to develop a new radar for the plane to boost exports.
"We have decided to cut 25 Eurofighters with a saving of 2 billion euros," Italian defence minister Ignazio la Russa told reporters at the air show in southern England.
Italy, Britain, Germany and Spain ordered a total of 620 Eurofighter jets in the 1990s and split the order into three tranches, each of which needed separate funding approval.
The third tranche of 236 planes was split into two in 2008 when nations were already facing a squeeze on budgets, and manufacturers have been pressing governments to plug the remaining budget gap to avoid having to lay off workers.
La Russa did not say which planes he was referring to but air show delegates said he clearly meant Italy's entire allocation of 25 planes under the final tranche, known as 3B.
This would cut Italy's total Eurofighter order to 96.
"We have no comment because we have received no formal communication," a Eurofighter spokesman said.
Defence reviews and budget pressures have also placed doubts over remaining planes allocated to Italy's three partners.
The Eurofighter is made by an industry consortium of the same name that includes Italy's Finmeccanica (SIFI.MI), Britain's BAE Systems (BAES.L) and EADS (EAD.PA), which represents Germany and Spain.
The group last month submitted an estimated 10 billion-euro offer to supply 124 planes under tranche 3B.
But executives in the consortium are resigned to seeing the number fall as governments cut deeply into defence spending.
"These cuts could be a big problem because if you cut production capacity it is costly to get it back," an executive close to the project said, asking not to be named.
Eurofighter said earlier it would put an unspecified amount into a new radar for the plane together with a specialist radar consortium led by Finmeccanica.
The fighter group said it aimed to have the new actively scanned electronic radar on the multirole aircraft by 2015.
The move and its timing were both designed to position the European plane for a contest to supply 126 fighter jets to India, one of the world's most sought-after defence deals.
The $12 billion Indian tender competition, which could be formally launched next year, is in one of the most hotly contested international defence markets, attracting bidders from the United States, Russia and Europe.
owcasing their own jets.
The unexpected announcement by one of four nations involved in the project highlighted the pressures being put on European defence budgets and came hours after reluctant arms firms agreed to cough up the funds to develop a new radar for the plane to boost exports.
"We have decided to cut 25 Eurofighters with a saving of 2 billion euros," Italian defence minister Ignazio la Russa told reporters at the air show in southern England.
Italy, Britain, Germany and Spain ordered a total of 620 Eurofighter jets in the 1990s and split the order into three tranches, each of which needed separate funding approval.
The third tranche of 236 planes was split into two in 2008 when nations were already facing a squeeze on budgets, and manufacturers have been pressing governments to plug the remaining budget gap to avoid having to lay off workers.
La Russa did not say which planes he was referring to but air show delegates said he clearly meant Italy's entire allocation of 25 planes under the final tranche, known as 3B.
This would cut Italy's total Eurofighter order to 96.
"We have no comment because we have received no formal communication," a Eurofighter spokesman said.
Defence reviews and budget pressures have also placed doubts over remaining planes allocated to Italy's three partners.
The Eurofighter is made by an industry consortium of the same name that includes Italy's Finmeccanica (SIFI.MI), Britain's BAE Systems (BAES.L) and EADS (EAD.PA), which represents Germany and Spain.
The group last month submitted an estimated 10 billion-euro offer to supply 124 planes under tranche 3B.
But executives in the consortium are resigned to seeing the number fall as governments cut deeply into defence spending.
"These cuts could be a big problem because if you cut production capacity it is costly to get it back," an executive close to the project said, asking not to be named.
Eurofighter said earlier it would put an unspecified amount into a new radar for the plane together with a specialist radar consortium led by Finmeccanica.
The fighter group said it aimed to have the new actively scanned electronic radar on the multirole aircraft by 2015.
The move and its timing were both designed to position the European plane for a contest to supply 126 fighter jets to India, one of the world's most sought-after defence deals.
The $12 billion Indian tender competition, which could be formally launched next year, is in one of the most hotly contested international defence markets, attracting bidders from the United States, Russia and Europe. (Additional reporting and writing by Tim Hepher and James Mackenzie; Editing by Dan Lalor, Greg Mahlich; Reuters Farnborough Media Centre +44 1252-418188)
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