LONDON/DUBAI, Nov 18 (Reuters) - Britain's biggest

defence company BAE Systems is teaming up with Boeing ( BA )

and Saab to develop a replacement for the

country's Hawk aircraft, as the country looks for a new fleet of

military training jets.

Confirming a Reuters exclusive from July, BAE said on

Tuesday the three companies had signed a letter of intent to

collaborate, and would base their design on the T-7, which

Boeing ( BA ) and Saab have jointly developed for the U.S. Air Force.

Britain said in June it needed to replace its

out-of-production Hawk fleet, part of which is recognisable

through its Red Arrows display team, and said then it would

welcome interest from UK-based suppliers.

The government is expected to launch a competitive process

for a new trainer jet shortly.

"Our new collaboration with Boeing ( BA ) and Saab will enable us

to present a compelling offer to the UK Royal Air Force and our

global customers," said BAE Systems' Air sector managing

director Simon Barnes, highlighting that a future product could

also appeal to BAE customers like Saudi Arabia and Oman.

The three companies' collaboration includes work on a

training system, integration of live and synthetic training

capability and associated mission systems, BAE said.

GROWING DEMAND FOR TRAINER JETS

The market for military trainer aircraft is forecast to rise

to $3.7 billion by 2030 from $2.8 billion, excluding spending on

support and training services, according to U.S.-based

consultancy AeroDynamic Advisory.

Key suppliers include the T-7, Leonardo's

Aermacchi M-346 and the Korea Aerospace Industries T-50 Golden

Eagle.

BAE could face competition from Aeralis, a privately owned

early-stage British company which has designed a modular jet

trainer, for the Hawk replacement.

Under its plan, BAE said final assembly of the jet would be

completed in Britain.

The Hawk trainer was developed by BAE's corporate

predecessor in the early 1970s. The Hawk T2 jets currently

flying are set to be retired in the next decade.

Boeing's ( BA ) CEO of Defense, Space & Security, Steve Parker, had

hinted on Sunday that a partnership deal for an international

version of its T-7 trainer was imminent.

It marks a change in the way Boeing ( BA ) and some defence

companies typically approach such competitions, after

traditionally insisting on taking the lead rather than working

alongside a local prime contractor.

"That is no longer the case," Bernd Peters, business

development for Boeing Defense, Space & Security, told Reuters

at the Dubai Airshow, noting that BAE would lead the project.

"That is a different way of thinking but also a

recognition that as defence budgets around the world increase,

we...have to be innovative in our approach to capturing that

share."

EYE ON EXPORTS

The choice of trainer also has potential implications in

the bigger global market for fighter jets.

Although BAE no longer produces Hawks, the partnership

could leverage BAE's incumbency, with more than 1,000 jets sold

to 18 nations.

"The focus for this particular partnership is the UK but

there is a broader global Hawk fleet and certainly that has

potential to open doors down the road," Peters said.

By offering a sophisticated all-new trainer, experts

also say some training that would otherwise have to be carried

out in the cockpit of warplanes would be transferred to the

smaller jet, saving costly flying hours on aircraft like the

F-35.