Lockheed Martin may top Boeing in race to supply Canada jets: experts

OTTAWA (Reuters) - Canada's decision to make it harder for Boeing Co BA.N to win a major jet order hands rival plane maker Lockheed Martin Corp LMT.N an advantage in capturing the contract, defense experts said on Wednesday.

FILE PHOTO: Lockheed Martin's logo is seen during Japan Aerospace 2016 air show in Tokyo, Japan on October 12, 2016. REUTERS/Kim Kyung-Hoon/File Photo

That would mark a reversal in Lockheed’s fortunes after Liberal leader Justin Trudeau campaigned in 2015 on a promise not to buy the firm’s F-35 stealth fighter.

Ottawa on Tuesday scrapped plans to buy 18 Boeing Super Hornets and made clear the company would not win a contract for 88 jets unless it dropped a trade challenge against Canadian planemaker Bombardier Inc BBDb.TO.

Officials estimate the cost of the jets at between C$15 billion ($11.7 billion) and C$19 billion and say it is the biggest investment in the air force in 30 years.

Last week Boeing made clear it would not back down in its fight against Bombardier, which it accuses of trying to dump airliners on the U.S. market.

The firm may not even launch a bid for the 88 jets, the first of which are due to be delivered in 2025.

That leaves the F-35, a new aircraft, up against two European rivals which first flew in the 1990s: the Eurofighter Typhoon AIR.PABAES.LLDOF.MI and Dassault Aviation SA's AVMD.PA Rafale.

One defense source noted that the European jets were likely to become obsolete by around 2040, at which point they could no longer incorporate the latest technologies.

“The longer this process plays out, the narrower the government’s options become, and the prospects for a European jet become even dimmer,” said the source, who declined to be identified given the sensitivity of the situation. The Super Hornet first flew in 1995.

A second defense source said Boeing now had little chance of winning the 88-plane contract and noted Canada’s air force had long sought an American jet so it could operate easily with the U.S. military.

Neither source works for a company that might make a bid.

The official opposition Conservative Party accused Trudeau of bungling the matter.

“Will the prime minister take responsibility and admit we are never going to get new jets?” Conservative leader Andrew Scheer said in the House of Commons.

Lockheed Martin said it was confident the F-35 was superior to older competitors. Boeing described the Super Hornet as “the low-risk, low-cost approach” which could serve Canada’s needs well into the future.

Canada belongs to the nine-nation consortium that helped fund development of the F-35, which has been hit by years of delays and cost overruns.

Trudeau initially opposed the F-35 on the grounds that it was too costly, but Ottawa has since softened its line.

Officials insist the competition will be open and say no company will be excluded. Yet in a clear swipe at Boeing, ministers say any bidder deemed to have harmed Canada’s economy will be at a distinct disadvantage.

Boeing accuses Bombardier of imitating Airbus by trying to muscle into the U.S. market. People familiar with Boeing say the strategic importance of defending its core passenger jet business outweighs the fighter dispute.

Jerry Dias, president of the Unifor union, said in a phone interview he did not think Boeing would react by cutting jobs. Unifor represents 1,300 workers at a Boeing plant in Winnipeg.

Boeing says its operations support 17,500 Canadian jobs.

($1=1.2865 Canadian dollars)

Addtional reporting by Allison Lampert in Montreal; Editing by David Gregorio and Cynthia Osterman