Leathernecks are flying high this morning, borne up by the news that the Pentagon's Defense Acquisition Board (DAB) has approved the Marine Corp's favorite aircraft, the V-22 Osprey tiltrotor, for full-scale production.
The Osprey, a propeller-driven plane that can fly horizontally and land vertically, was originally requested by the Corps in 1983 and has been in development since 1989. At present, though, it is still only being produced in small quantities.
But investors shouldn't get too excited over that number, because it will take a while for the ramp-up to really hit its stride. In 2005, the firms will produce 16 Osprey; in 2006, 17 more. Even seven years down the road, the companies expect to be short of full capacity, producing only 45 planes in 2012. That said, Textron expects the 2005 contracts to net it $675 million in revenue, with an additional $625 million following in 2006 -- boosting that firm's annual revenues by about 6%.
What's more, now that some of the kinks have been worked out of the plane, the Osprey's creators seem set on making further improvements -- which could yield additional orders of larger tiltrotor-technology aircraft. Earlier this month, the Army awarded the companies a contract to develop a larger "Quad Tiltrotor" aircraft for use in its Joint Heavy Lift program for transporting heavier supply payloads and larger numbers of soldiers (the Osprey maxes out at about 24 passengers).
If all goes well, the Osprey could be just the beginning of an entirely new line of aircraft -- and an entirely new revenue stream -- for Textron and Boeing.
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Fool contributor Rich Smith does not own shares in any of the companies mentioned above.