"Imagine an unstoppable commercial Learjet with a full-automatic cannon in its nose and an iron bathtub surrounding the cockpit. That gives you some idea of the A-10's appearance and performance."
-- Mother Jones
Built by Fairchild Republic, maintained by Northrop Grumman (NOC -1.40%), and currently getting new wings courtesy of Boeing (BA 1.29%), the U.S. Air Force A-10 Thunderbolt II aircraft (nicknamed the Warthog) has been called the best close-air-support plane ever designed. It costs less to fly than the Lockheed Martin (LMT -2.00%) F-35 stealth fighter, carries more ammo than Lockheed's F-16 -- and carries a bigger gun to boot.
Yet for the better part of a decade, the Air Force has been trying to kill it -- to retire all its A-10s and replace them with F-35s instead.
The A-10 evades flak from Air Force budget-cutters
When last we heard, then-Secretary of Defense Ashton Carter had made what sounded like a final decision on the A-10's fate: to begin retiring A-10s in batches, and ultimately to retire the aircraft entirely in 2022. And yet, for the last three years running, FlightGlobal's reports on the U.S. Air Force arsenal have contained good news for fans of the Warthog: The number of A-10s has more or less held steady at about 290 planes in service.
This month, the news got even better. The A-10 could very well keep flying -- not just through 2022, but for decades to come!
This happy news is contained in a line item from the Senate Armed Services Committee's recent Fiscal Year 2020 National Defense Authorization Act (the 2020 NDAA). As explained in the "highlights" section of the act, Congress has elected to "maintain air superiority" by "encouraging the ongoing modernization of the A-10 fleet through fiscal year 2030 to continue providing unmatched air power."
What it means to investors
Fans of the A-10 Warthog, who include Republicans Johnny Isakson and Martha McSally in the U.S. Senate (McSally used to fly the A-10), will certainly be pleased by this development. Investors should be pleased by the language of the 2020 NDAA as well.
In calling for modernization of the A-10 fleet to extend through 2030, the Senate appears to be insisting that the plane be kept in service not only up until that date, but presumably for some years, or even decades, thereafter. (It would make little sense to keep modernizing a plane up to 2030, then junk it in 2031.) This implies that Northrop Grumman, which has taken the lead in maintaining the A-10 since way back in 1987, can expect to continue performing this work for at least another decade or more.
The specific reference to modernization is also good news for Boeing, which holds a $2 billion contract to "re-wing" the A-10 fleet -- an integral part of the modernization effort, as aging A-10s will certainly need new wings.
Lockheed Martin: Crying all the way to the bank
But what about Lockheed Martin, maker of the F-35 and presumed beneficiary of the $337 million in funds that would be freed up by the Air Force's plan to retire the A-10? (Those funds were presumably being earmarked for the purchase of additional F-35s.)
Lockheed, too, has little to complain about in this development. For one thing, alongside Northrop, it has a role as one half of the Pentagon's A-10 Prime Team that keeps the A-10s operational, so Lockheed will continue to share in that revenue stream. And for another, the 2020 NDAA authorizes the spending of $10 billion to buy 94 new F-35s for the Air Force, Navy, and Marine Corps -- 16 more planes than the Pentagon itself had asked for, worth well over $1 billion in additional revenue.
Even if it were inclined to do so, Lockheed can hardly complain about not getting a few hundred million in A-10 funds diverted to its F-35 program -- not when Congress has chosen to shower the F-35 with more than $1 billion in extra funding. (It would seem downright ungracious to insist that they get literally all the money Congress has to spend.)
With Lockheed, the company most likely to lobby against it, now sidelined from the debate, the future has never looked brighter for the best close-air-support plane ever.