For more than a decade -- ever since it canceled Northrop Grumman's successful X-47B drone project, in fact -- the U.S. Navy has had one thing on its wish list: a new uncrewed drone that it can launch from its aircraft carriers to refuel fighter jets and thus increase their flight range.
Ten years later, the Navy might finally get its wish.
Image source: Boeing.
Introducing the MQ-25A Stingray
After two years of planning, Boeing (BA +0.48%) won the competition to build the new aerial refueling drone, dubbed the MQ-25B Stingray, in 2018 -- and was awarded an initial $805 million contract to develop an initial flight of four aircraft for flight testing. (Ultimately, the Stingray fleet is expected to grow to 76 aircraft.)
Years of development work followed, culminating this week in a successful test flight of the first of those four Stingrays initially ordered eight years ago. As Boeing reported in a press release, Stingray "demonstrated its ability to autonomously taxi, take off, fly, land and respond to commands from the Unmanned Carrier Aviation Mission Control System MD-5 Ground Control Station (GCS)."
What happens next
Stingray did not, however, conduct an aerial refueling -- indeed, the test flight did not even take off from or land on an actual aircraft carrier! (The test flight was conducted over land.) Until MQ-25A proves it can perform the mission, taking off from a carrier flight deck, refueling fighters in the air, and then landing back on the carrier, roughly one out of every four F/A-18 fighter jets carried on U.S. aircraft carriers will be required to serve primarily as tanker aircraft supporting the remaining fighters.
Conversely, once MQ-25As take over this role, the attack strength of every carrier in the fleet will immediately grow by approximately 33%.
According to Aerospace Global News, the plan at this point is to begin carrier testing toward the end of 2026, with hopes of having the first Stingray ready for operational deployment no earlier than 2029.
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What it means for Boeing
In other words, 10 years after this program began, Boeing has made progress... but we're still years away from the finish line. Investors should anticipate even more years beyond that, moreover, before Boeing receives the full financial benefit of winning the Stingray contract back in 2018.
But how big a payoff should we be expecting when that happy day arrives?
As luck would have it, the latest U.S. Government Accountability Office "weapon systems annual assessment" for Congress has some advice on that score. When MQ-25A was first awarded to Boeing, the Navy anticipated that the purchase of 76 units at $207 million each, plus program development costs, would total $15.8 billion for Boeing. And despite what you may have heard about Boeing's "inadequate" and "ineffective" development processes, the MQ-25A program actually appears to be coming pretty close to on-budget -- if not exactly on time.
The latest GAO estimate sees the Pentagon spending $15.9 billion to build the Stingray fleet, with per-unit costs rising only slightly, to $209 million.
This is not to say execution has been flawless. GAO noted that over the past decade of development work, some MQ-25A components have already become obsolete, and complained of "a significant increase in development costs since our last report." GAO also highlighted the potential for development costs to continue creeping higher. But at least some of these issues seem to have originated with the Pentagon's management of the program -- not with Boeing itself.
For the time being, at least, the Pentagon remains committed to the MQ-25A program and could decide to start low-rate initial production as early as this year, putting Boeing on a path to generate $16 billion or more in total revenue from the program, followed by even more revenue from maintaining and upgrading its Stingrays in future years, after they're built and sold.
For Boeing, whose defense, space, and security business just turned profitable again in Q1 (unlike its commercial airplanes division), that decision can't come soon enough.
