United Technologies' Sikorsky wins $1.3 billion U.S. helicopter deal

WASHINGTON Thu Jun 26, 2014 7:49pm EDT

WASHINGTON (Reuters) - Sikorsky Aircraft, a unit of United Technologies Corp (UTX.N), won a $1.28 billion contract on Thursday to develop a new combat rescue helicopter for the U.S. Air Force, a deal that could eventually be worth up to $7.9 billion.

The initial contract covers development and delivery of four new Combat Rescue Helicopters (CRH) based on the company's workhorse UH-60 Black Hawk, and caps nearly 15 years of repeated unsuccessful efforts by the Air Force to replace its aging fleet of HH-60G Pave Hawk rescue helicopters.

The Air Force said Sikorsky beat its affordability target by about $700 million.

Sikorsky welcomed the deal, noting that it has built combat search and rescue helicopters for the U.S. military since 1943. Sikorsky President Mick Maurer said the helicopters allowed the Air Force to "perform one of its most important and sacred missions – bringing our downed service members home safely."

Air Force Secretary Deborah James said the Air Force was the key service responsible for global personnel recovery, and remained committed to a mission she described as "part of the military ethos."

More than 12,200 U.S., allied and other forces have been saved in rescue missions around the world, the Air Force said.

Thursday's contract with Sikorsky comes after one of the longest-running and controversial acquisition programs the service has attempted in recent decades.

"It has been a very, very long road," Sam Mehta, president of Sikorsky Military Systems, told Reuters in an interview.

He said Sikorsky bid aggressively to win the contract, aware of the budget pressures facing the Pentagon and expecting tough competition from other companies. He said work on Black Hawk variants for the Army and Navy would allow Sikorsky to leverage economies of scale in the supply chain and lower costs.

The new contract - and a separate one for a new presidential helicopter - will bolster Sikorsky production from 2019 on, but the company still faces challenges in the near-term because of declining U.S. military spending, Mehta added.

He said the company was heartened by news on June 24 that the Pentagon had approved the sale of Black Hawk helicopters to Mexico, a deal worth $225 million, and was chasing other orders.

The Air Force awarded Boeing Co (BA.N) a contract to build 141 rescue helicopters based on its twin-rotor CH-47 "Chinook" design in 2006, but the deal was protested immediately by the losing bidders - Sikorsky and Lockheed Martin Corp (LMT.N) - and later canceller by then-Defense Secretary Robert Gates.

The Air Force restarted the program in 2012, but Boeing, Northrop Grumman Corp (NOC.N) and Europe's Airbus (AIR.PA) later dropped out of the competition, arguing that the Air Force had skewed the requirements to favor Sikorsky's helicopter.

In March, the Air Force's 2015 budget request to Congress omitted funding for the program, but officials added the program back in the same day under pressure from senior U.S. lawmakers.

(Reporting by Andrea Shalal; Editing by Bill Trott, Grant McCool and Andre Grenon)