Boeing Wins! Navy Will Buy Its Advanced Super Hornet
Boeing (NYSE:BA) has been
lobbying the U.S. government to fill
a "fighter gap" in naval aviation -- the difference between the number of
fighter jets needed to fully equip all of the country's aircraft carriers and
the number of operational warplanes it actually has. This fighter gap has been growing for years, and been
exacerbated by delays in production of new "carrier-variant" F-35C stealth
fighter jets from Lockheed Martin (NYSE:LMT).
But the fighter gap should soon begin closing.
We know this because, just last month, Aviation
Week reported that the Navy has green-lighted a plan floated by
Boeing to shore up the Navy's fighter fleet with new "Advanced Super Hornet"
fighter jets.
Also known as the "F/A-18XT" and "Block 3 Super Hornet," Boeing's
Advanced Super Hornet is an upgrade of the company's current F/A-18E/F fighter
jets. Among other improvements, the new design features "advanced network
architecture" and "advanced cockpit displays" on the inside, and conformal fuel
tanks -- adding 100 to 120 nautical miles to the plane's range, and providing a
stealthier radar profile -- on the outside. The new design is not
as stealthy as a Lockheed Martin F-35C. But at a
mooted price of $79 million, the Advanced Super Hornet is also a heckuvalot
cheaper than the $122 million price
tag that Lockheed hangs on an F-35C.
Citing a "detailed blueprint" obtained from the U.S. Navy,
Aviation Week reports that the Navy is planning to
invest roughly $265 million upgrading F/A-18s to Boeing's new design between
2019 and 2022. And this could be only a down payment on further spending.
AW's read is that the Navy's decision means that
"Boeing's Super Hornet line has a future beyond the 2020s."
Boeing expects to have the Advanced Super Hornet design ready for
action by 2019 (perhaps not coincidentally, the same year in which Boeing's
archrival Lockheed Martin hopes to achieve initial operational capability for
the F-35C). Logically, this means that by 2019, the Navy will be able to make
informed choices between buying pricier fifth-generation F-35Cs or buying
cheaper F/A-18s equipped with Boeing's new upgrades. It also opens the
possibility to the Navy ordering upgrades on its
existing F/A-18 fleet, which currently number 545
aircraft (and only two F-35Cs), according to data from
FlightGlobal.
Even if it costs no more than the $9 million price differential
between a current model F/A-18 and an Advanced Super Hornet to upgrade the
former into the latter, that's a $4.9 billion revenue opportunity for
Boeing.
The upshot for investors: The Navy is funding upgraded F/A-18s to the
tune of only $265 million today, which probably doesn't sound like a lot
relative to Boeing's $93 billion annual revenue stream. If the Navy likes what
it sees once those upgrades start rolling out, though, this could turn into a
really big deal for Boeing.
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