February 29, 2008 / 11:55 PM / 12 years ago

Northrop sees U.S. tanker deal positive for growth

WASHINGTON (Reuters) - Northrop Grumman Corp’s (NOC.N) capture of a $35 billion U.S. Air Force aerial refueling aircraft contract will boost the company’s growth plan, Chief Executive Ronald Sugar told Reuters on Friday.

“This will be very positive for us,” Sugar said in a telephone interview shortly after Air Force Secretary Michael Wynne called to tell him the news.

Sugar said the win, which came as a surprise to industry analysts, underscored the company’s recent statements it expected significant growth in a variety of business areas.

Northrop and its partner EADS EAD.PA defeated Boeing Co (BA.N), which many experts had expected to win the contract to produce up to 179 tanker aircraft.

Initial funding for the contract would be relatively small, but quickly build, Sugar said. Air Force officials have said they expect to ramp spending up to around $3 billion annually within a few years, an amount that will pay for 12 to 18 tankers a year.

Asked if Northrop was surprised by the news, Sugar said: “We are very pleased. We took our very best shot. We thought we put a very compelling offering on the table.”

He praised the Air Force’s handling of the deal and said he was “impressed with the openness and transparency of the process.”

Sugar also described subcontractor EADS, which will supply its A330 aircraft to be modified as a military tanker, as a “great partner.”

The Northrop contract would result in several thousand new jobs in Mobile, Alabama, where EADS has pledged to build its A330 production facility and where Northrop will add military equipment for the tanker mission, Sugar said.

Overall, the contract would provide for 25,000 jobs across all Northrop suppliers.

Also important is EADS’ plan to build commercial A330 aircraft in Alabama if it and Northrop won the big Air Force contract.

“This is very much an investment in the United States,” Sugar said.

Sugar declined comment on the prospect of rival Boeing filing a formal protest over the Air Force decision.

Northrop is eager to start working on the tanker, which the Air Force has named the KC-45.

“We’re going to move out smartly and get these tankers to the war fighter. They need them,” Sugar said.

Existing Air Force refueling tankers date back to the Eisenhower administration.

Air Force officials said they hope to start testing the new tanker in 2010, both its airworthiness and ability to refuel in air.

Editing by Andre Grenon

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