Coordinates : 51°16′25″N 0°46′00″W / 51.27361°N
0.76667°W / 51.27361; -0.76667
BAE Systems plc
Public limited company
LSE : BA.
FTSE 100 Component
Arms industry ,
Marconi Electronic Systems
November 30, 1999; 17 years ago (1999-11-30)
London LINE-HEIGHT:1.2EM;">AREA SERVED
Sir Roger Carr (chairman)
Charles Woodburn (CEO)
Civil and military aerospace
Land warfare systems
Maintenance, consultancy, training etc.
£ 17.79 billion (2016)
£1.74 billion (2016)
£0.93 billion (2016)
£22.98 billion (2016)
£3.46 billion (2016)
NUMBER OF EMPLOYEES
BAE Systems Inc.
BAE Systems Australia
BAE Systems Applied Intelligence
BAE Systems Land it was ranked as the third-largest based on
applicable 2015 revenues. Its largest operations are in the United
Kingdom and United States, where its
BAE Systems Inc. subsidiary is
one of the six largest suppliers to the US Department of Defense .
Other major markets include Australia, India and Saudi Arabia. The
company was formed on 30 November 1999 by the £ 7.7 billion merger of
two British companies:
Marconi Electronic Systems (MES) – the
defence electronics and naval shipbuilding subsidiary of the General
Electric Company plc (GEC) – and
British Aerospace (BAe) – an
aircraft, munitions and naval systems manufacturer.
BAE Systems is the successor to various aircraft, shipbuilding,
armoured vehicle, armaments and defence electronics companies,
Marconi Company , the first commercial company devoted
to the development and use of radio; A.V. Roe and Company , one of the
world's first aircraft companies; de Havilland , manufacturer of the
Comet , the world's first commercial jet airliner; British Aircraft
Corporation , co-manufacturer of the
Concorde supersonic transport;
Supermarine , manufacturer of the Spitfire ;
Yarrow Shipbuilders ,
builder of the
Royal Navy 's first destroyers ; Fairfield Shipbuilding
and Engineering Company , pioneer of the triple-expansion engine and
builder of the world's first battlecruiser ; and Vickers Shipbuilding
and Engineering , builder of the Royal Navy's first submarines . Since
its formation it has made a number of acquisitions, most notably of
United Defense and
Armor Holdings of the United States, and sold its
Astrium , AMS and
Atlas Elektronik .
BAE Systems is involved in several major defence projects, including
Lockheed Martin F-35 Lightning II , the
Eurofighter Typhoon , the
_Astute_-class submarine and the _Queen Elizabeth_-class aircraft
BAE Systems is listed on the
London Stock Exchange and is a
constituent of the
FTSE 100 Index
FTSE 100 Index .
* 1 History
* 1.1 Heritage
* 1.2 Formation
* 1.3 2000s
* 1.4 2010s
* 2 Products
* 3 Areas of business
* 3.2 United States
* 3.3 Rest of the world
* 4 Shareholders
* 5 Organisation
* 6 Corporate governance
* 7 Financial information
* 8 Corruption investigations
* 8.1 Serious Fraud Office
* 8.2 Saudi Arabia
* 8.3 Others
* 9 Criticism
* 9.1 Espionage
* 9.4 Saudi war crimes in Yemen
* 9.5 Political influence
* 10 See also
* 11 References
* 12 Further reading
* 13 External links
Supermarine , the manufacturer of the Spitfire was a predecessor
company of BAE Systems. It was purchased by
Vickers-Armstrongs , which
itself was merged into the
British Aircraft Corporation in 1960.
BAE Systems was formed on 30 November 1999 by the £7.7 billion
British Aerospace (BAe) and Marconi Electronic Systems
(MES). As a result,
BAE Systems is the successor to many of the most
famous British aircraft, defence electronics and warship
manufacturers. Predecessor companies built the Comet , the world's
first commercial jet airliner; the Harrier "jump jet", the world's
first operational Vertical/Short Take-Off and Landing (VTOL) aircraft;
the "groundbreaking" Blue Vixen radar carried by Sea Harrier FA2s and
which formed the basis of the Eurofighter's CAPTOR radar; and
co-produced the iconic
Concorde supersonic airliner with Aérospatiale
British Aerospace was a civil and military aircraft manufacturer, as
well as a provider of military land systems. The company had emerged
from the massive consolidation of UK aircraft manufacturers since
World War II.
British Aerospace was formed on 29 April 1977 by the
nationalisation and merger of The
British Aircraft Corporation (BAC),
Hawker Siddeley Group and
Scottish Aviation . Both BAC and Hawker
Siddeley were themselves the result of various mergers and
Marconi Electronic Systems was the defence subsidiary of British
The General Electric Company (GEC), dealing largely
in military systems integration , as well as naval and land systems.
Marconi's heritage dates back to
Guglielmo Marconi 's Wireless
Timeline of British aerospace companies since 1955
Short Brothers and Harland Ltd.
Short Brothers Ltd.
Short Brothers plc
F. G. Miles
British Aerospace (BAe)
Hawker Siddeley Aviation
Hawker Siddeley Dynamics
British Aircraft Corporation (BAC)
The General Electric Company (GEC)
Marconi Electronic Systems
English Electric Company
* Government owned from 1966 to liquidation
* Purchased rights for various Beagle and Handley-Page designs from
Hawker Aircraft ,
Gloster Aircraft Company and
Armstrong Whitworth Aircraft .
