Boeing Wins Deal To Build Helicopters, Beating Lockheed
Friday, November 10, 2006
Boeing Co. won a coveted contract yesterday for 141 Air Force search-and-rescue helicopters, a program that could be worth as much as $15 billion, besting rivals Lockheed Martin Corp. and Sikorsky Aircraft Corp.
The helicopters will replace the Air Force's fleet of HH-60 Pave Hawks, which have been used extensively in Iraq and Afghanistan.
The Air Force said it went with the low-risk option, choosing Chicago-based Boeing's adaptation of the CH-47 Chinook, which the military has used for more than 50 years. The decision followed a strategy adopted by the government for at least two other high-profile programs in recent months -- a NASA space-vehicle program and a border-security initiative.
"We are not trying to go put the most elegant grand solution" together, Sue C. Payton, the assistant Air Force secretary for acquisition, said at a briefing. "We are going out with what we can do that will vastly improve what we have today in HH-60 helicopters."
It was a disappointing loss for Bethesda-based Lockheed, which was betting that its surprise win last year over Sikorsky to provide the Marine One helicopters used to ferry the president would give it an edge. Most analysts expected the Air Force competition to be a rematch of that battle. Instead, Boeing, which didn't compete last year, trumped both Lockheed and Sikorsky.
The loss also was a setback to Lockheed's plans to expand into new areas of business as defense budgets become tighter. The company is best known for building fighter jets, missiles and satellites, but teamed with a helicopter maker -- AgustaWestland Inc., a unit of the Italian defense firm Finmeccanica SpA -- hoping to move into new terrain and grab a bigger part of the Pentagon's budget.
During the Marine One competition, critics complained about Lockheed's use of foreign partners, saying that the president should be flown only in an American aircraft. For that competition, Sikorsky dumped some foreign contractors, including companies from Taiwan and Japan, to boost its entry's American content.
Lockheed expressed disappointment with the Air Force's decision in a statement yesterday, as did Sikorsky.
"We thought we had a very strong proposal," Sikorsky spokesman Ed Steadham said.
The initial contract is worth $712 million, but the program's budget is to grow as Boeing begins building the aircraft. The new helicopters will be able to conduct longer missions, hold more people and go faster than those in the current fleet, Air Force officials said. Boeing has also trumpeted the new craft's ability to fly higher and withstand hotter temperatures.
The Air Force said Boeing's helicopters would be ready months before those from its competitors would have been.
The "award is a vote of confidence by the Air Force in the ability of Boeing to provide them the rotorcraft they need for this very important mission," James F. Albaugh, president and chief executive of Boeing's defense division, said in a written statement.
The deciding factor may have been Boeing's experience, Byron Callan, industry analyst for Prudential Equity Group LLC, said in a research note. "The award decision reflects a more conservative risk-avoidance strategy on this particular program," he wrote. Lockheed's and Sikorsky's aircraft had merit "but neither is in current operating service with the U.S. military, whereas the DoD has an extensive inventory and operating experience with the CH-47."