THE RAF may become an unwitting victim of the credit crunch, with the lending crisis threatening to increase the cost of a £13 billion scheme to provide a vital new fleet of tanker aircraft.

The scheme’s backer, Airtanker, a consortium led by Airbus’s parent company, EADS, is trying to raise £2.5 billion in the City for a fleet of new Airbus tanker aircraft supplied to the RAF by the private sector. But the cost of a fund-raising has ballooned because of the credit crunch, and the companies involved are said to be considering a bond issue instead – even though bond markets have been in limbo since July.

Details of the financing were revealed last week by Thomson’s Project Finance International, a financial publication. It said the programme, called Future Strategic Tanker Aircraft (FSTA) “hangs in the balance”. Its report said that a plan for a group of banks to provide the loans came unstuck when they raised the price because of the credit crunch.

The government had expected the loans to cost 50 basis points (half of 1%) over Bank rate, but the banks wanted a full 1%, with an option to increase the interest if market conditions changed.

Project Finance International said the banks involved included RBS, Bank of Scotland, Société Générale, BBVA, Calyon and BNP Paribas.

It is thought the FSTA team may now consider, at least in part, a bond issue to fund the project. It had earlier decided against using bond markets because of fears over the uncertainty of pricing.

The EADS-led consortium includes VT, Rolls-Royce, Cobham and Thales, and plans to provide a fleet of Airbus A330 tankers to replace the RAF’s old tanker fleet. It was selected as preferred bidder in February 2005.

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