The Boeing Co. (NYSE:BA) received a $150-million contract to provide engineering support services for multiple Commercial Derivative Aircraft (CDA) platforms.
Details of the Deal
The contract was awarded by the Air Force Life Cycle Management Center, Tinker Air Force Base, Oklahoma. Work related to the deal will be majorly carried out in Oklahoma City, OK; San Antonio, TX and other locations across the United States. Work under the contract is scheduled to be over by Jan 31, 2019.
A Brief Note on CDA Platform
A commercial derivative aircraft began operations as a commercial aircraft but was later transformed into military aircraft. The U.S. Military and Defense forces are currently using Boeing’s P-8A and P-8I, both of which were launched as a Next Generation 737-800. Other derivatives like the Airborne Early Warning & Control, Airborne Warning and Control System and KC-46 tanker started operations as 707s, 737s or 767s.
Our View
Boeing’s third-quarter backlog stood at $46 billion, with international customers accounting for 35%. This included 36 F-15 fighter aircraft for Qatar, 28 F-18 fighter aircraft for Kuwait, up to 40 Chinook helicopters for Saudi Arabia and the C-17 military transport aircraft for India.
This shows the solid demand that Boeing’s products enjoy in the overseas. In particular, products like rotorcraft, commercial derivatives, fighters and satellites have been witnessing solid traction in the international market. As developing countries like Japan and India are expanding their defense budget, in line with developed countries, we expect Boeing to win more FMS contracts like the latest one.
In line with this, during the fourth quarter, Boeing’s Defense business secured a foreign military sales contract worth $6.2 billion from the Qatar Emiri Air Force. The company also clinched a $279-million deal for delivering the first KC-46 tanker and logistics support to the Japan Air Self-Defense Force.
During the third-quarter earnings call, Boeing raised its 2017 sales outlook citing higher sales volume as the primary reason. Considering the rise in international demand as indiacted by rising contract wins for its defense offerings, we expect Boeing to see impressive sales growth in the days ahead.
The company poses stiff competition to peers like Lockheed Martin Corp. (NYSE:LMT) , General Dynamics Corp. (NYSE:GD) and Airbus Group (OTC:EADSY) .
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