Potential European Funding for IAF Trainer Aircraft Acquisition

15/5/2012 Arie Egozi - israeldefense.com

In the framework of the negotiation over details of the new trainer aircraft deal, European and perhaps even Israeli banks may fund the acquisition

A consortium of European banks, and perhaps even Israeli banks, will fund the deal for acquiring the Italian M-346 trainer aircraft selected by the Israeli Air Force several months ago. Negotiations over the details of the entire deal, which is expected to be signed before the end of the year, are currently underway.

It was initially expected that Thor, a company jointly owned by Israel Aerospace Industries (IAI) and Elbit Systems, would fund a large portion of the deal (an estimated $600 million) through loans from both companies.

However, there now discussion that the funding will come from a consortium of European banks. It was also learned that at least one Israeli bank has shown interest in joining the deal. The rest of the money will come from the Ministry of Defense.

At this time, the Ministry of Defense is working on a contract for operating the aircraft for the next 20 years, with a commitment to designate a predetermined number of flight hours for the IAF’s flight school.

The Israeli government will acquire the engine and several other systems for the aircraft directly from the US through US funding, since they are American-made. This acquisition will stand at approximately $350 million.

In addition, the Italian government has committed to carrying out large-scale reciprocal trade in Israel, which will include at least two early-warning aircraft as well as an advanced espionage satellite. The aircraft are scheduled to arrive to Israel in 2014.