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Strong Support for Air Tanker Private Finance Deal



Industry has shown strong interest in a potential private finance deal to replace the Royal Air Force's ageing air-to-air refuelling fleet.
Rather than procuring and operating new aircraft to replace its elderly VC10s and TriStars, the MOD is looking to the private sector to provide an air-to-air refuelling service for the RAF from early in the next century. This would involve the design, supply, management, operation and funding of the replacement tanker fleet.
Over 70 organisations inquired about the project when it was announced during the Farnborough Air Show last September, and nearly 50 companies attended an industry day last month. A Request for Information has now been issued to industry as the first step to establishing the feasibility of a Private Finance Initiative solution.
The Strategic Defence Review confirmed that the ability rapidly to deploy, sustain and recover our forces is of critical importance if we are to respond quickly to future crises. Maintaining the RAF's air-to-air refuelling capability is a vital part of this.
The Future Strategic Tanker Aircraft is potentially MOD's largest and most innovative PFI project to date. It breaks new ground in seeking to move the PFI closer to the front line. This presents both the MOD and potential service providers with some significant challenges. Following the Industry Day to hear about the project at the Abbey Wood procurement headquarters last month, a further open day for industry is planned at RAF Brize Norton on 17 February.
The project opens up a number of new commercial opportunities, such as the possible use of Sponsored Reservists to crew and maintain the aircraft, the use of spare capacity for third party revenue generation when the tankers are not required by the RAF, and possible commercial management of the main operating base.
MOD will be looking for innovative and well-thought-out proposals, and will need to ensure that any solution delivers value for money and maintains operational effectiveness.
A final decision on the way ahead is planned for early 2002 and FSTA could enter service as early as 2004 if early replacement of the VC10 is shown to offer value for money. If the private finance route is followed, the aircraft would be flown by regular RAF personnel or reservists and held on the military register for operational missions. MOD will keep those likely to be affected by the decision as fully informed as possible as its thinking develops. It is committed to full consultation with the relevant Trades Unions.
The Royal Australian Air Force has a similar air-to-air refuelling requirement and is already closely associated with the project. Other nations are also taking an interest. The FSTA project does not affect plans for the Short Term Strategic Airlift (STSA) or the long-term requirement to replace the rest of the elderly air transport fleet, for which the Future Large Aircraft remains a strong contender.

Background
MOD has signed 23 PFI projects to date, with a total value of £3 billion and with a private sector investment of £1 billion in defence infrastructure. A further 90 projects, with an estimated capital investment of £6 billion, are in train. Most of these are in support areas, but some involve provision or close support of equipment deployable to operational theatres. MOD's PFI programme is one of the largest in Government.

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Strong Support for Air Tanker Private Finance Deal