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The successful ability to conduct underwater transportation using multiple autonomous underwater vehicles (AUVs) is important for the commercial sector to undertake precise underwater installations on large modules, whilst for the military sector it has the added advantage of improved secrecy for clandestine operations. The technical requirements are the stability of the payload and internal collision avoidance while keeping track of the desired trajectory considering the underwater effects. Here, a leader-follower formation control strategy was developed and implemented on the transportation system of AUVs. PID controllers were used for the vehicles and a linear feedback controller for maintaining the formation. A Kalman Filter (KF) was designed to estimate the full state of the leader under disturbance, noise and limited sensor readings. The results demonstrate that though the technical requirements are met, the thrust oscillations under disturbance and noise produce the undesired heading angles.