SEATTLE — When the Pentagon this spring announces who will design and build a major new stealth bomber for the Air Force, the decision will determine Boeing’s future in the combat-aircraft business.
The choice could also reshape the military-industrial base. Top aerospace analyst Richard Aboulafia said that whatever the outcome, it could precipitate an aggressive move by Boeing, the No. 2 U.S. defense contractor, to acquire the aircraft unit of No. 3 defense player Northrop Grumman.
Boeing has teamed with Lockheed Martin, the top defense contractor, in bidding against Northrop to build up to 100 new-generation, long-range strike bombers that will replace the Air Force’s B-1 and B-52 bombers.
The currently projected cost, not counting classified spending, is $90 billion, or $900 million per airplane.
“If Boeing loses, it won’t be building combat aircraft after 2018 unless it buys Northrop’s aircraft unit,” said Aboulafia, a Teal Group analyst.
“If Boeing wins, Northrop will not be a combat-aircraft prime, and its investors may decide the company is more valuable broken up — in which case, Boeing would be the likely buyer for the aircraft unit anyway.”
Besides aerospace, Northrop has distinct and substantial businesses in electronics, information systems and technical services such as supply-chain management.
Details of the government’s requirements for the plane remain top secret. But Pentagon officials have said the aircraft must be able to carry nuclear bombs, and may be designed to fly unmanned when dropping conventional bombs.
Should the Boeing/Lockheed team win, it’s likely Lockheed will do the design and Boeing will build it, Aboulafia said in an interview.
Boeing would probably build the planes in St. Louis, with significant pieces subcontracted around the nation.
Aboulafia’s bold thesis is backed by history.
In November 1996, the Pentagon eliminated McDonnell Douglas from the Joint Strike Fighter competition, leaving the company with dim prospects.
Boeing, eager to balance its commercial unit with a defense acquisition, announced just a month later it would buy McDonnell Douglas for $13.3 billion in stock.
The market forces that will come to bear after the long-range strike bombers decision may be even stronger than in 1996.
Pressure on the U.S. defense-procurement budget has increased under the mandatory budget cuts imposed by Congress in the process known as “sequestration.”
Boeing plans $4 billion in cuts on its defense side to cope with the downturn in business.
Ahead, there are few big-money military-airplane contracts. After the long-range strike bombers, defense contractors won’t begin real work on the next prospect, new “sixth-generation” jet fighters, for a decade or more.
Long-range strike bombers are by far the biggest prize in sight.
The contest for the bomber is so secret, analysts outside the Pentagon have no idea who is favored.
No one knows for sure what the plane will look like, either, though it is expected to be a triangular “flying wing” shape like the B-2.
Would the Pentagon accept Boeing absorbing Northrop’s aircraft unit, reducing its prime military-airplane providers from three to two, perhaps with Lockheed exclusively building fighters and Boeing bombers?
The government analyst said the Pentagon has already accepted such virtual monopoly consolidation in the building of U.S. submarines and aircraft carriers.
Both Boeing and Northrop declined to answer questions on the bomber competition.
“We feel we are well positioned for this program in terms of capability and capacity,” said Northrop spokesman Randy Belote.
Boeing spokesman Todd Blecher said the company has “been part of the bomber community from the start of the bomber age” and looks forward to the opportunity provided by long-range strike bombers.