English Electric Aircraft, a subsidiary of the English Electric
* BAC comprised the aviation interests of the companies that formed
it, and wholly owned Hunting Aircraft.
* GEC purchased EE and with it The
Marconi Company and EE's
shareholding in BAC, through its subsidiary EE Aircraft.
* Part of
Modern timeline of British shipbuilding companies, 1960-present
Hawthorn Leslie & Company
Caledon Sh\'b. & Eng. Co.
Robb Caledon Shipbuilding
Harland and Wolff
Harland & Wolff Heavy Industries
Ailsa Shipbuilding Company
Ailsa & Perth
Scotts Sh\'b. & Eng. Co.
Greenock Dockyard Co.
Swan Hunter & Wigham Richardson
Swan Hunter Group
Smiths Dock Co.
John Readhead & Sons
Hall Russell & Co.
Austin & Pickersgill
North East Shipbuilders Ltd.
A&P Appledore International
William Doxford & Sons
Babcock Marine Appledore
Cammell Laird & Company
Vickers Ltd. Shipbuilding
Marconi Marine (VSEL)
BAE Systems Marine
BAE Sub. Solutions
Yarrow & Co.
Y\'w. Sh\'b. Ltd.
Upper Clyde Shipbuilders
Marconi Marine (YSL)
BAE Surf. Flt. Solutions
BVT Surface Fleet
BAE Systems Surface Ships
Fairfield Sh\'b. & Eng. Co.
Charles Connell & Company
John Brown & Company
Alexander Stephens & Sons
W. Denny & Bros.
A. & J. Inglis
J. I. Thornycroft & Co.
Vosper background-color:#7EC0EE;">BSC = BRITISH SHIPBUILDERS
The 1997 merger of American corporations
Boeing and McDonnell Douglas
, which followed the forming of
Lockheed Martin , the world's largest
defence contractor in 1995, increased the pressure on European defence
companies to consolidate. In June 1997
British Aerospace Defence
managing director John Weston commented "Europe... is supporting three
times the number of contractors on less than half the budget of the
U.S.". European governments wished to see the merger of their defence
manufacturers into a single entity, a European
Aerospace and Defence
As early as 1995
British Aerospace and the German aerospace and
defence company DaimlerChrysler
Aerospace (DASA) were said to be keen
to create a transnational aerospace and defence company. The two
companies envisaged including Aérospatiale, the other major European
aerospace company, but only after its privatisation. The first stage
of this integration was seen as the transformation of
Airbus from a
consortium of British Aerospace, DASA,
Construcciones Aeronáuticas SA into an integrated company; in this
British Aerospace and DASA were united against the various
objections of Aérospatiale. As well as Airbus,
British Aerospace and
DASA were partners in the
Panavia Tornado and Eurofighter Typhoon
aircraft projects. Merger discussions began between British Aerospace
and DASA in July 1998, just as French participation became more likely
with the announcement that
Aérospatiale was to merge with
emerge with a diluted French government shareholding. A merger was
British Aerospace chairman Richard Evans and DASA CEO
Jürgen Schrempp in December 1998.
Meanwhile, GEC was also under pressure to participate in defence
industry consolidation. Reporting the appointment of George Simpson as
GEC managing director in 1996, _The Independent_ had said "some
analysts believe that Mr Simpson's inside knowledge of BAe, a
long-rumoured GEC bid target, was a key to his appointment. GEC
favours forging a national 'champion' defence group with BAe to
compete with the giant US organisations." When GEC put MES up for
sale on 22 December 1998,
British Aerospace abandoned the DASA merger
in favour of purchasing its British rival. The merger of British
Aerospace and MES was announced on 19 January 1999. Evans stated that
in 2004 that his fear was that an American defence contractor would
acquire MES and challenge both
British Aerospace and DASA. The merger
created a vertically integrated company which _The Scotsman_ described
as " contracting and platform-building skills with Marconi's coveted
electronics systems capability", for example combining the
manufacturer of the Eurofighter with the company that provided many of
the aircraft's electronic systems;
British Aerospace was MES' largest
customer. In contrast, DASA's response to the breakdown of the merger
discussion was to merge with
Aérospatiale to create the European
Aeronautic Defence and Space Company (
EADS ), a horizontal integration
EADS has since considered a merger with Thales to create a "fully
Seventeen undertakings were given by
BAE Systems to the Department of
Trade and Industry which prevented a reference of the merger to the
Monopolies and Mergers Commission . These were largely to ensure that
the integrated company would tender sub-contracts to external
companies on an equal basis with its subsidiaries. Another condition
was the "firewalling " of former
British Aerospace and MES teams on
defence projects such as the Joint Strike Fighter (JSF). In 2007 the
government, on advice from the
Office of Fair Trading
Office of Fair Trading , announced it
had agreed to release
BAE Systems from ten of the undertakings due to
"a change in circumstances".
BAE Systems inherited the UK government owned "golden" share that was
British Aerospace was privatised. This unique share
prevents amendments of certain parts of the company's Articles of
Association without the permission of the Secretary of State. These
Articles require that no foreign person or persons acting together may
hold more than 15% of the company's shares or control the majority of
the board and that the CEO and the Chairman of
BAE Systems must be
British Aerospace's head office was in Warwick House, Farnborough
Aerospace Centre in
Farnborough, Hampshire .
