Efforts to integrate the commercial leasing and product support activities of British Aerospace and Saab have been held up by the financial aspects of the proposed deal.
Stephen O'Sullivan, executive vice-president of BAe's Asset Management (AM) division, says that he had hoped an agreement would be concluded in time for an announcement at the show, but plans have been held up by "financially related risk/reward issues".
Michael Magnusson president of Saab Aircraft Leasing (SAL) confirms that discussions have been held with BAe, as well as "several other parties". While acknowledging that the likely partner is BAe, a link-up will only happen "if it makes sense," he says.
"The underpinning financial issues run into perhaps billions of dollars and we have to agree on the distribution of the risk and reward," says O'Sullivan. "Discussions are at an advanced stage and I hope the issues can be resolved, but there are no assurances," he adds.
BAe AM manages a portfolio of 450 jets and turboprops while Saab is winding up new aircraft production and focusing on the lease management of 314 of the 510 Saab 340s and 2000s in-service in which it has financial recourse. The two companies are linked through BAe's 35% shareholding and, with the military sides of both organisations already aligned, discussions on a merger of the commercial businesses have been on going for the last six months.
Having now got to grips with the management of its own fleet, O'Sullivan says that BAe does not want to get involved with more financial recourse "unless there is value there. The synergies of linking together the businesses are obvious", he says adding that the two companies have similar markets, and the financing arrangements are alike.
If a deal can be reached, O'Sullivan envisages that a new joint commercial aircraft company will be formed, with combined divisions providing support and lease management functions. Magnusson says there have not been any detailed discussions on the format that a link with BAe would take, but it would not necessarily require a full merger between the two operations.
Source: Flight International
