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Military

Raytheon to Join Bidding for Air Force Training Jet Contract

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By Paul Ausick Updated Published
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Raytheon to Join Bidding for Air Force Training Jet Contract

© courtesy of Finmeccanica/Alenia Aermacchi

Ever since General Dynamics Corp. (NYSE: GD) decided last March to drop its partnership with Italy’s Alenia Aermacchi to bid on the U.S. Air Force’s T-X training jet, the Italian company has been looking for a new partner. It appears that Raytheon Co. (NYSE: RTN) has stepped up.

A report in Defense News cites a source who said that Raytheon will announce on Monday, February 22, that it is joining Alenia in a bid for the training jet program. The first phase of the program is valued at about $8.4 billion. The Air Force is expected announce a contract award in 2017 to acquire 350 of the new planes to replace the decades-old T-38 fleet.

The Raytheon/Alenia bid is based on Alenia’s M-346 training jet, which the company has rebranded as the T-100. The Italian company needs a U.S.-based prime contractor, and Raytheon, which provides electronics and weapons to other manufacturers, needs a platform for its components.

Boeing Co. (NYSE: BA) and Saab have teamed on a clean-sheet design for the T-X. Other expected bidders on the Air Force trainer contract are a clean-sheet design from a team lead by Northrop Grumman Corp. (NYSE: NOC) and a proposal from Lockheed Martin Corp. (NYSE: LMT) in conjunction with Korean Aerospace, makers of the T-50 jet trainer, which would be modified to meet the Air Force’s requirements. Textron Airland may also be preparing a new design, but none has yet been announced.
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The T-X contract may be the last big military aircraft contract for several years. The Pentagon recently chopped five of Lockheed Martin’s F-35 fighters from the 2017 defense budget in an effort to manage the Air Force’s major modernization programs. Funding for major Air Force acquisitions is forecast to rise by 73% between fiscal year 2015 and fiscal year 2023 driven by the F-35, the new Long Range Strike-Bomber and the KC-46 tanker.

Raytheon stock closed up 0.7% on Wednesday, at $121.68 in a 52-week range of $95.32 to $129.99.

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About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.

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