The US Navy on Monday said it awarded Boeing Co a US$3.9 billion deal to design a replacement for the submarine-hunting P-3 aircraft, bypassing Lockheed Martin Corp, which built the current fleet of aging P-3s.
Chicago-based Boeing, the No.2 US defense contractor, snared the Multi-mission Maritime Aircraft, or MMA, contract from Lockheed, which many analysts had expected to win the deal for 150 replacement aircraft.
Full production and likely foreign orders could boost the value of the MMA program to more than US$20 billion, industry analysts have said.
Boeing shares rose 2.8 percent after the announcement late Monday afternoon, while Lock-heed shares fell 2 percent.
Navy acquisitions chief John Young said the MMA would transform how the Navy carried out maritime reconnaissance and surveillance missions, ensuring a sustained forward presence, sea domination and network intelligence capability.
Boeing will supply modified versions of its 737-800 passenger jet outfitted with advanced computers and other electronic gear from Raytheon Co, Northrop Grumman Corp and the UK's Smiths Group.
CFM International, a joint venture of General Electric Co and France's state-owned Snecma, supplies engines for all 737s.
Representative 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 called the deal "a major breakthrough" for use of commercial off-the-shelf technology for military procurement deals.
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.
Congressional sources and others familiar with the contract said the Navy planned to buy about 150 aircraft over the coming years.
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