I am pleased to announce today that the Ministry of Defence has decided to proceed towards financial and contractual close of the Future Strategic Tanker Aircraft (FSTA) project PFI deal. The FSTA project is an innovative programme intended to provide future air-to-air refuelling and strategic air transport capability, through a service based contract funded under the private finance initiative. It will provide the Royal Air Force with a modern capability to replace our VC10 and TriStar aircraft.

In February 2005, the then Secretary of State for Defence announced that the Government intended to enter into preferred bidder negotiations with AirTanker Ltd. Extensive evaluation of the final bid has demonstrated that PFI offers a cost effective solution to this requirement and we are now proceeding towards financial and contractual close of the deal with AirTanker Ltd. We expect AirTanker Ltd. to now begin the fund raising process.

I should stress that FSTA remains a complex and challenging PFI programme. Contract signature is dependent upon the outcome of the PFI fund raising process. Nevertheless, I believe this announcement is good news for our armed forces, for the taxpayer, for AirTanker, and for UK industry.