Boeing Co. is favored to win an 8.3 trillion-won ($7.7 billion) fighter-jet deal from South Korea, sustaining its F-15 production line and handing a setback to Lockheed Martin Corp. (LMT) in the world’s biggest combat aircraft tender this year.
Boeing, which is also competing against European Aeronautic, Defence Space Co., was the only one of the three bidders to present an offer within the ministry’s budget guidance, the Yonhap news agency reported yesterday. Baek Youn Hyeong, spokesman for South Korea’s arms procurement office, declined to name the remaining bidder and said Defense Minister Kim Kwan Jin will meet with officials at 2 p.m. today in Seoul to make the final decision.
Gaining the contract would mark a reversal of fortunes for Boeing after losing bids in India to Dassault Aviation SA (AM) and in Japan to Lockheed. Boeing already provides fighter jets to South Korea and the country has favored U.S. weapons to assure interoperability with the 28,500 U.S. troops that help defend against threats from North Korea.
“Boeing’s win would be a heart-breaker for Lockheed Martin,” Yang Uk, a senior researcher at Seoul’s Korea Defense and Security Forum, said by phone. “Lockheed Martin needs this deal to help compensate for the shrinking U.S. defense budget and give a boost to its F-35.”
Contracts from Saudi Arabia along with winning the South Korean deal would assure the F-15’s production continues past 2020 with Boeing’s other combat jet, the F/A-18E/F Super Hornet, at risk of going out of production before then.
Incumbent Provider
Boeing, the incumbent provider of combat planes to South Korea after selling two batches of F-15s previously, is offering an improved model called the F-15 Silent Eagle, which is supposed to be more difficult for enemies to detect than earlier designs now in service.
The Silent Eagles would replace South Korea’s aging F-4s and F-5s and add to the arsenal of F-15Ks and KF-16s that form the backbone of the country’s air force. South Korea operates about 460 fighter planes, according to its 2012 defense white paper.
For Lockheed Martin, the world’s largest weapons maker, the decision would be the first setback for its F-35 in the global arms market. The single-engine jet, the world’s most expensive weapons program, is being bought by countries from the U.S. to Australia to Israel, and is being considered by Singapore which currently operates F-15s as well.
Sales Potential
“This is a good thing for Boeing and keeps the F-15 line going,” Bruce Lemkin, former U.S. Air Force undersecretary for international affairs, said by phone. “It obviously also provides the potential for Boeing to market more of these aircraft.”
A loss for the Eurofighter Typhoon consortium, that includes EADS, BAE Systems Plc, and Finmeccanica SpA, would be the latest in a series of setbacks internationally as the group tries to secure exports after losses in India, Japan and Switzerland. Sales of Typhoons to countries such as Saudi Arabia and Oman have come on the strength of government-to-government ties rather than in international competition.
EADS was also trying to sway South Korea with an extensive service package including the promise of assistance on KF-X, a future indigenously developed combat jet.
South Korea faces North Korea over one of the world’s most heavily armed borders, a legacy of the 1950-53 Korean War which ended in a truce. In 2010, North Korea bombarded a South Korean island near the front-line, killing four people. That incident has led military officials to vow air strikes should another front-line provocation take place.
The purchase of new fighter jets would also boost South Korea’s ability to independently defend itself after the country takes back the wartime command of its 640,000 troops from the U.S. in 2015. That command was given to the U.S. at the onset of the Korean War and has never been returned.
To contact the reporters on this story: Sam Kim in Seoul at skim609@bloomberg.net; Robert Wall in London at rwall6@bloomberg.net
To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net
Boeing Favored to Win $7.7 Billion South Korean Jet Fighter Deal
A Boeing F-15SG Eagle fighter jet is displayed at the Singapore Airshow in Singapore on February 14, 2012. Photograph: Roslan Rahman via AFP/Getty Images
A Boeing F-15SG Eagle fighter jet is displayed at the Singapore Airshow in Singapore on February 14, 2012. Photograph: Roslan Rahman via AFP/Getty Images
Boeing Favored to Win $7.7 Billion South Korean Jet Fighter Deal
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