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Boeing rivals step up pressure for UK spy plane competition

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young

By Sarah Young and Tim Hepher

LONDON (Reuters) - Global defense companies are clamoring for the chance to compete with Boeing (BA.N) for a multi-billion-dollar contract to provide Britain with submarine-hunting aircraft, as the UK government ponders a gap left by recent defense cuts.

At a time of rising Western tensions with Russia -- whose submarines are suspected of entering Swedish and Finnish waters -- Britain is struggling to carry out its own aerial hunts for such boats since scrapping its Nimrod spy-plane program in 2010.

Defence Minister Michael Fallon confirmed on Wednesday that a British government defense and security review due to conclude in November could state the need for a new maritime patrol aircraft.

Until recently, Boeing (BA.N) was widely seen as a shoo-in with its P-8 Poseidon, an off-the-shelf solution based on its best-selling 737 passenger jet.

But rivals queued up at a major defense exhibition this week to press Britain to run a competition, worried that the return towards Cold War levels of tension could favor a rushed deal.

With few defense deals up for grabs due to spending cuts, any competition is likely to attract a flood of offers with jetmakers vying against turboprop makers, though Britain has not yet said exactly what type of missions should be carried out.

"We very much hope for competition, but we need to know what the question is before we can provide the answer," Paul Kahn, president of Airbus Group UK (AIR.PA), told Reuters on the sidelines of the DSEI exhibition in London.

The European aerospace group wants to compete against Boeing with its C-295 military turbo-prop aircraft.

Lockheed Martin (LMT.N) entered the fray this week with plans to upgrade the C-130J Hercules transport aircraft already owned by the Royal Air Force, while Italy's Finmeccanica (SIFI.MI), L-3 (LLL.N) of the United States, Sweden's Saab (SAABb.ST) and Japan's Kawasaki are also potential contenders.

Brian Burridge, Britain's former commander in Iraq and now senior vice president UK corporate for Finmeccanica, said the case for competition after five years of uncertainty was "compelling".

The politically sensitive decision could affect hundreds of jobs but many are calling for a broader debate about whether Britain wants to combine the maritime role with other sensitive missions such as land surveillance and special forces work in order to make the project more efficient.

"The government is under great pressure to restore some kind of maritime patrol capability as fast as possible and therefore Boeing presenting a package ... seems to be quite a good short-term solution," said Alexandra Ashbourne-Walmsley, associate fellow of the Royal United Services Institute think-tank.

"Is that the correct answer for the long term? I think this is where the real thinking and capability studies have to come. It seems to me there is a need for a combination of manned and unmanned platforms."

U.S. contractor Northrop Grumman (NOC.N) is expected to propose a solution involving some unmanned assets, but rivals such as Lockheed say it would need a manned aircraft to go after any submarines spotted by unmanned aerial vehicles.

Northrop declined to comment.

Boeing said it would "support whatever the government decides" in its upcoming defense review.



(Editing by Susan Fenton)