Boeing sees industrial base worry if programs stall

WASHINGTON (Reuters) - Boeing Co BA.N is continuing to fund research and development of new military aircraft, but its technological base may erode if the U.S. Air Force does not move soon to begin a competition for a new bomber and a new fighter, a top executive said on Monday,

“The technology base is eroding for Boeing as we move late into the next decade,” Darryl Davis, president of Boeing’s Advanced Systems unit, told reporters at the annual Air Force Association meeting.

In recent years, Boeing has lost several key military aircraft competitions, including the $200 billion Joint Strike Fighter project, won by Lockheed Martin Corp LMT.N; an unmanned combat airplane competition won by Northrop Grumman Corp NOC.N; and an unmanned Navy patrol plane, also won by Northrop.

Given that Boeing’s production line for the C-17 transport plane and F-18 fighter jet are beginning to wind down, defense analysts have raised concerns about Boeing’s ability to compete for more military aircraft contracts in the future.

Davis agreed it was a concern, especially if the Air Force’s program to build a new bomber and possibly start work on a sixth-generation fighter were delayed.

Overall, U.S. defense spending was likely to level off and possibly decline in coming years, and much would depend on the priorities of the new administration, Davis said.

He said Boeing expected research and development programs to continue being funded, but those programs might not move into design, development and production “as soon as we hoped.”

“It’s going to be a difficult environment,” Davis said.

The Pentagon’s renewed emphasis on testing prototypes before signing big production contracts was aimed at ensuring competition, but those efforts needed to be funded by the government. “Boeing can’t fund everything on its own,” he said. “We’re not talking about a small amount of money.”

In the case of the Air Force’s plan to field a new bomber by 2018, such a move might not be necessary, given that a great deal of the technology was already developed, Davis said.

Gene Cunningham, a Boeing vice president and head of the V-22 program for Boeing and Textron Inc's TXT.N Bell Helicopter, said that program was doing very well and the last six aircraft were actually delivered ahead of schedule.

He said the Pentagon’s decision to sign a multiyear contract would allow the companies to boost production of the unique tilt-rotor aircraft from 17 this year to a peak of 36 per year in 2012.

The agreement, which was also recently expanded to include even more CV-22s, the Air Force version, had helped Bell-Boeing reach out to suppliers and encourage more investment in their facilities, Cunningham said.

The Air Force had completed testing of the new CV-22 and was preparing to field the aircraft in combat, possibly later this year. The Marine Corps was preparing for a third rotation of MV-22s in Iraq this fall.

In addition, several countries had expressed interest in buying the V-22 aircraft, which could result in short-term foreign sales of 36 to 50, with that number set to expand further as the aircraft becomes more heavily used.

“We’re making sure we’re ready” to support the expected U.S. Air Force deployment and continuing Marine Corps deployments, Cunningham said.

Initial foreign orders could come next year or in 2010, he said.

The company also expected to sign a two-phased performance-based logistics support contract for the V-22s later this year, he said.

Editing by Tim Dobbyn