Raytheon and Airbus close in on $9bn Polish defence deals

Raytheon and Airbus took big steps on Tuesday towards securing Polish defence contracts worth an estimated $9bn as the US and French companies were given the nod for two of Europe's largest and most closely fought military deals.

Poland has chosen Raytheon's Patriot system for its air and missile defence programme - a contract worth an estimated $5.6bn - rejecting rivals such as Thales and Lockheed Martin. Warsaw also announced Airbus as its preferred bidder for a $3bn competition to supply the central European country with multipurpose helicopters, although the number was reduced from 70 to 50.

Ewa Kopacz, Polish prime minister, said the Raytheon contract would help to "ensure the participation of Poland's defence industry in the supply [of equipment to the forces] and enable the transfer of modern technology and know-how for Polish companies". The contract is still subject to final approval.

The tenders, which will account for roughly a quarter of Poland's defence modernisation budget for the next eight years, have attracted the world's biggest defence groups to fill two big gaps in the country's military apparatus, as it scrambles to reinforce its borders in response to the Ukraine conflict.

Both orders follow years of heavy lobbying as bidders strove to secure the multibillion-dollar deals amid an environment of falling defence spending across much of Europe.

Airbus has suggested that Poland could become one of its core manufacturing countries. Guillaume Faury, chief executive of Airbus Helicopters, told the Financial Times this year that winning the Polish tender would "accelerate the [company's] speed of going to Poland".

The country was "the next step" in the parent group's plans to expand into eastern Europe, he said. "It is a key player in Europe. They are moving from Russian helicopters and equipment to western technology. It is a unique opportunity to fulfil the needs of Poland and to grow as a company."

The highly political deals achieve Warsaw's primary goal of working closely with two of its strongest defence allies. Ensuring robust ties with both Washington and the Nato leadership has become the primary goal for Poland's defence establishment since the conflict in the east of Ukraine began 14 months ago - four months after the crisis started - sparking concerns of Russian aggression across eastern Europe.

Poland also said it was accelerating the tender for attack helicopters to replace its ageing Russian fleet.

Raytheon's Patriot system, which will give Poland the ability to defend itself against air missiles and military aircraft, fought off competition from products such as Thales' Eurosam system, and Meads, a system part-developed by Lockheed Martin.

Meads, which is competing with Patriot to win a similar contract in neighbouring Germany, had previously hoped to make Poland its initial customer.

Washington was keen for Poland to choose Raytheon's missile system, and has agreed to loan Warsaw a temporary set of Patriot batteries until the purchased products are delivered.

Warsaw's decision to enter into exclusive talks with Airbus to supply the H225M Caracal transport helicopters means that the French company has trumped the Black Hawks of the US's Sikorsky, and Anglo-Italian company AugustaWestland's AW149 models.

Discussions on pricing and specification will now begin, and could take several months. The final contract is expected to include support and maintenance and could be worth a total of up to $5bn.

Both procurement decisions were fraught with delays and controversy because of heavy lobbying from all sides and Warsaw's desire to ensure it balanced geopolitical concerns and its needs to increase employment.

All parties offered incentives to enhance Poland's domestic aerospace and defence industry. Airbus Helicopters and engine maker Safran have both promised to build a full final assembly line for the medium weight H225M machine and its engine in Poland, and these will also be used for Polish exports.

Airbus, the parent group, has also suggested it would invest in civil aerospace production in Poland.

Such deals are becoming increasingly important in both defence and commercial contracts and are affecting the whole supply chain, according to Renaud Durand, head of aerospace at procurement specialists Vendigital.

"Offsets are an increasingly important differentiator when bidding for such contracts," he said. "Airbus and its supply chain will have to build in some significant benefits. For example, Airbus Helicopter together with Safran, an Airbus Supplier, has bolstered its capacity in Poland to secure a competitive advantage."

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