UPDATE 2-US, Israel in pact for Lockheed planes

Fri Mar 26, 2010 7:57pm EDT

* Part of an order potentially worth up to $1.9 billion

* Deal inked amid turbulence in U.S.-Israeli relations

* Israel plans to buy up to 9 C-130J tactical transports (Recasts with Defense Department sourcing, adds spokeswoman comments)

By Jim Wolf

WASHINGTON, March 26 (Reuters) - The United States has signed a deal to supply Israel with initially up to three new Lockheed Martin Corp (LMT.N) C-130J "Super Hercules" tactical transport aircraft, the Defense Department told Reuters on Friday.

The deal is part of an order worth up to $1.9 billion if all options are exercised for nine C-130Js. The aircraft may be used for special operations, disaster relief or humanitarian missions.

Under a government-to-government pact signed on Wednesday, Israel would get its first C-130J in 2013, said a source familiar with the sale, who asked not to be identified pending official government announcements.

The deal was inked amid turbulence in U.S.-Israeli ties, highlighted by strains over Jewish housing construction in occupied East Jerusalem.

In a sign of the rift over Israeli settlement policy, the White House withheld some of the usual trappings of a White House visit on Tuesday by Prime Minister Benjamin Netanyahu.

Israel has a fleet of older C-130 transports. The J version boosts the previous models' range, payload and speed roughly 40 percent, according to Lockheed Martin, the Pentagon's No. 1 supplier by sales.

A standard C-130J costs about $75 million, not including any special configurations or support. The U.S. Air Force, the middleman in the sale, must now negotiate a contract with Lockheed to cover the aircraft configuration and support services.

A Defense Department spokeswoman said the $115 million agreement signed on Wednesday is for the purchase of one C-130J with options for two additional aircraft. She also said additional purchases are anticipated over the next few years.

Israel has asked to buy up to nine C-130Js, the Pentagon's Defense Security Cooperation Agency told the U.S. Congress in July 2008. It put the potential value of the deal at $1.9 billion.

The U.S State Department and Israeli Defense Forces had no immediate comment.

Lockheed Martin said it looked forward to modernizing Israel's airlift fleet.

In notifying Congress of the proposed sale in 2008, the Pentagon said it would provide Israel a "credible special operations airlift capability that will deter aggression in the region, provide humanitarian airlift capability, and ensure interoperability with U.S. forces in coalition operations."

Other nations that are operating or have ordered the C-130J include Australia, Canada, Denmark, India, Iraq, Italy, Norway, Oman, Qatar, Britain, Tunisia and the United States.

The U.S. Air Force uses it in the wars in Iraq and Afghanistan. (Reporting by Jim Wolf; Editing by Gary Hill; editing by Carol Bishopric)

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