BAE Systems retains this
but the registered office , and base for the senior leadership team,
is in the
City of Westminster .
BAE Systems' first annual report identified Airbus, support services
to militaries and integrated systems for air, land and naval
applications as key areas of growth. It also stated the company's
desire to both expand in the US and participate in further
consolidation in Europe.
BAE Systems described 2001 as an "important
year" for its European joint ventures, which were reorganised
considerably. The company has described the rationale for expansion in
the US; " is by far the largest defence market with spend running
close to twice that of the Western European nations combined.
Importantly, US investment in research and development is
significantly higher than in Western Europe." When
Dick Olver was
appointed chairman in July 2004 he ordered a review of the company's
businesses which ruled out further European acquisitions or joint
ventures and confirmed a "strategic bias" for expansion and investment
in the US. The review also confirmed the attractiveness of the land
systems sector and, with two acquisitions in 2004 and 2005, BAE moved
from a limited land systems supplier to the second largest such
company in the world. This shift in strategy was described as
"remarkable" by the _Financial Times_. Between 2008 and early 2011
BAE acquired five cyber security companies in a shift in strategy to
take account of reduced spending by governments on "traditional
defence items such as warships and tanks".
Matra Marconi Space , a joint BAE Systems/
Matra company, was
merged with the space division of DASA to form
Astrium . On 16 June
2003 BAE sold its 25% share to
EADS for £84 million, however due to
the lossmaking status of the company,
BAE Systems invested an equal
amount for "restructuring". In January 2001
Airbus Industrie was
transformed from an inherently inefficient consortium structure to a
formal joint stock company.
BAE Systems sold its 54% majority share
BAE Systems Canada , an electronics company, in April for CA$310
(approx. £197 million as of December 2010). In November 2001, the
company announced the closure of the
Avro Regional Jet (
Avro RJ )
production line at Woodford and the cancellation of the
Avro RJX, an
advanced series of the aircraft family, as the business was "no longer
viable". The final
Avro RJ to be completed became the last British
civil airliner. In November 2001 BAE sold its 49.9% share of Thomson
Marconi Sonar to Thales for £85 million. A further step of European
defence consolidation was the merger of BAE's share of
Dynamics and the missile division of
Alenia Marconi Systems (AMS) into
MBDA in December.
MBDA thus became the world's second largest missile
EADS has been reported to be interested in
acquiring full control of MBDA, BAE has said that, unlike Airbus, MBDA
is a "core business". _ The Astute_-class submarine project
caused BAE to issue a profit warning in 2002 and invest £250 million
to overcome its difficulties.
In June 2002,
BAE Systems confirmed it was in takeover discussions
with TRW , an American aerospace, automotive and defence business.
This was prompted by
Northrop Grumman 's £4.1 billion (approx. US$6
billion c. 2002) hostile bid for TRW in February 2002. A bidding war
between BAE Systems, Northrop and
General Dynamics ended on 1 June
when Northrop's increased bid of £5.1 billion was accepted. On 11
December 2002, the company issued a shock profit warning due to cost
overruns of the Nimrod MRA4 maritime reconnaissance/attack aircraft
and the _Astute_-class submarine projects. On 19 February 2003 BAE
took a charge of £750 million against these projects and the Ministry
of Defence (MOD) agreed to pay a further £700 million of the cost.
In 2000 the company had taken a £300 million "loss charge" on the
Nimrod contract which was expected to cover "all the costs of
completion of the current contract".
The UK government, following a cabinet row described as "one of the
most bitter Cabinet disputes over defence contracts since the Westland
helicopter affair in 1985", ordered 20
BAE Hawk trainer aircraft with
24 options in July 2003 in a deal worth £800 million. The deal was
significant because it was a factor in India's decision to finalise a
£1 billion order for 66 Hawks in March 2004. Also in July 2003 BAE
Finmeccanica announced their intention to set up three
joint venture companies, to be collectively known as
These companies would have pooled the avionics,
communications businesses of the two companies. However the
difficulties of integrating the companies in this way led to a
re-evaluation of the proposal; BAE Systems' 2004 Annual Report states
that "recognising the complexity of the earlier proposed Eurosystems
Finmeccanica we have moved to a simpler model". The
main part of this deal was the dissolution of AMS and the
SELEX Sensors and Airborne Systems ;
BAE Systems sold
its 25% share of the latter to
Finmeccanica for €400 million
(approx. £270 million c. 2007) in March 2007.
In May 2004, it was reported that the company was considering selling
its shipbuilding divisions,
BAE Systems Naval Ships and BAE Systems
Submarines . It was understood that
General Dynamics wished to acquire
the submarine building facilities at
Barrow-in-Furness , while VT
Group was said to be interested in the remaining yards on the Clyde .
However, in 2008
BAE Systems merged its Surface Fleet arm with the
shipbuilding operations of
VT Group to form
BVT Surface Fleet , an aim
central to the British Government's
Defence Industrial Strategy .
BAE's £2.5 billion purchase of
United Defense in 2005 added the
M2/M3 Bradley family of armoured vehicles to its product line.
On 4 June 2004,
BAE Systems outbid
General Dynamics for Alvis Vickers
, the UK's main manufacturer of armoured vehicles.
