British Aerospace

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British Aerospace (BAe) was a UK aircraft and defence systems manufacturer, now part of BAE Systems.

Contents

1 History

1.1 Losses and restructuring
1.2 Expansion in defence and aerospace
1.3 Transition to BAE Systems
1.4 Acquisitions made/divisions established

2 References
3 See also

History

BAe evolution since 1955 until 1999 merger to form BAE Systems

The company was formed as a statutory corporation on April 29, 1977 as a result the Aircraft and Shipbuilding Industries Act. This called for the nationalisation and merger of; the British Aircraft Corporation, Hawker Siddeley Aviation, Hawker Siddeley Dynamics and Scottish Aviation.

In 1979 BAe officially joined Airbus, the UK having previously withdrawn support for the consortium in April 1969.

In accordance with the provisions of the British Aerospace Act 1980 the statutory corporation was changed to a plc, British Aerospace Public Limited Company, on January 1 1981. On February 4 1981 the government sold 51.57% of its shares. The British government sold its remaining shares in 1985, maintaining a £1 Golden Share which allows it veto foreign control of the board or company.

BAe was the UK's largest exporter, a Competition Commission report gives a ten-year aggregate figure of £45 billion, with defence sales accounting for approximately 80%. Competition Commission (1995) [British Aerospace Public Limited Company and VSEL Plc: A report on the proposed merger] p. 28

On September 26 1985, the UK and Saudi Arabian governments signed the Al Yamamah contract, with BAe as prime contractor. The contracts, extended in the 1990s and never fully detailed, involved the supply of Tornado strike and air defence aircraft, Hawk trainer jets, Rapier missile systems, infrastructure works and naval vessels. The Al Yamamah deals are valued at anything up to £20 billion and still continue to provide a large percentage of BAE Systems' profits.

Losses and restructuring

In 1991 BAe began to experience major difficulties. BAe saw its share price fall below 100p for the first time. Only an emergency rights issue, which raised £430 million, saved the company from bankruptcy. BAe's CEO Richard Evans described the troubles as a confluence of events:

"our property company [Arlington Securities] was hit with a lousy market. Sales of the Rover Group sank by about a fifth and losses mounted. The government's defence spending volumes underwent a major review. Losses in our commercial aerospace division increased dramatically with the recession in the airline industry." Evans, Richard (1999). Vertical Take-off. London: Nicholas Brealey Publishing. ISBN 1-85788-245-8. p.2

In mid-1992 BAe wrote off £1 billion of assets, largely as part of restructuring of its regional aircraft division including the closure of its plant in Hatfield, Hertfordshire. This was largest asset write-off in UK corporate history. It is interesting to note that The General Electric Company (GEC), later to sell its defence interests to BAe, came close to acquiring BAe at this time. BAe cut 47% of its workforce (60,000 out of 127,000) 40,000 of which were from the regional aircraft division. ibid, p.3

Evans decided to sell non-core businesses (these "non-core" activities included The Rover Group, Arlington Securities, BAe Corporate Jets, BAe Communications and Ballast Nedam). Although the rationale of diversification was sound (to shield the company from cyclical aerospace and defence markets) the struggling company could not afford to continue the position: "We simply could not afford to carry two core businesses, cars and aerospace. At one point Rover was eating up about £2 billion of our banking capacity." ibid, p.6 BAe Corporate Jets Ltd and Arkansas Aerospace Inc were sold to Raytheon in 1993. In 1994 the Rover Group was sold to BMW and British Aerospace Space Systems was sold to Matra Marconi Space. In 1998 BAe's shareholding of Orange plc was reduced to 5%. The Orange shareholding was a legacy of the 30% stake in Hutchison.

Expansion in defence and aerospace

An example of a wing of the first Airbus model, the A300

Panavia Tornado GR1

buzz BAe 146-300

BAe built Eurofighter development aircraft

In 1997 BAe joined the Lockheed Martin X-35 Joint Strike Fighter team.

Transition to BAE Systems

Defence consolidation became a major issue in 1998, with numerous reports linking various European defence groups — mainly with each other but also with American defence contractors.

It was widely anticipated that BAe would merge with Germany’s DASA to form a pan-European aerospace giant, however BAe chose instead to merge with GEC’s defence electronics business, Marconi Electronic Systems. This move, to create a UK company compared to what would have been an Anglo-German firm, made the possibility of further penetration of the United States (US) defence market more likely.

The company, initially called "New British Aerospace", was officially formed on November 30, 1999 and known as BAE Systems (most likely to make it seem less overtly "foreign" as it sought extensive US defense contracts and acquisitions).

Following that decision, DASA instead merged with Aerospatiale to create the European Aeronautic Defence and Space Company (EADS). This group was joined by Spain’s CASA following an agreement in December 1999.

Acquisitions made/divisions established

1986 - Eurofighter GmbH formed with Alenia Aeronautica, CASA and DASA for development of the Eurofighter Typhoon.
1987 - Royal Ordnance
1988 - The Rover Group plc
1991 - Heckler & Koch GmbH
1991 - 30% interest acquired in Hutchison Telecommunications
1991 - BAeSEMA formed as a naval systems joint venture company with the Sema Group.
1992 - Avro RJ Regional Jets formed to produce the Avro RJ series, the development of the BAe 146.
1994 - BAeSEMA, Siemens Plessey and GEC-Marconi form UKAMS Ltd, the UK partner in the Principal Anti-Air Missile System (PAAMS) consortium, Eurosam formed the rest of the consortium.
1995 - BAe, the Defence Research Agency (later part of DERA), GEC-Marconi and Cray Research (UK) Ltd form The Farnborough Supercomputing Centre — a collaborative research asset.
1995 - Saab Military Aircraft and BAe signed an agreement for the joint development and marketing of the JAS 39 Gripen export version.
1996 - BAe and Matra Defense agreed to form a missiles joint venture to be called Matra BAe Dynamics.
1998 - UK operations of Siemens Plessey Systems (SPS) acquired from Siemens AG. DASA purchases SPS' German assets.
1998 - UKAMS became a wholly owned subsidiary of BAe Dynamics.
1998 - SEMA's 50% share of BAeSEMA.