Lockheed Martin, Airbus Team Up to Supply a Tanker in Case the Air Force Needs One That Works

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Lockheed Martin Corp. (NYSE: LMT) and European aircraft maker Airbus announced Tuesday morning that the two companies have signed a memorandum of agreement to “explore opportunities” to meet “growing demand” from U.S. defense customers for aerial refueling. The new partners plan to offer the Airbus A330-based Multi Role Tanker Transport (A330 MRTT) as an alternative to the KC-46 from Boeing Co. (NYSE: BA).

In this morning’s press announcement, the two companies said their agreement is intended to “address any identified capacity shortfall and to meet requirements for the next generation of tankers capable of operating in the challenging environments of future battlespace.” That next generation may be a replacement for the current 59 U.S. Air Force KC-10 refueling tankers at some future unspecified date.

The immediate effect is to poke a finger in Boeing’s eye. The Chicago-based aircraft maker has had its struggles delivering the KC-46 on a contract to replace 179 KC-135 tankers, about half the existing fleet of 400 of the older tankers. According to The Wall Street Journal, the Pentagon indicated that it may be interested in more refueling capacity than the Boeing contract is set to deliver. Officials met with potential suppliers to discuss acquiring refueling capacity on a fee-for-service basis and that the military would need 7,000 hours of such services annually, according to a draft requirements document.

Lockheed’s board chair and chief executive, Marillyn Hewson, said:

Reliable and modernized aerial refueling is an essential capability for our customers to maintain their global reach and strategic advantage. By combining the innovation and expertise of Airbus and Lockheed Martin, we will be well-positioned to provide the United States Air Force with the advanced refueling solutions needed to meet 21st century security challenges.

Airbus CEO Tom Enders added:

The U.S. Air Force deserves the best aerial-refueling technology and performance available under the sun and this great industry team, Lockheed Martin and Airbus, will offer exactly that.

Take that Boeing!

Lockheed and Airbus assume that once Boeing delivers 179 new tankers, the remaining KC-135 fleet will be replaced along with the 59 larger KC-10s. That’s nearly 300 additional tankers, and while Boeing continues to have difficulties in delivering the KC-46 (none has been delivered yet), the new partners have a proven competitor in the A330 MRTT that sports an in-service fleet of 33 planes in eight countries and a backlog of 60 orders.

Boeing shares dropped nearly 5% on Tuesday in the Dow’s 799-point, 3.1%, dive. Shares closed at $342.50, in a 52-week range of $274.00 to $394.28.