Alvis Vickers was
merged with the company's
RO Defence unit to form
BAE Systems Land
Systems. Recognising the lack of scale of this business compared to
BAE Systems executives soon identified the US
United Defense Industries (UDI), a major competitor to
General Dynamics, as a main acquisition target. On 7 March 2005 BAE
announced the £2.25 billion (approx. US$4.2 billion c. 2005)
acquisition of UDI. UDI, now
BAE Systems Land and Armaments ,
manufactures combat vehicles, artillery systems, naval guns, missile
launchers and precision guided munitions.
In December 2005,
BAE Systems announced the sale of its German naval
systems subsidiary, Atlas Elektronik, to
ThyssenKrupp and EADS. The
sale was complicated by the requirement of the German government to
approve any sale. The _Financial Times_ described the sale as "cut
price" because French company Thales bid €300 million, but was
blocked from purchasing Atlas on national security grounds. On 31
January 2006 the company announced the sale of BAE Systems
Aerostructures to Spirit AeroSystems, Inc , having said as early as
2002 that it wished to dispose of what it did not regard as a "core
On 18 August 2006 Saudi Arabia signed a contract worth £6 billion to
£10 billion for 72 Eurofighter Typhoons, to be delivered by BAE
Systems. On 10 September 2006 the company was awarded a £2.5 billion
contract for the upgrade of 80
Royal Saudi Air Force Tornado IDSs.
One of BAE Systems' major aims, as highlighted in the 2005 Annual
Report, was the granting of increased technology transfer between the
UK and the US. The F-35 (JSF) programme became the focus of this
British government ministers such as Lord Drayson ,
Minister for Defence Procurement , suggesting the UK would withdraw
from the project without the transfer of technology that would allow
the UK to operate and maintain F-35s independently. However, on 12
December 2006, Lord Drayson signed an agreement which allows "an
unbroken British chain of command" for operation of the aircraft. On
22 December 2006 BAE received a £947 million contract to provide
guaranteed availability of
Royal Air Force
Royal Air Force (RAF) Tornados.
On 7 May 2007 the company announced its subsidiary
BAE Systems Inc.
was to purchase
Armor Holdings for £2.3 billion (approx. US$4.5
billion c. 2007) and completed the deal on 31 July 2007. The company
is a manufacturer of tactical wheeled vehicles and a provider of
vehicle and individual armour systems and survivability technologies.
BAE Systems (and
British Aerospace previously) was a technology
partner to the McLaren Formula One team from 1996 to December 2007.
The partnership originally focused on McLaren's F1 car's aerodynamics,
eventually moving on to carbon fibre techniques, wireless systems and
fuel management. BAE Systems' main interest in the partnership was to
learn about the high speed build and operations processes of McLaren.
The company announced the acquisition of
Tenix Defence , a major
Australian defence contractor on 18 January 2008. The purchase was
completed on 27 June for A$775 million (£373 million) making BAE
Systems Australia that country's largest defence contractor. The UK
Ministry of Defence awarded
BAE Systems a 15-year munitions contract
in August 2008 worth up to £3 billion, and known as MASS. The
contract guarantees supply of 80% of the UK Armed Forces' ammunition
and required BAE to modernise its munitions manufacturing facilities.
BAE Systems expanded its intelligence and security business with the
£531 million purchase of
Detica Group in July 2008. It continued
this strategy with purchases of Danish cyber and intelligence company
ETI for approximately $210 million in December 2010, and
PLC the following month for €217 million. The latter provides
counter fraud and anti-money laundering solutions to the global
financial services industry where its software assists institutions to
comply with regulations on financial intelligence and monitoring.
BAE Systems inherited British Aerospace's share of
which consisted of two factories at Broughton and
Filton . These
facilities manufactured wings for the
Airbus family of aircraft. In
Airbus was incorporated as
Airbus SAS, a joint stock company . In
return for a 20% share in the new company
BAE Systems transferred
ownership of its
Airbus plants (known as
Airbus UK ) to the new
Despite repeated suggestions as early as 2000 that
BAE Systems wished
to sell its 20% share of Airbus, the possibility was consistently
denied by the company. However, on 6 April 2006 BBC News reported
that it was indeed to sell its stake, then "conservatively valued" at
£2.4 billion. Due to the slow pace of informal negotiations, BAE
Systems exercised its put option which saw investment bank Rothschild
appointed to give an independent valuation. Six days after this
Airbus announced delays to the A380 with significant
effects on the value of
Airbus shares. On 2 June 2006 Rothschild
valued the company's share at £1.87 billion, well below its own
analysts' and even EADS' expectations. The
BAE Systems board
recommended that the company proceed with the sale. On 4 October 2006
shareholders voted in favour and the sale was completed on 13 October.
BAE Systems' sale of its
Airbus share saw the end of UK owned
involvement in civil airliner production.
Airbus Operations Ltd (the
Airbus UK) continues to be the
Airbus "Centre of Excellence"
for wing production, employing over 9,500, but is entirely owned by
Airbus Group (formerly EADS).
In February 2010
BAE Systems announced a £592 million writedown of
Armor Holdings business following the loss of the Family of
Medium Tactical Vehicles contract in 2009. It was outbid by Oshkosh
Corporation for the £2.3 billion ($3.7 billion) contract. Land and
Armaments had been the "star performer" of BAE Systems' subsidiaries,
growing from sales of £482 million in 2004 to £6.7 billion in 2009.
