By Louise Egan
OTTAWA Jan 3 Canada has reached an agreement
with United Technologies Corp's Sikorsky Aircraft unit
to reactivate a C$5 billion ($4.7 billion) deal to buy 28
helicopters that had been beset by delays and was almost
scrapped by Ottawa.
Canada signed a contract in 2004 for Sikorsky's Cyclone
helicopters to replace its ageing fleet of Sea Kings. But after
delays and complications, Ottawa announced last September that
it might scrap the deal and consider other options.
The Conservative government now says it has accepted the
recommendations of a third-party report for a different project
model and governance structure.
It reached an agreement with Sikorsky on Dec. 31, which will
form the basis for formal contract negotiations. Sikorsky also
agreed to pay Canada $88.6 million in liquidated damages for
"Under the new terms established in the Principles of
Agreement, Sikorsky has committed to deliver the needed
helicopter capability at no additional cost to Canada," Diane
Finley, Canada's minister of public works and government
services, said in a statement.
"In addition, the Government of Canada will only issue
further payment to Sikorsky upon capability delivery," she said.
Canada will see delivery of helicopters with enough
capability to allow the government to begin retiring its old
helicopters in 2015. Sikorsky will enhance those capabilities to
produce "fully capable" CH 148 Cyclone helicopters in 2018.
Byron Callan, analyst with Capital Alpha Securities, said
the deal was not material for a company the size of United
Technologies, but it would allow Sikorsky to move past an issue
that had been a source of concern.
"It's a Christmas present come late," Callan said. "It
allows them a clean slate to start the new year."
Sikorsky officials welcomed the deal.
"We are very pleased to have reached this agreement with the
Crown and look forward to a contract amendment while we continue
to move the program forward," said spokesman Paul Jackson.
Sikorsky has so far provided just a handful of Cyclones for
training purposes, and said last year that some of the delays
were caused by major modifications requested by Canada.
On Friday, the company apologized for the delays but said it
was confident the new plan would succeed.
"As the pre-eminent helicopter manufacturer in the world, we
regret that we have not executed this program to the
satisfaction of the Government of Canada and that no aircraft
were delivered in 2013," said Sikorsky President Mick Maurer.