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These 5 Companies Will Compete to Build a New Attack Airplane

By Lou Whiteman - May 24, 2021 at 5:42AM

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The Pentagon is shopping for a propeller-powered military aircraft.

The U.S. military is in the market for a new propeller-powered attack aircraft. That could mean a big payday for one of five under-the-radar contractors set to battle it out for the contract.

Even in a world of long-range bombers and supersonic fighter jets, there's still a need for smaller, less expensive planes that can fly surveillance and provide close air support for ground forces. The U.S. Special Operations Command could spend as much as $1.5 billion on these planes in the years to come -- but first one candidate must prove its worth.

A five-plane dogfight

Special Operations Command has awarded a total of $19.2 million to Textron (TXT 1.55%), L3Harris (LHX 2.36%), Leidos Holdings (LDOS 1.94%), as well as privately held Sierra Nevada and MAG Aerospace to fund construction of five prototype designs. The planes are set to participate in a series of demonstrations at Eglin Air Force Base in Florida through March 2022.

Textron's Wolverine aircraft in flight.

Textron's Wolverine, one of five planes vying for the contract. Image source: Textron.

There's no guarantee any of the planes will meet the requirements. But if one does, "the contractor may be requested to provide a production proposal for a follow-on production award."

Ideally, the military would like to buy about 75 planes for its Armed Overwatch program at a price tag of about $20 million apiece.

Though you would not want these planes engaged in Top Gun-style battles against the air forces of major powers, smaller, more nimble planes still have a place in modern warfare. Their slower speeds allow for better maneuverability for reconnaissance and to support ground efforts. And they offer a lower-cost alternative if the military is deploying in less-contested air environments or places with limited infrastructure and shorter runways.

In fact, Special Operations Command has used its existing 1990s-era U-28 Draco planes so often that they are wearing out. The Pentagon is hoping to find a reliable, low-cost replacement from a manufacturer that is able to quickly ramp up production.

Off-the-shelf instead of bleeding edge

For some of the contractors involved, this competition offers the chance of a much-needed lifeline for their aircraft designs. Textron and Sierra Nevada have been in a battle for years as the Air Force considered whether it wanted to add one or both of their prop planes to its arsenal.

This competition is an update on those previous efforts. Textron is again offering a version of its AT-6 Wolverine, an update on the Beechcraft T-6 Texan that the U.S. military has used for years. The Sierra Nevada entry is a modified M-28 SkyTruck, a platform it has worked with for at least five years.

The other three candidates would be considered wildcards. Leidos is the country's largest defense IT contractor, and it has dabbled in some high-tech hardware including autonomous ships. It also recently added space-focused contractor Dynetics to its portfolio. However, it's not known as an aviation company. Leidos partnered with Vertex Aerospace and South Africa's Paramount Group, among others, on its design. The plane, known as the Bronco II, is a clean-sheet design with modules that can be swapped out for various missions.

Similarly, L3Harris is primarily a space and electronics contractor. It partnered with Air Tractor, a 40-year-old Texas-based aircraft manufacturer best known for making crop dusters. And MAG Aerospace is best known for its electronics and integration work. Its MC-208 Guardian aircraft was designed with partners including Textron, L3Harris, and Raytheon Technologies' Pratt & Whitney, and is based on an airframe platform that has been in use for 40 years.

Investor takeaway

This effort isn't going to produce a new trillion-dollar aircraft, but the contract will be big enough to move the needle for whichever company is the eventual winner. And it should result in an aviation franchise that will need spare parts and updates for the foreseeable future, creating new opportunities in an area where none of these companies is currently strong.

More broadly, this competition could be an indication of other opportunities yet to come. The Pentagon is currently focused on modernization and new technologies, but bleeding-edge tech is high cost. To offset those added expenses in a flat budget environment, Defense officials might seek value elsewhere. As with Armed Overwatch, those sorts of competitions tend to give second-tier defense contractors a chance to get more involved.

If Textron, Leidos, or L3Harris come out on top here, the win will be the beginning of a new revenue platform that will likely come with future growth opportunities for that company and its stock.

Lou Whiteman owns shares of L3Harris Technologies and Leidos Holdings. The Motley Fool recommends Textron. The Motley Fool has a disclosure policy.

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Stocks Mentioned

L3Harris Technologies, Inc. Stock Quote
L3Harris Technologies, Inc.
LHX
$236.74 (2.36%) $5.45
Textron Inc. Stock Quote
Textron Inc.
TXT
$68.08 (1.55%) $1.04
Leidos Holdings, Inc. Stock Quote
Leidos Holdings, Inc.
LDOS
$100.06 (1.94%) $1.90

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