BAE Systems inherited British Aerospace's 35% share of
Saab AB , with
which it produced and marketed the Gripen fighter aircraft. In 2005 it
reduced this share to 20.5% and in March 2010 announced its intention
to sell the remainder. _The Times_ stated that the decision brought
"to an end its controversial relationship with the Gripen fighter
aircraft". Several of the export campaigns for the aircraft were
subject to allegations of bribery and corruption. Meanwhile, the
company was increasing its presence in India with the formation of
Defence Land Systems India in April, a joint venture with Mahindra &
Mahindra Limited .
BAE Systems holds just 26% of the equity due to
Indian foreign direct investment regulations.
The company continued its move into support services in May 2010 with
the purchase of the marine support company
Atlantic Marine for $352
million. In September 2010
BAE Systems announced plans to sell the
Platform Solutions division of
BAE Systems Inc., which the _Financial
Times_ said could yield as much as £1.3 billion. However, despite
"considerable expressions of interest", the sale was abandoned in
January 2011. On 19 October 2010 the
British government cancelled
the Nimrod project as part of its Strategic Defence and Security
Review . The purchases of _Queen Elizabeth_-class aircraft carrier ,
the Astute class submarines, and the Type 26 frigates were all
confirmed. A new generation of nuclear missile submarines will be
built, however the final decision will be delayed until after the next
BAE Systems sold the regional aircraft lease portfolio and asset
management arm of its
BAE Systems Regional Aircraft business in May
2011. This unit leases the
BAe 146 /
Avro RJ family,
BAe ATP ,
BAe 748 . The company retained the support and
engineering activities of the business as part of the transaction.
In September 2011,
BAE Systems began consultation with unions and
workers over plans to cut nearly 3,000 jobs, mostly in the company's
military aircraft division.
In its 2012 half-year report, the company revealed a 10% decline in
revenue in the six months up to 30 June due to falling demand for
armaments. In May 2012 the governments of the UK and Saudi Arabia
reached an agreement on an arms package which saw a £1.6 billion
contract awarded to BAE for the delivery of 55 Pilatus PC-21 and 22
BAE Systems Hawk aircraft. The Sultanate of Oman ordered Typhoon and
Hawk aircraft worth £2.5 billion in December 2012.
On 13 September 2012, it was reported that
BAE Systems and
entered possible merger talks. In case of a potential tie-up, BAE
shareholders would own 40% and EADS' 60% of the new organisation.
However, on 10 October 2012, the companies said the merger talks had
been called off.
In July 2014 it announced the acquisition of US intelligence
capability, Signal Innovations Group Inc., to augment imagery and data
analysis technologies in its Intelligence ">
BAE Systems Maritime -
Naval Ships builds the
Type 45 destroyer
Type 45 destroyer . Other subsidiaries of BAE
supply the naval gun and
S1850M radars for the class
BAE Systems plays a significant role in the production of military
equipment. In 2008, 95% of BAE Systems' total sales were military
It plays important roles in military aircraft production. The
company's Typhoon fighter and Tornado fighter-bomber are both front
line aircraft of the RAF. The company is a major partner in the F-35
Lightning II programme. Its Hawk advanced jet trainer aircraft has
been widely exported. In July 2006, the British government
declassified the HERTI (High Endurance Rapid Technology Insertion), an
Unmanned Aerial Vehicle
Unmanned Aerial Vehicle (UAV) which can navigate autonomously.
BAE Systems Land and Armaments manufactures the M2/M3 Bradley
fighting vehicle family, the US Navy
Advanced Gun System (AGS), M113
armoured personnel carrier (APC), M109 Paladin ,
M777 howitzer , the
British Army's Challenger II ,
Warrior Tracked Armoured Vehicle ,
Panther Command and Liaison Vehicle , and the
Major naval projects include the _Astute_-class nuclear submarine,
Type 45 air defence destroyer and _Queen Elizabeth_-class aircraft
AREAS OF BUSINESS
BAE Systems defines its "home markets" to be Australia, India, Saudi
Arabia, the UK and the US.
BAE Systems is the predominant supplier to the UK Ministry of Defence
(MoD); in 2009/2010
BAE Systems companies in the list of Top 100
suppliers to the MoD received contracts totalling £3.98 billion, with
total revenue being higher when other subsidiary income is included.
In comparison, the second largest supplier is Babcock International
Group and its subsidiaries, with a revenue of £1.1 billion from the
MoD. Oxford Economic Forecasting states that in 2002 the company's UK
businesses employed 111,578 people, achieved export sales of £3
billion and paid £2.6 billion in taxes. These figures exclude the
After its creation,
BAE Systems had a difficult relationship with the
MoD. This was attributed to deficient project management by the
company, but also in part to the deficiencies in the terms of "fixed
price contracts". CEO Mike Turner said in 2006 "We had entered into
contracts under the old competition rules that frankly we shouldn't
have taken". These competition rules were introduced by Lord Levene
during the 1980s to shift the burden of risk to the contractor and
were in contrast to "cost plus contracts" where a contractor was paid
for the value of its product plus an agreed profit.
BAE Systems was operating in "the only truly open defence market",
which meant that it was competing with US and European companies for
British defence projects, while they were protected in their home
markets. The US defence market is competitive, however largely between
American firms, while foreign companies are excluded. In December 2005
the MoD published the
Defence Industrial Strategy (DIS) which has been
widely acknowledged to recognise
BAE Systems as the UK's "national
champion". The DIS identifies key industrial capabilities which must
be maintained within the UK through long-term government commitments
to support research spending and procurement. Of these capabilities,
several are dominated by BAE Systems, including naval vessels and
submarines, combat vehicles, fixed-wing aircraft, general munitions
(with the exception of certain "niche capabilities abroad") and
network-enabled capability (defined as
C4ISTAR in the DIS). The
company maintains an interest in future UAV technologies through its
collaborative FLAVIIR research programme with EPSRC .
After the publication of the DIS
BAE Systems CEO Mike Turner said "If
we didn't have the DIS and our profitability and the terms of trade
had stayed as they were... then there had to be a question mark about
our future in the UK". Lord Levene said in the balance between value
for money or maintaining a viable industrial base the DIS "tries as
well as it can to steer a middle course and to achieve as much as it
can in both directions. ...We will never have a perfect solution."
In May 2012, the MOD awarded
BAE Systems a £328m contract to design
the UK's next generation nuclear-armed submarines.
On 6 November 2013,
BAE Systems announced that 1,775 jobs are to go
at its yards in England and Scotland. Shipbuilding will cease entirely
in Portsmouth in 2014 with the loss of 940 jobs, and a further 835
jobs would be lost at Filton, near Bristol, and at the shipyards in
Govan, Rosyth, and Scotstoun in Scotland.
BAE Systems Inc.
The attraction of MES to
British Aerospace was largely its ownership
of Tracor, a major American defence contractor. Since its creation
the company has steadily increased its investment in and revenues from
BAE Systems Inc. now sells more to the US Department of Defense (DOD)
than the UK MoD. The company has been allowed to buy important
defence contractors in the US, however its status as a UK company
requires that its US subsidiaries are governed by American executives
Special Security Arrangements . The company faces fewer
impediments in this sense than its European counterparts, as there is
a high degree of integration between the US and UK defence
establishments. BAE Systems' purchase of
Lockheed Martin Aerospace
Electronic Systems in November 2000 was described by
John Hamre , CEO
Center for Strategic and International Studies and former
Deputy Secretary of Defense , as "precedent setting" given the
advanced and classified nature of many of that company's products.
The possibility of a merger between
BAE Systems Inc. and major North
American defence contractors has long been reported, including Boeing,
General Dynamics, Lockheed Martin, and Raytheon.
REST OF THE WORLD
BAE Systems Australia is one of the largest defence contractors in
Australia, having more than doubled in size with the acquisition of
Tenix Defence in 2008. The
Al Yamamah agreements between the UK and
Saudi Arabia require "the provision of a complete defence package for
the Kingdom of Saudi Arabia";
BAE Systems employs 4,600 people in the
BAE Systems Land Systems South Africa , 75% owned by BAE
Systems, is the largest military vehicle manufacturer in South Africa,
and is currently taking part in the US
MRAP programme. BAE Systems'
interests in Sweden are a result of the purchases of
Alvis Vickers and
UDI, which owned Hägglunds and
Bofors respectively; The companies are
now part of
BAE Systems AB and have a combined workforce of
BAE Systems is also present in India under the
BAE Systems India. Also,
BAE Systems owns 49% of
Air Astana ,
As of 8 October 2012
BAE Systems listed the following as
Invesco Perpetual (13.38%), BlackRock
(4.66%), Franklin Templeton Investments , (3.95%) and Legal "> BAE
Systems has offices in the Farnborough
Aerospace Centre business park.
Senior managers are based at the registered office in Carlton Gardens
City of Westminster . 6 Carlton Gardens,
London A BAE
Eurofighter Typhoon T1 . BAE is a partner in Eurofighter
GmbH , the multinational company that coordinates the design,
production, and upgrade of the aircraft.
BAE Systems has its head office and its registered office in City of
Westminster , London. In addition to its central
London offices, it
has an office in
Farnborough, Hampshire that houses functional
specialists and support functions.
The company divides its business into the following business groups:
Applied Intelligence This division delivers hardware and software
tools to protect and enhance critical assets. The division includes
BAE Systems Applied Intelligence . Saudi Arabia This division supports
customers in Saudi Arabia, including the
Al Yamamah project and
subsequent Saudi Typhoon contract. Intelligence & Security This
division provides mission-critical cyber security tools, information
technology and intelligence and analytical and support tools Maritime
This division designs and manufactures naval ships and submarines. The
BAE Systems Maritime – Naval Ships and BAE Systems
Maritime – Submarines . Maritime has inherited the naval systems
businesses of Insyte, for example
BAE Systems Underwater Systems and
naval radar. Regional Aircraft This division provides regional
aircraft and support services to regional airlines Australia This
division supports customers in Australia Electronic Systems This
division supplies flight and engine controls for electronic warfare
and night vision systems, surveillance and reconnaissance sensors,
secure networked communications equipment, and power and energy
management systems Platforms & Services This division designs,
develops, produces, supports, maintains, modernises and upgrades
armoured combat vehicles, wheeled vehicles, naval guns, surface ship
combatants, commercial vessels, missile launchers, artillery systems,
military ordnance, and protective wear and armour. This division
BAE Systems Land & Armaments . It also includes projects such
as Taranis . The company's 33% share of Eurofighter Jagdflugzeug GmbH
(33%) represents its involvement in the
Eurofighter Typhoon project.
