India's decision to terminate a contract to buy 12 helicopters from AgustaWestland has rekindled hopes among rival helo-makers, but the Anglo-Italian company is still looking for business in the country, despite the stain of a bribery scandal.

India made its largest defense contract cancellation, terminating on Jan. 1 its $770 million contract for the purchase of the AW101 helicopters. It did so on grounds of breach of the pre-contract integrity pact, amid allegations that Finmeccanica-owned AgustaWestland had paid bribes to win the deal. The scandal's reverberations continue and have been felt as far off as Norway, the latest AW101 buyer, which could fine the company if the allegations hold up in court.

Still, Finmeccanica executives can perhaps breathe a sigh of relief knowing that India has stopped short of blacklisting their company. The move allows it to remain in the race for key military programs.

“We don't want the termination of the AW101 deal to impede other defense contracts which are either being executed by Finmeccanica or for which the company or its subsidiaries would be bidding,” says an Indian defense official.

The decision to maintain ties with the Italian defense conglomerate has financial impact. Finmeccanica is pursuing bids in key Indian procurement programs that together are worth around 600 billion rupees ($9.6 billion).

One major deal includes a 100 billion rupee contract to supply 56 Naval Utility Helicopters (NUH) and 14 twin-engine helicopters to the Indian coast guard. AgustaWestland is bidding its AW109 for the NUH, while ATR, a 50% joint-venture company with Finmeccanica, is offering the ATR 72 MP for a medium-range maritime reconnaissance aircraft competition.

India is also close to assigning a contract for a navy program worth 35 billion rupees for 16 multirole helicopters. One of the finalists is the NH90, developed by AgustaWestland with Eurocopter and Fokker. AgustaWestland is responsible for the overall integration of the NH90 naval mission system for all NFH variants. In addition, Finmeccanica owns 25% of the missile systems company MBDA, which is likely to supply the Meteor air-to-air missile to India as a weapon for its planned fleet of 126 Rafale fighters. MBDA also provides weapons for the country's upgraded Mirage fleet.

Indian defense authorities say the AgustaWestland bribery scandal does not cast a shadow on the purchases for the navy of Black Shark torpedoes and RAN-40L 3D air-surveillance radars from Finmeccanica's Whitehead Sistemi Subacquei (WASS) and Selex ES, respectively. India's indigenous aircraft carrier, under construction at Cochin Shipyard, will be equipped with the radars.

“Since the country is in on a major force modernization and weaponization drive, [blacklisting an] international firm may jeopardize attempts to jointly produce armaments,” says a defense ministry official.

In the past, India's company blacklisting adversely affected several weapons projects, including an artillery purchase program and a deal to address shortages in ammunition. Manufacturers blacklisted include Denel of South Africa, Singapore Technologies, Israel Military Industries and Rheinmetall Air Defense.

India's investigation bureau has not filed charges in connection with the Finmeccanica contract cancellation. The Indian government halted the contract last February after Giuseppe Orsi, then-CEO of Finmeccanica, was arrested in Italy and charged with paying bribes to secure the Indian deal while he was CEO of AgustaWestland.

Norway has included clauses in the contract for 16 AW101s—to meet its All-Weather Search and Rescue Helicopter (Nawsarh) requirement—that will give it the right to cancel the deal or impose a one-off penalty on the helicopter manufacturer if Orsi or his former deputy and successor as AgustaWestland CEO, Bruno Spagnolini, are found guilty in the corruption trials, which are expected to soon restart in Italy. The size and upper limit of the fine has been redacted from the copy of the clauses sent to Aviation Week.

As part of the contract, AgustaWestland signed a deal in mid-December with Norwegian Veritas Italia (DNV GL), a testing and inspection services company that will review procedures, control mechanisms and regulations throughout AgustaWestland.

Norway's selection of the AW101 was a huge boost for AgustaWestland's production line at Yeovil, England, which is building a handful of the helicopters each year. Oslo selected the AW101 against Eurocopter's EC725, finalizing the deal, which includes options for another six helos, on Dec. 19. The AW101s, the first of which is scheduled to enter service in 2017, will enable Norway to retire its aging Westland Sea King by the end of 2020.

Finmeccanica, meanwhile, has denied any wrongdoing and welcomed the Indian government's decision to take part in an arbitration process. Investigations by both Italian and Indian authorities are continuing. Both sides have named their arbitrators, and the process is expected to commence soon. The supply of spare parts for the three AW101 helicopters that have already been delivered will be one of the key issues.

However, Finmeccanica says “it still finds that neither the termination notice by the defense ministry nor the show-cause notice, from which this termination notice stems, offers adequate basis to take any action against the company.”

A company spokesman says AgustaWestland is committed to working with the Indian government to “resolve the issues and allow the Indian armed forces to receive the equipment they need and is ready to perform the remaining obligations under the agreement for the supply of the 12 VVIP/VIP helicopters. AgustaWestland will continue to support the three helicopters already delivered to and currently operated by the Indian air force.”

Finmeccanica says it has introduced stringent ethical procedures for its subsidiaries, the spokesman says. To mitigate risks, AgustaWestland is planning workforce reductions, though these would have only a minor impact on the Yeovil facility, according to company officials.

AgustaWestland's former rival in the Indian competition, Sikorsky, is prepared with an alternative, its upgraded platform of VIP helicopters. “If we are called upon as a sequel to the process, we will be more than willing to come forward and address the requirements,” says Arvind Jeet Singh Walia, Sikorsky's regional executive for India and South Asia.

Sikorsky offered its S-92 Super Hawk, which failed to meet key requirements during the February 2008 user trials.

India may even consider going back to Russia to acquire a new VVIP/VIP fleet to replace its aging Mil Mi-8 helicopters, defense officials say. However, a new competition may not materialize; at this point, it would be considered a follow-on order to India's already-booked 139 Mi-17 V5s.