LONDON (AFP) - France is close to signing a contract worth RM4.1 billion to supply Malaysia with three diesel-electric submarines, according to Jane's Defence Weekly .

But the latest edition of the specialist magazine said the deal has been held up by a demand from air transportation firm Malaysian Airline System (MAS) to increase its flights between France and Malaysia from three to seven a week.

"It would appear that Kuala Lumpur considers traffic rights for MAS part of the offset package in the naval transaction," a source at French warship builder Direction des Constructions Navales (DCN) told the magazine.

"We had been hoping the contract would be finalised by the end of December at the latest."

Breakthrough

Jane's Defence Weekly said DCN was ready to supply the Royal Malaysian Navy with with two new-generation Scorpene submarines which would be built together with Spanish shipmaker Izar.

DCN was also to deliver the 'Ouessant', a refurbished Agosta-class submarine, which France recently withdrew from active service. It would serve as a training vessel for Malaysian submariners and would be based in Toulon in the south of France.

The contract would represent a breakthrough for France in a Malaysian market dominated up to now by German and British suppliers, according to Jane's .