Military Air & Information This division provides information
superiority and air power to customers. The division includes BAE
Systems Military Air _The Financial Times_ noted that King's career at
Marconi distances him from the British Aerospace-led Al Yamamah
In 2015 the company invested more than £11m in charities and
not-for-profit organisations through company and employee donations to
support its key areas of customer, education and heritage.
On 22 February 2017
BAE Systems announced that on that day Ian King
had informed the Board that he would retire on 30 June 2017. It was
confirmed that Charles Woodburn, currently Chief Operating Officer,
will be appointed as Chief Executive from 1 July 2017. Charles
BAE Systems in May 2016 as Chief Operating Officer and
Executive Board Director, following over 20 years' international
experience in senior management positions in the oil and gas
Financial information for the Company is as follows:
TURNOVER (£ MILLION)
PROFIT/(LOSS) BEFORE TAX (£M)
NET PROFIT/(LOSS) (£M)
31 December 2015
31 December 2015
31 December 2014
31 December 2013
31 December 2012
31 December 2011
31 December 2010
31 December 2009
31 December 2008
31 December 2007
31 December 2006
31 December 2005
31 December 2005
31 December 2004
31 December 2003
31 December 2002
31 December 2001
31 December 2000
31 December 1999
: Restated to exclude
Airbus contributions. Included for comparison.
: Data prepared using UK GAAP guidelines. Recent data prepared using
International Financial Reporting Standards .
: Reflects £750 million charges for problems with Nimrod MRA4 (£500
Astute class submarine (£250 million) programmes.
SERIOUS FRAUD OFFICE
BAE Systems has been under investigation by the Serious Fraud Office
, into the use of political corruption to help sell arms to Chile,
Czech Republic, Romania, Saudi Arabia, South Africa,
Qatar. In response, BAE Systems' 2006 Corporate Responsibility
Report states "We continue to reject these allegations... We take our
obligations under the law extremely seriously and will continue to
comply with all legal requirements around the world. In June 2007
Lord Woolf was selected to lead what the BBC described as an
"independent review.... ethics committee to look into how the defence
giant conducts its arms deals." The report, _Ethical business conduct
BAE Systems plc – the way forward_, made 23 recommendations,
measures which the company has committed to implement. The finding
stated that "in the past BAE did not pay sufficient attention to
ethical standards in the way it conducted business," and was described
by the BBC as "an embarrassing admission."
In September 2009, the Serious Fraud Office announced that it
intended to prosecute
BAE Systems for offences relating to overseas
The Guardian _ claimed that a penalty "possibly of more
than £500m" might be an acceptable settlement package. On 5 February
BAE Systems agreed to pay £257m criminal fines to the US and
£30m to the UK. The UK had already massively benefited from £43
billion contract in tax receipts and jobs in the UK, and dropped an
anti-corruption investigation into the
Al Yamamah contracts later
taken up by US authorities. Crucially, under a plea bargain with the
US Department of Justice ,
BAE Systems was convicted of felony
conspiracy to defraud the United States government and sentenced in
March 2010 by US District Court Judge
John D. Bates to pay a $400
million fine, one of the largest fines in the history of the DOJ.
Judge Bates said the company's conduct involved "deception, duplicity
and knowing violations of law, I think it's fair to say, on an
BAE Systems did not directly admit to bribery, and
is thus not internationally blacklisted from future contracts. Some of
the £30m penalty the company will pay in fines to the UK will be paid
ex gratia for the benefit of the people of Tanzania. On 2 March 2010
Campaign Against Arms Trade and The Corner House were successful in
gaining a High Court injunction on the Serious Fraud Office's
settlement with BAE Systems. The High Court may order a full review of
One of 24
Panavia Tornado ADVs delivered to the Royal Saudi Air
Force as part of the
Al Yamamah arms sales . Main article:
Al-Yamamah arms deal
Al-Yamamah arms deal
BAE Systems (and
British Aerospace previously) has long been the
subject of allegations of bribery in relation to its business in Saudi
Arabia. The UK National Audit Office (NAO) investigated the Al Yamamah
contracts and has so far not published its conclusions, the only NAO
report ever to be withheld. The MOD has stated "The report remains
sensitive. Disclosure would harm both international relations and the
UK's commercial interests." The company has been accused of
maintaining a £60 million Saudi slush fund and was the subject of an
investigation by the Serious Fraud Office (SFO). However, on 14
December 2006 it was announced that the SFO was "discontinuing" its
investigation into the company. It stated that representations to its
Director and the Attorney General Lord Goldsmith had led to the
conclusion that the wider public interest "to safeguard national and
international security" outweighed any potential benefits of further
investigation. The termination of the investigation has been
controversial. In June 2007, the BBC's Panorama alleged BAE Systems
"paid hundreds of millions of pounds to the ex-Saudi ambassador to the
Prince Bandar bin Sultan " in return for his role in the Al
Yamamah deals. In late June 2007 the United States Department of
Justice (DOJ) began a formal investigation into BAE's compliance with
anti-corruption laws. On 19 May 2008
BAE Systems confirmed that its
CEO Mike Turner and non-executive director
Nigel Rudd had been
detained "for about 20 minutes" at two US airports the previous week
and that the DOJ had issued "a number of additional subpoenas in the
US to employees of
BAE Systems plc and
BAE Systems Inc as part of its
ongoing investigation". _The Times_ suggested that such "humiliating
behaviour by the DOJ" is unusual toward a company that is co-operating
A judicial review of the decision by the SFO to drop the
investigation was granted on 9 November 2007. On 10 April 2008 the
High Court ruled that the SFO "acted unlawfully" by dropping its
investigation. _The Times_ described the ruling as "one of the most
strongly worded judicial attacks on government action" which condemned
how "ministers 'buckled' to 'blatant threats' that Saudi cooperation
in the fight against terror would end unless the ...investigation was
dropped." On 24 April the SFO was granted leave to appeal to the
House of Lords against the ruling. There was a two-day hearing before
the Lords on 7 and 8 July 2008. On 30 July the House of Lords
unanimously overturned the High Court ruling, stating that the
decision to discontinue the investigation was lawful.
