Formation and privatisation The company has its origins in the
Aircraft and Shipbuilding Industries Act 1977, which called for the
nationalisation and merger of the
British Aircraft Corporation,
Hawker Siddeley Aviation,
Hawker Siddeley Dynamics and
Scottish Aviation. On 29 April 1977, the new entity was formed in the United Kingdom as a statutory corporation. Under the provisions of the British Aerospace Act 1980 (c. 26), on 1 January the statutory corporation was transferred to a limited company, which then re-registered as a
public limited company (plc), under the name "British Aerospace Public Limited Company", on 2 January 1981. BAe was privatised in two main phases, the first in February 1981, involving 51.6% shares of the company, during which the public sale was 3.5 times subscribed and at the end of the first day's trading, share prices were 14% above the original offer price. The second phase occurred in May 1985, in which 48.4% shares were sold; this sale was 5.4 times subscribed and the first day closing price was 11% above the initial offer price.
Programmes Tornado IDS in flight, 2007 British Aerospace inherited a number of live development programmes from its predecessors. Scottish Aviation was working on a project for a 19-seat turboprop airliner, an upgraded version of the
Handley Page Jetstream. BAe placed the
Jetstream 31 into production after the first flight of the prototype in March 1980. At the same time, production of Hawker Siddeley's
HS 125 business jet,
Harrier VTOL jet fighter and
HS 748 turboprop airliner continued under BAe, as did that of the
Trident jet airliner for a short time. Similarly, low-rate production of the
BAC One-Eleven jet airliner, the
Strikemaster two-seat military jet trainer/attack aircraft, and the iconic
Concorde supersonic airliner also continued. On 29 July 1976, less than a year prior to BAe's formation, the contract for production of the first batch of the
Panavia Tornado, an advanced
nuclear-capable fighter bomber, was signed. It was developed and produced via a multinational company,
Panavia Aircraft GmbH, of which BAe was one of several companies to be heavily involved. On 10 July 1979, the
maiden flight of a production Tornado occurred. On 5 and 6 June 1979, the first aircraft were delivered to the RAF and
German Air Force respectively. On 25 September 1981, the first Italian Tornado was delivered. The Tornado would be produced in large numbers, the 500th aircraft to be completed was delivered to
West Germany on 19 December 1987. Production of the Tornado ended in 1998, the final batch being delivered to the
Royal Saudi Air Force, that had ordered a total of 96 IDS Tornados. Aviation author Jon Lake noted that "The Trinational Panavia Consortium produced just short of 1,000 Tornados, making it one of the most successful postwar bomber programs". In 1978, BAe relaunched the
BAe 146, a
short-haul regional airliner that had been previously worked on by Hawker Siddeley. The company marketed it as a quiet and economic
turbofan-powered compact airliner that could replace the previous generation of
turboprop-powered feeder aircraft. In 1982, the first completed aircraft made its first flight. Upon its launch into service the following year, it was hailed as being "the world's quietest jetliner". In 1993, an upgraded model of the BAe 146, referred to as the
Avro RJ series, superseded the original; changes included the replacement of the original Lycoming
ALF 502 turbofan engines by higher-thrust
LF 507 turbofan engines, which were housed in redesigned
nacelles. The Avro RJ series also featured a modernised cockpit with
EFIS replacing the analogue ADI, HSI, and engine instrumentation. Production of the Avro RJ ended with the final four aircraft being delivered in late 2003; a total of 173 Avro RJ aircraft was delivered between 1993 and 2003. Sea Harrier FRS1 from HMS
Illustrious in post-Falklands War low-visibility paint scheme|alt=Grey jet aircraft with black radome and large engine inlet hovering with undercarriage extended. It is obscuring another identical jet in the distance. Near the bottom of the photograph, taken out at sea, is the horizon BAe developed several advanced models of the
Harrier family. In 1978, the
Royal Navy received the first
BAe Sea Harrier of an initial order for 24. The Sea Harrier was declared operational three years later, being initially embarked on both the first
Invincible class aircraft carrier
HMS Invincible, and the older
HMS Hermes. Following their decisive role in the 1982
Falklands War, several of the lessons learnt from the conflict shaped a new upgrade programme for the fleet authorised in 1984, resulting in the
Sea Harrier FRS.2 (later known as
FA2). The first flight of the prototype took place in September 1988 and a contract was signed for 29 upgraded aircraft in December of that year. The Sea Harrier FA2 was fitted with the
Blue Vixen radar, which was described as one of the most advanced
pulse doppler radar systems in the world. In August 1981, BAe and the American aircraft manufacturer
McDonnell Douglas signed a
memorandum of understanding regarding the
McDonnell Douglas AV-8B Harrier II. Under this agreement, BAe was effectively a
subcontractor rather than a full partner, receiving 40 per cent of the airframe's work-share in terms of man-hours. The variant procured for the RAF, which was known as the
BAe Harrier II, featured many differences, including avionics fit, armaments and equipment; the wing of the GR5 featured a stainless steel leading edge, giving it different flex characteristics from the AV-8B. In December 1989, the first RAF squadron to be equipped with the Harrier II was declared operational. In 1979, BAe officially joined the multinational aircraft manufacturer
Airbus and acquired a 20% share in the venture, the move effectively reversed a decision made ten years prior in which the UK government had withdrawn its support for the Airbus consortium. Airbus' first aircraft, the
A300, had been received with little initial demand, but orders for the airliner had picked up in the late 1970s. By 1979, the consortium had 256 orders for A300, and Airbus had launched its second airliner, the
A310, less than 12 months prior to BAe formally joining the consortium. at the
Farnborough Air Show, 1986 During the 1983
Paris Air Show, the launch of the
Experimental Aircraft Programme (EAP) to develop and fly an advanced fighter technology demonstrator was announced; at this point, the effort was intended to be a partnership between Britain and several of its European neighbours, including West Germany and Italy. The resulting aircraft, the
British Aerospace EAP, ended up being primarily developed by BAe as a private venture; it formed the basis for the multinational
Eurofighter Typhoon. In 1986, in conjunction
Alenia Aeronautica,
CASA and
DASA, BAe formed
Eurofighter GmbH for the development and production of the Eurofighter. The multinational organisation's head office was established in
Hallbergmoos, Bavaria, Germany. The
maiden flight of the Eurofighter prototype took place in Bavaria on 27 March 1994, flown by DASA chief test pilot Peter Weger. On 30 January 1998, the first production contract for the Eurofighter was signed between Eurofighter GmbH, engine manufacturer
Eurojet and the
NATO Eurofighter and Tornado Management Agency, the organisation set up to manage the procurement of the aircraft. On 26 September 1985, the UK and Saudi Arabian governments signed the
Al-Yamamah arms deal with BAe as prime contractor. The contracts, extended in the 1990s and never fully detailed, involved the supply of
Panavia Tornado strike and air defence aircraft,
BAe Hawk trainer jets,
Rapier missile systems, infrastructure works and naval vessels. The Al Yamamah deals are valued at anything up to £20 billion and still continue to provide a large percentage of BAE Systems' profits.
