Indian gov't approves $1.1b IAI Phalcon deal

KC 46 refuel plane

Israel Aerospace will supply two aircraft equipped with Phalcon early warning systems for intelligence gathering, the Indian media reports.

The Indian security cabinet has approved an agreement with Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) for the supply of two aircraft equipped with Phalcon early warning systems for intelligence gathering missions, the Indian media reports. The price for procurement of the planes was estimated at $1.1 billion. Despite approval granted by the Indian security cabinet, the deal, which is significant for IAI, has not yet been signed. Informed sources did not rule out the possibility that the deal itself would be signed on a visit to Israel by Indian President Narendra Modi scheduled for the coming months. IAI did not comment today on the Indian media report.

Informed Israeli sources nevertheless said that the negotiations between the parties on this matter had begun a number of years ago. IAI signed a different deal 12 years ago involving intelligence aircraft, and supplied three aircraft with Phalcon systems to the Indian air force for more than $1 billion. Those systems were installed on the Russian Illyushin IL-76 platform, after it was adjusted and advanced avionics and other systems were installed on it, including innovative radar systems developed and manufactured by IAI subsidiary Elta Systems.

India is considered one of IAI's most important customers. In addition to its procurement of the new intelligence aircraft, India is in prolonged negotiations with the company to buy Barak 8 defensive missiles adapted for deployment on land for several hundred million dollars.

In the past, India already signed a major deal for the purchase of Barak 8 defense systems adapted to warships, and shared in the funding for the development program for these missiles. As part of the joint development program between IAI and the Indian defense research and development agency, tests of the naval version of the Barak 8 were recently conducted in India.

The battle for aerial refueling

At the same time, the air force is pressuring the Ministry of Defense in an attempt to persuade it to carry out the planned procurement of airplanes adapted for aerial refueling of fighters. The defense establishment is considering the procurement of Boeing's KC-46 refueling planes using US military aid money.

The KC-46 is a new plane, development of which is slated for completion only in 2-3 years. Sources inform "Globes" that senior IAI officials and some members of the IAI workers organization have been exerting pressure on the defense establishment to give preference to IAI's refueling planes. The planes offered by IAI were also made by Boeing, but are an older model, the 767-300, which under the IAI proposal will undergo a comprehensive upgrading and adaptation to aerial refueling missions suitable for the air force's needs.

Informed sources told "Globes" that two planes can be bought from IAI for the same cost as one of the planes Israel is considering buying from Boeing, and many jobs would be saved by boosting the business of the IAI Bedek Aviation Group, which has run into financial difficulties in recent years.

"It is rather strange for the defense establishment to prefer buying US refueling planes for the air force, while many countries around the world are buying refueling planes from IAI. At this time, when IAI faces a crisis, it is right to consider the decision in depth, because if the Israeli air force does not buy the refueling planes from Israeli company IAI, what message does that give to the company's foreign customers?", an informed source told "Globes." It is believed that the deal for buying the future refueling planes will amount to several hundred million dollars.

Published by Globes [online], Israel business news - - on March 6, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

KC 46 refuel plane
KC 46 refuel plane
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