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Navy awards $3.9 billion deal to Boeing

The Boeing Co. has won a $3.9 billion contract for a new U.S. Navy patrol plane, the Pentagon said Monday.
Seen in an artist renditon released by Boeing, the new plane, called a Multimission Maritime Aircraft, is a derivative of the next-generation 737-800 with increased gross weight capability. It replaces the Lockheed P-3 Orion, a design that has been in use since 1962.Boeing Co. via AP
/ Source: The Associated Press

The Boeing Co. has won a $3.9 billion contract for a new U.S. Navy patrol plane, the Pentagon said Monday.

The contract to develop and demonstrate the new plane could lead to Boeing building 109 of the aircraft, said John Lockard, senior vice president/general manager Boeing Naval Systems

“Obviously, this is a terrific day for us and our customer the U.S. Navy,” he said.

Boeing was in fierce competition with Lockheed Martin for the contract for the multimission marine planes, which will be used to hunt submarines, maritime patrol and other functions.

Boeing’s entry is based on converting its popular 737 commercial jet for military use.

Under the contract, Boeing and its subcontractors — engine-maker CFM International, Northrop Grumman Corp., Raytheon Co. and Smiths Aerospace — will produce seven test aircraft. Plans eventually call for the Navy to replace its aging fleet of 223 P-3 Orion aircraft with 109 of the new planes.

Aerospace analyst Paul Nisbet of JSA Research called it Boeing’s biggest contract victory this year, even though the planes will contribute only a small percentage to company revenues and estimates of Boeing’s earnings are unlikely to be altered. The contract should boost production of the 737 line by about 5 percent, he estimated.

“It’s a great win and it’ll go for many years, as long as those planes are alive, and that’s probably 40 years from now,” Nisbet said.

Lockheed Martin had based its proposal on an extensive upgrade of its propeller-driven P-3, long the Navy’s primary patrol plane.

The Navy’s decision comes as Boeing is waiting to hear whether it will be able to move forward with its deal to supply 100 airborne tankers to the U.S. Air Force, based on a conversion of its 767 passenger jet.

Taken together, the contracts could mean billions of dollars for Boeing, at a time when its commercial airplane division badly needs the business.

“I’m so proud that the Navy has decided that Boeing is the company to build this new plane, which is so vital to our long-term safety and security,” said Sen. Patty Murray, D-Wash.

Rep. Norm Dicks, D-Wash., said Boeing’s entry showed greater range and speed than the Lockheed Martin model.

Boeing shares rose 8 cents to close at $48.83 on the New York Stock Exchange before the contract news. They gained 90 cents, nearly 2 percent, in the extended session.

The U.S. Navy on Monday awarded Chicago-based Boeing Co. a multibillion dollar deal to design a replacement for the Navy’s fleet of submarine-hunting P-3 aircraft, congressional sources said.

These sources said No. 2 U.S. defense contractor Boeing beat out Bethesda, Maryland-based Lockheed Martin Corp. , maker of the current P-3 aircraft, to win the so-called Multi-mission Maritime Aircraft, or MMA. Many analysts had believed Lockheed would win.

Rep. Norm Dicks, a Washington Democrat whose district includes a large Boeing facility, lauded the decision and said the Boeing 737 offered the Navy greater capability, speed and the ability to stay on station longer.

He also lauded the deal as “a major breakthrough” for the use of commercial off-the-shelf technology for military procurement deals.

“It makes all kinds of sense in terms of saving development costs,” said Dicks.

Richard Aboulafia of the Virginia-based Teal Group said the Navy would also derive some cost benefits from opting for the Boeing 737 platform, given its extensive worldwide logistics and support base.

“The 737 has a huge worldwide support base that’s very attractive for a budget-conscious Navy,” he said.

Congressional sources and others familiar with the contract said the Navy planned to buy about 150 aircraft over the coming years. The Navy planned to pick the winner of the high-stakes competition last week, but delayed its announcement out of respect for events honoring the late President Ronald Reagan.