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Lockheed Martin, Boeing Set to Square Off in Canadian Fighter Competition

By Lou Whiteman – Jul 31, 2020 at 3:17PM

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Both companies carry baggage heading into this $12 billion fight.

Lockheed Martin (LMT 0.33%) and Boeing (BA -0.82%) have both submitted proposals to supply Canada's next-generation fighter, the latest step in a lucrative competition that has been beset by delays, political uncertainty, and international trade battles.

Lockheed Martin's F-35 Joint Strike Fighter and Boeing's F/A-18 Super Hornet were entered into what is expected to be a $12 billion competition ahead of the July 31 deadline. Swedish aircraft-maker Saab was also expected to submit its Gripen-E fighter, with the Eurofighter Typhoon and Dassault Aviation Rafale also potential candidates.

Boeing's F/A-18 Super Hornet in flight.

Image source: Boeing.

The fight to modernize Canada's air arsenal has been simmering for more than a decade. Canada is a founding member of the international coalition assembled to design the F-35, and was assumed to be an eventual customer.

But current Prime Minister Justin Trudeau, on the election trail in 2015, said his government would not buy the fighter because of its high cost. That seemingly played into Boeing's hand, as the Super Hornet -- while not as modern as the F-35 -- is less expensive. However, Boeing potentially squandered that advantage in 2017 when it accused Canadian manufacturer Bombardier of selling commercial aircraft in the U.S. below cost.

Canada responded by saying it would disqualify from the fighter competition any defense contractors that caused "harm" to the national economy, a clear shot at Boeing.

It's hard to say who has an advantage now. The Canadian Air Force is said to strongly favor the F-35, which was designed with coordination between North American allies in mind, but the Trudeau Administration is likely to stick to its guns on pricing. And while it is hard to say if there are lingering hard feelings toward Boeing, the company was not prohibited from entering the competition.

Saab is attempting to present the Gripen as a good compromise, with next-gen features including short take-off capabilities and interoperability with allies, without the F-35's costs and political baggage.

Canada plans to buy a total of 88 fighters, with deliveries not expected before 2025.

Lou Whiteman owns shares of Lockheed Martin. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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