Defense contractors operate in a bizarre environment. On the one hand, their chief customer, the U.S. government, is pretty reliable. It has deep pockets and has steadily been spending more and more over the years. On the other hand, the government is a fickle client. Its demands can exceed what is currently technologically possible. Contract changes in midstream are common. And periodic budget cuts can be major shocks to contractors' results.
So when contractors have an opportunity to broaden their customer base to other countries, it can be a golden opportunity. Lockheed Martin (NYSE:LMT) soon may have such an opportunity. Reuters recently reported that the U.S. is thinking about selling F-16 fighter planes to India and Pakistan. But a sale doesn't appear to be imminent, as Lockheed's sales prospects are at the mercy of U.S. policymakers' goals and the vagaries of international politics.
The web of interests involved in a potential fighter-plane sale is dizzying, but here goes. The Pakistanis have long been interested in buying the planes, but the U.S. blocked such sales years ago in response to Pakistan's pursuit of nuclear weapons. India, of course, opposes the sale of F-16s to its archrival Pakistan but has expressed interest in U.S. weapons for itself after relying for years on Russian-made wares. Pakistan is concerned about India's buying of weapons, natch, and it's especially worried about the possibility that India might purchase Raytheon's (NYSE:RTN) Patriot missile defense system. All the U.S. wants is to keep Pakistan, a key ally in the war on terror, happy, even as America warms up to India.
At the moment, then, it looks like Lockheed still has some waiting to do before it can hawk its planes to Pakistan or India. Despite relative calm recently, the two nations remain cagey about the balance of power in the region, and the U.S. wants to be sure that its actions don't upset that balance. Nevertheless, such sales remain on the table, and for Lockheed, the potential profits could be significant.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