_ HMS Coventry_ was one of two frigates sold to Romania.
In September 2005 _The Guardian_ reported that banking records showed
BAE Systems paid £1 million to
Augusto Pinochet , the former
Chilean dictator. _The Guardian_ has also reported that "clandestine
arms deals" have been under investigation in Chile and the UK since
2003 and that
British Aerospace and
BAE Systems made a number of
payments to Pinochet advisers. In 2003, HMS _Sheffield_ was sold to
Chilean Navy for £27 million, however the government's profit
from the sale was £3 million, after contracts worth £24 million were
BAE Systems for upgrade and refurbishment of the ship.
BAE Systems is alleged to have paid "secret offshore commissions" of
over £7 million to secure the sale of HMS _London_ and HMS _Coventry_
Romanian Navy . The company received a £116 million contract
for the refurbishment of the ships prior to delivery; however the
British taxpayer only received the scrap value of £100,000 each from
BAE Systems ran into controversy in 2002 over the abnormally high
cost of a radar system sold to
Tanzania . The sale was criticised by
several opposition MPs and the
World Bank ; Secretary of State for
Clare Short declared that
BAE Systems had
"ripped off" developing nations. In December 2010, leaked US
diplomatic communications revealed that Edward Hoseah, the Tanzanian
prosecutor investigating misconduct by BAE Systems, had confided in US
diplomats that "his life may be in danger" and was being routinely
In January 2007, details of an investigation by the Serious Fraud
Office into BAE Systems' sales tactics in regard to South Africa were
reported, highlighting the £2.3 billion deal to supply Hawk trainers
Gripen fighters as suspect. In May 2011, as allegations of
bribery behind South Africa's Gripen procurement continued, the
Saab AB issued strong denials of any illicit
payments being made; however in June 2011 Saab announced that BAE
Systems had made unaccounted payments of roughly $3.5 million to a
consultant, this revelation prompted South African Opposition parties
to call for a renewed inquiry. The Gripen's procurement by the Czech
Republic was also under investigation by the Serious Fraud Office in
2006 over allegations of bribery.
In September 2003 _The Sunday Times_ reported that
BAE Systems had
hired a private security contractor to collate information about
individuals working at the
Campaign Against Arms Trade and their
activities. In February 2007, it was reported that the corporation
again obtained private confidential information from CAAT.
The company was reported in 2012 to have been the target of Chinese
cyber espionage that may have stolen secrets related to the Lockheed
Martin F-35 Lightning II .
BAE Systems was excluded from the portfolio of the
government pension fund of Norway "because they develop and/or produce
central components for nuclear weapons". "According to the ethical
guidelines for the Government Pension Fund – Global, companies that
produce weapons that through normal use may violate fundamental
humanitarian principles shall be excluded from the fund." BAE Systems
is indirectly engaged in production of nuclear weapons – through its
37.5% share of
MBDA it is involved with the production and support of
the ASMP missile, an air-launched nuclear missile which forms part of
the French nuclear deterrent . The company is also the UK's only
nuclear submarine manufacturer and thus produces a key element of the
United Kingdom's nuclear weapons capability. However, Norway has bound
their strategic defence to the UK's "since Napoleonic times",
including both protection under the British nuclear deterrent as well
as the joint NATO nuclear sharing policy.
BAE Systems was in 2003 initially criticised for its role in the
production of cluster bombs , due to the long term risk for injury or
death to civilians. However, following the 2008 Oslo Convention on
BAE Systems was among the first defence contractors
to stop their manufacture and by 2012 the majority of the munitions
had been destroyed.
SAUDI WAR CRIMES IN YEMEN
Saudi Arabia is BAE's third biggest market. _The Independent_
reported that "in 2014, British defence firm BAE won a contract worth
£4.4bn to supply the Saudis with 72 fighter jets – some of which
were used to bomb Red Cross and MSF hospitals in Yemen ." The
chairman of BAE Systems, Sir Roger Carr , rejected criticism over
BAE's continued work in Saudi Arabia, saying "We will stop doing it
when they tell us to stop doing it. ... We maintain peace by having
the ability to make war and that has stood the test of time."
Former Foreign Secretary Robin Cook said of his time in office that
he "came to learn that the chairman of BAE appeared to have the key to
the garden door to number 10. Certainly I never knew No 10 to come up
with any decision which would be incommoding to BAE." As well as
employing in-house lobbyists,
BAE Systems also employs a lobbying
agency called Portland PR ; many of Portland PR's staff have worked
at the upper echelons of both Labour and Conservative governments.
* Hampshire portal
* Companies portal
* Aviation portal
Aerospace industry in the
European multilateral defence procurement
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