The Australian Air Force will buy eight P-8A Poseidon spy planes from Boeing Co. (NYSE: BA) for $3.6 billion. The U.S. Navy already plans to purchase 117 of the planes, which are designed to be used for long-range anti-submarine warfare, anti-surface warfare, intelligence, surveillance and reconnaissance.
The Australian planes will be delivered to the Royal Australian Air Force in 2017 and all are scheduled to be fully functional by 2021. Australia also has an option for four additional planes.
The growth of the Chinese navy has been accompanied by the rising tension over control of the sea lanes from the Sea of Japan to the Indian Ocean. More than 80% of China’s crude oil supply arrives by way of the Indian Ocean, traveling near the west coast of Australia. China held a military exercise in the eastern Indian Ocean earlier this month, according to Reuters, which many believe is a signal that China plans to protect its interests in the Indian Ocean sea lanes.
While the order may be a boon for Australia, it is just as meaningful for Boeing, which has had trouble selling military aircraft since the U.S. defense budgets have been cut. The company is also selling 12 planes that are a variant of the Poseidon to India.
In addition, Australia is expected to acquire a fleet of maritime surveillance drones from Northrop Grumman Corp. (NYSE: NOC) as the planes enter service in 2017. The U.S. Navy has plans to acquire 68 of the drones, according to Reuters.
Boeing’s stock was trading down about 0.4% in premarket trading Friday, at $129.00 in a 52-week range of $75.03 to $144.57.