Lost Brazil order raises threat to Boeing fighter jets

Lost Brazil order raises threat to Boeing fighter jets

Brazil's decision to buy Swedish fighter jets instead of F/A-18 Super Hornets from Boeing eliminates its most promising foreign-sales prospect just as the US company faces critical decisions about extending the jet's production line past 2016.

The loss of the US$4.5 billion (S$5.7 billion) contract for 36 planes is the latest blow to Boeing's defence division, whose F-15 fighter jet last month lost a potential 60-plane order from South Korea to Lockheed Martin Corp's next-generation F-35 fighter.

Without new orders, both programs, based in St. Louis, Missouri, could fold in several years, effectively putting Boeing out of the fighter-jet business until a next-generation plane is developed, a decade or more in the future. The closures would follow the shuttering of Boeing's C-17 military transport plane production, in Long Beach, California, set for 2015, also because of sagging sales.

All these prospects present a near-term threat to Boeing's defence business. Fighters and C-17s accounted for 40 per cent of Boeing's military aircraft deliveries so far this year. Military aircraft sales totaled US$11.5 billion in the first nine months of 2013, down from US$11.9 billion a year ago. (Boeing does not break down revenue by product line.)

Spokesman Conrad Chun said Boeing was disappointed about the loss in Brazil but remained confident about the Super Hornet's prospects in Europe and the Middle East.

The outlook for new domestic or foreign contracts is also diminished by budget cuts in the United States and financial constraints abroad, leading to delays in contract decisions in some key foreign markets.

Without fighters and the transport planes, Boeing's military aircraft business would be largely reliant on Apache and Chinook helicopters and the P-8 antisubmarine plane.

Boeing's lucrative after-sale market would be undermined as well. More than 80 per cent of the money earned on a fighter jet comes from sales of spare parts, upgrades and support services over the jet's lifespan of 30 years.

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