Al Yamamah: The never-ending story?

The massive Al Yamamah contract, one of the largest export orders ever received by Britain, was established as a government to government agreement with the British Ministry of Defence (MoD) signing a deal with the Saudi government in an 'weapons for oil' deal that encompassed an enormous array of platforms, equipment and support.

The contract centred on equipping the Royal Saudi Air Force (RSAF), with a smaller, yet not insubstantial, commitment for the Royal Saudi Navy (RSN) fleet of minesweepers.

With the bulk of the equipment and support sourced from BAe, the company's bonanza was assured for the duration of the 'acquisition' phase of the program. While delivering and introducing into service the various platforms, the BAe position was in little doubt.

However, as the program transitioned into the 'support' phase, the company's grip on the lucrative revenue stream generated from the various support elements seemed less assured.

With some recognition, from the inner circles of the Saudi Ministry of Defence, that there should be a more concerted effort to attain value for money, the initial support contract negotiation was a tough period for BAe. The company, of course, sought a long-term commitment from the Saudis, but the customer required a shorter, more flexible arrangement.

After protracted negotiations, an agreement was reached and the company continues to this day in its key role supporting the Kingdom with maintenance & logistics support, training, and a growing series of life-of-type upgrade programs. However, even such activities as Programmed Depot Maintenance (PDM) and up-grade programs have slipped from the grasp of BAES with award of significant contracts to Riyadh-based Al Salam Aircraft Corporation (ASAC), a company 50% owned by Boeing.

The Al Yamamah contract is managed within the BAES Customer Solutions & Support (CS&S) business unit which has warned of a drop in margins as a greater proportion of work ordered through the Al Yamamah programme is undertaken by Saudi Arabian companies.

The issue of 'Nationalisation' of the BAES workforce in Saudi has been a major issue for the company. A significant effort has been undertaken in recent years to increase the proportion of nationals employed in non-administrative roles such as technical personnel.

With over 2000 Saudi Nationals employed, of a Kingdom-wide workforce of approximately 4500, the company is demonstrating a commitment to meeting 'Saudisation' targets. In meeting such commitments, the requirement for greater levels of training and development of Saudi nationals has become paramount to support its own workforce requirements aside from the training activities delivered for Saudi Military personnel.

Since its inception, the Al Yamamah contract has incorporated a hefty element of training; particularly aircrew and aircraft / support technical training. In relation to RSAF pilots, BAES has feasted at all levels of training from flight screening & selection; ab-initio training; fast-jet conversion using the Mk 65 Hawk trainer, and conversion training to both Air Defence Variant (ADV) and Interdictor Strike (IDS) Tornado aircraft.

The training delivery element of support is by no means assured for BAES however, as the Saudi Military seek to drive further efficiencies and examine other credible alternative suppliers in the training domain. This is particularly possible in relation to technical and support related training where other entities from the likes of Canada, Australia or the US or may offer more cost effective solutions.

While BAES is still hopeful of selling the Typhoon fighter to the RSAF, many analysts have cast doubt on such a move. In which case, the question is 'is there an end in sight for BAE SYSTEMS in Saudi Arabia?' Or will the company be able to diversify to other product categories such as UAVs or C4I systems?