Firms argue over who's more British

THE battle between European aerospace giants to land the Government's biggest-ever Private Finance Initiative (PFI) project has descended into a bizarre 'flag-wrapping' row over which bid has the best British credentials.

Officials at the Defence Procurement Agency, the Ministry of Defence (MoD) and the Treasury face intensive lobbying from the two consortia short-listed for the £13bn PFI contract to run the RAF's air-to-air refuelling for the next 27 years.

The bidding war has pitched Tanker Team, made up of BAE Systems, its US ally Boeing and PFI specialist Serco, against Air Tanker, a consortium of continental defence groups - Eads ( Airbus owner European Aeronautic Defence and Space Company) and Thales - and British aerospace companies Rolls-Royce and Cobham.

Both make claims which one official said amount to 'wrapping themselves in the Union flag'.

Tanker Team argues that, with British companies BAE and Serco controlling 62% of its shares, it is the British-led consortium. Its plan to convert 20 BA Boeing 767s to replace the RAF's ageing tanker fleet of VC10s and Tristars, it says, will provide jobs for UK workers, including its key subcontractor, Marshall Aerospace.

Air Tanker counters that its Rolls-Royce and Cobham partners own 50% of the consortium. It says its plans to build Airbus A330s for its alternative tanker fleet will provide work for Airbus employees at Broughton in North Wales.

The flak is flying. Sources question whether Air Tanker will in fact use new aircraft or instead rely on converting A330s.

Meanwhile, there are counterclaims that BAE's presence in the Tanker Team pitch is causing problems because of a string of run-ins with the MoD.

It is also argued that BAE is likely to fall sooner, rather than later, into the hands of a US rival.

The Future Strategic Tanker Aircraft contract is hotly contested-because the winner will be well placed to win future PFI work from the MoD - and be in prime position to win the contract to run the 500-strong US Air Force tanker fleet.

Air Tanker's chief executive Robin Southwell said: 'This is about breaking Boeing's global monopoly in air-tankering. This is about upgrading what the RAF wants and making Britain, and not the US, the centre of airtankering.'

Tanker Team's managing director Keith Archer-Jones countered: 'We believe we are the lowestrisk, best value-for-money option with the most in-depth understanding of the project.'