S.Korea to set fighter jet auction terms late Nov -sources

Reuters

* Lockheed's F-35 has the upper hand in the auction

* New auction comes after earlier bid by Boeing voted down

* Boeing, Eurofighter hope S.Korea will pursue mixedpurchase

By Joyce Lee

SEOUL, Nov 11 (Reuters) - South Korea will set the terms ofa multi-billion dollar fighter jet auction in late November - anauction likely to favour Lockheed Martin Corp but whichwill also be watched by rivals to see if they will get a shareof the pie.

Sources familiar with the matter also said the air forcerequested enhanced stealth capability on Monday.

The move was expected after the government in Septemberbowed to public opinion and voted down a bid by Boeing tosupply 60 warplanes, saying it would restart the the 8.3trillion won ($7.8 billion) tender process to get a moreadvanced, radar-evading jet.

At the time, Boeing's bid was the only one that had comewithin budget and even if it now favours Lockheed's F-35programme, Seoul is also considering options such as initiallybuying fewer jets or splitting the purchase between differentjets to keep costs down.

"There is talk of splitting the 60 plane purchase into onelot of 40 and one lot of 20, but it will all be sorted beforethe (Joint Chiefs) meeting," said a separate source belonging tothe Joint Chiefs of staff.

That source and another separate source said the air force'srequest will be scrutinised and likely modified by the JointChiefs of Staff, defense ministry and the presidential officebefore being approved at a Joint Chiefs meeting tentatively setfor Nov. 27.

Although the defense ministry is in talks with the financeministry to increase the budget for the jet purchase, thelikelihood of that is slim as South Korea wrestles with a taxshortfall of up to 8 trillion won this year while trying toexpand social welfare spending.

Boeing spokesman Conrad Chun said a mixed purchase was thebest option for the South Korean government.

"We know that cost, capability and safety are important tothe ROKAF (Korea's air force)... and believe that the bestoption is a mixed buy that includes Advanced F-15s that have aguaranteed price and capability," he said in a statement emailedto Reuters.

The Eurofighter consortium is also hoping for a mixedpurchase.

"We are prepared to offer a programme flexible enough toaccomodate (a split) scenario," said Christian Scherer, EADS Cassidian's chief sales officer and head ofinternational operations.

One U.S. government official said South Korea had asked forand been granted an extension in the terms of the proposed F-35offer through the end of December.

The official, who was not authorized to speak publicly, saidWashington was awaiting details in coming weeks on how Seoulplanned to proceed with the fighter competition.

Lockheed officials were not immediately available forcomment.

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