By Idrees Ali and Mike Stone
WASHINGTON (Reuters) - Boeing Co (N:BA) was selected to build the U.S. Air Force's next training jet in a contract worth up to $9.2 billion over the life of the program, the Air Force said on Thursday.
Boeing teamed up with Sweden's Saab AB (ST:SAABb) to develop a new plane for the competition, beating out Lockheed Martin Corp (N:LMT) and Leonardo DRS (MI:LDOF).
The Air Force currently plans to purchase 351 of the jets and 46 simulators. Additional purchase options on the $9.2 billion contract, first reported by Reuters, could allow the Air Force to buy as many as 475 of the jets and 120 simulators.
The service expects the first jets to be delivered in 2023 with the program to reach full operation in 2034.
In its bid, Lockheed had offered a modified version of its T-50 training jet developed jointly with Korea Aerospace Industries Ltd (KS:047810) while Italy's Leonardo DRS had offered the T-100, a modified version of the Italian aerospace company's M-346.
Boeing shares edged higher after the news, to close up 0.6 percent at $367.38, while shares of Korea Aerospace fell more than 24 percent in Seoul. The company said its group lost because Boeing's bid was lower.
The Air Force wants to replace its aging fleet of T-38 planes, which are nearly 50 years old. Analysts have said it could eventually buy up to 600 planes.
General Arnold Bunch of the office of the assistant secretary of the Air Force for acquisition told reporters that "two-thirds of what we train for the fighters in the fourth and the fifth gen(eration) we actually can't do in the T-38."
Winning the contract is significant for Boeing, which reorganized its defense business more than a year ago in the hopes of a "franchise level" victory such as the trainer.
Landing big defense contracts had been difficult for Boeing, but Leanne Caret, chief executive of Boeing's Defense, Space & Security since February 2016, has helped the company win more contracts.
"Today's announcement is the culmination of years of unwavering focus by the Boeing and Saab team," Caret said in a statement. "We expect T-X to be a franchise program for much of this century."
The award from the Air Force comes after Boeing has had trouble delivering to the Air Force its new in-air refueling jet, the KC-46.
In a statement Saab said the award means Boeing can now begin placing orders with its suppliers, including Saab, but has not done so yet. Saab said that more than 90 percent of Boeing’s offering will be made in America, supporting more than 17,000 jobs in 34 states.