Acquisitions and restructuring BAe acquired
Royal Ordnance, the British armaments manufacturer, for £190 million on 22 April 1987. The German armaments specialist
Heckler & Koch was folded into this division after BAe acquired it four years later. In 1988, BAe purchased the
Rover Group from the British government of
Margaret Thatcher for £150 million. The sale was controversial due to opaque financial arrangements between the government and BAe; however the House of Commons
Trade and Industry Committee was said to believe that "in spite of a catalogue of complaints, the committee concludes that the sale to BAe may well have been the best solution for the government." In 1991, BAe acquired a 30% interest in
Hutchison Telecommunications through a
stock swap deal, where Hutchison was given a controlling stake of 65% in BAe's wholly owned subsidiary
Microtel Communications Ltd. In August 1991, BAe formed a naval systems joint venture,
BAeSEMA, with the
Sema Group. On 25 September 1991 BAe directors led by CEO
Richard Evans ousted the Chairman Professor Sir Roland Smith in a move described by
The Independent as "one of the most spectacular and brutal boardroom coups witnessed in many years." Evans described the troubles as a confluence of events: "our property company [Arlington Securities] was hit with a lousy market. Sales of the Rover Group sank by about a fifth and losses mounted. The government's defence spending volumes underwent a major review. Losses in our commercial aerospace division increased dramatically with the recession in the airline industry." In mid-1992, BAe wrote off £1 billion of assets, largely as part of
redundancies and restructuring of its regional aircraft division. This was the largest asset write-off in UK corporate history.
General Electric Company (GEC), later to sell its defence interests to BAe, came close to acquiring BAe at this time. BAe Corporate Jets and Arkansas Aerospace were sold to
Raytheon in 1993. In 1994, the Rover Group was sold to
BMW and
British Aerospace Space Systems was sold to
Matra Marconi Space. In 1998, BAe's shareholding of
Orange was reduced to 5%. The Orange shareholding was a legacy of the 30% stake in Hutchison Telecommunications (UK) Ltd. In 1994, BAeSEMA,
Siemens Plessey and
GEC-Marconi formed UKAMS Limited as part of the
Principal Anti-Air Missile System (PAAMS) consortium. UKAMS would become a wholly owned subsidiary of BAe Dynamics in 1998. In 1995,
Saab Military Aircraft and BAe signed an agreement for the joint development and marketing of the export version of the
JAS 39 Gripen. In 1996, BAe and
Matra Defense agreed to merge their missile businesses into a joint venture called
Matra BAe Dynamics. In 1997, BAe joined the
Lockheed Martin X-35 Joint Strike Fighter team. The following year, BAe acquired the UK operations of
Siemens Plessey Systems (SPS) from
Siemens, while DASA purchased SPS' German assets.
Transition to BAE Systems In the late 1990s, European defence consolidation became a prevailing practice; European governments wished to see the merger of their defence manufacturers into a single entity, a European Aerospace and Defence Company. This ambition led to numerous reports linking various European defence groups – mainly with each other but also with American defence contractors. In July 1998, merger discussions began between BAe and DASA. Terms for such a merger had been reportedly agreed between British Aerospace Chairman
Richard Evans and DASA CEO
Jürgen Schrempp in December 1998. However, when the British
General Electric Company (GEC) put its defence electronics business
Marconi Electronic Systems (MES) up for sale on 22 December 1998, BAe's management opted to abandon the DASA merger in favour of purchasing its British rival. During 2004, Evans stated that his fear was that an American defence contractor would acquire MES and challenge both British Aerospace and DASA. On 14 October 1999, DASA agreed to merge with Aérospatiale-Matra to create the
European Aeronautic Defence and Space Company (EADS). 10 July 2000 was "day one" for the new company, which became the world's second-largest aerospace company after
Boeing and the second-largest European
arms manufacturer after BAE Systems. The GEC merger to create a solely British company, compared to the prospective Anglo-German company that would have resulted from merging with DASA, was promoted as having superior prospects for further penetration of the lucrative defence market of the United States. The newly combined company, which was initially referred to as "New British Aerospace", was officially formed on 30 November 1999; it is named
BAE Systems. ==Products==