Boeing's Da Bomb

Chairman of the Joint Chiefs of Staff Admiral Michael Mullen tells us that Lockheed Martin's (NYSE: LMT  ) F-35 fighter jet will probably be the last manned fighter jet the U.S. ever builds … but he didn't say anything about the bombers … and that's great news for Boeing (NYSE: BA  ) .

Last week, we discussed Boeing's just-in-time landing of a $5.3 billion order for F-18 fighter jets -- big news at the time, but a contract that pales next to the monster deal Boeing just inked to upgrade the Air Force's fleet of B-52 bombers. Spread over an eight-year timespan, the $11.9 billion deal would will account for just 2.3% of Boeing's annual revenue stream -- about $1.5 billion per year. But you know what they say: A billion-and-a-half here, a billion-and-a-half there…)

More significant than the contract win per se is what it bodes for future defense work at Boeing, and elsewhere. As you may recall, the Air Force has been pondering the fate of the strategic bomber program for some months now. Both Boeing and Lockheed both want to build a successor to the B-2 stealth bomber, currently Northrop Grumman's (NYSE: NOC  ) baby. There's also talk of an FB-22 Strike Raptor (probably dead, now that the base F-22 Raptor has been canceled), and an even more futuristic "2037 Bomber."

And of course, Pentagon halls are still buzzing over the Center for Strategic and Budgetary Assessments' suggestion last year that if we could get ourselves one really good long-range bomber, supplemented with a few bargain-priced UAVs from Textron (NYSE: TXT  ) or Honeywell (NYSE: HON  ) , Boeing or General Atomics, we might not need to buy quite so many obsolete manned fighter jets in the first place. Then again, if the Pentagon is thinking a mere update of the B-52 is all it needs, all these other theories could go out the window -- and with them, a potential $15+ billion in revenues needed to develop a new strategic bomber.

Hmm. With that prospect in mind, I'm not sure Boeing's $11.9 billion B-52 deal is such good news after all.

The softer side of Boeing
In less militaristic Boeing news, Boeing announced yesterday that it's finalized terms of a 60-jet sale to the recently established "Air Lease Corporation," a creation of AIG (NYSE: AIG  ) ILFC alum Steven Udvar-Hazy. ALC will purchase 54 Next-Gen Boeing 737-800s straight up, and take an option on an additional half-dozen planes. Total value at list price: Nearly $4.9 billion.

A billion-and-a-half here, four-point-nine bills there -- now we're talking real money.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.


Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1322619, ~/Articles/ArticleHandler.aspx, 9/23/2014 8:49:50 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement