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The Boeing Company (BA - Analyst Report) has been awarded a contract worth $368 million by the Electronic Systems Center of the U.S. Air Force to provide engineering, manufacturing and development (“EMD”) assistance to U.S. Air Force and NATO. This agreement constitutes the second phase of a cooperative program between NATO and the U.S. Air Force.
Per the agreement, Boeing will amalgamate new and existing avionics and communications systems, create a design for installation of the new equipment and upgrade an aircraft for each Airborne Warning and Control System (“AWACS”) fleet. The company will also train flight crew and maintenance support staff of the fleet.
The AWACS was initiated in 1977 and used by the U.S. Air Force and NATO. This Boeing 707-320B and the E-3 airframe based system deals with command and control, and surveillance and communications activities for strategic and defensive missions.
Boeing has already completed initial formalities including subsystem requirements reviews. While installation on the NATO AWACS aircrafts are expected to start from the third quarter of 2013, modernization activities are scheduled to begin in 2014. Both the processes are expected to conclude by 2015.
The digital flight deck will comprise five main glass displays, thus providing pilots and co-pilots with comprehensive and customized engine, navigation and radar information. The transition from analog to digital systems will enable the U.S. Air Force and NATO fleet to comply with air traffic management requirements for flying and also reduce cost of operations due to a decline in crew members from four to three.
Apart from Boeing, Rockwell Collins, Inc. (COL - Analyst Report) will provide glass displays and air-data and flight-management computers. The company will also get support from Raytheon Company (RTN - Analyst Report) and Thales SA.
Prior to this contract, Boeing was awarded a contract worth $324 million by the Electronics Systems Center at Hanscom Air Force Base, Massachusetts to improve France's fleet of four E-3F AWACS aircrafts and its ground system.
Boeing has a strong product portfolio, well positioned to take advantage of the focus on the defense and security division with improving financial results. In first quarter 2012, the Defense, Space & Security segment contributed revenue of $8.2 billion compared with $7.6 billion in the year-ago quarter. This was driven by higher sales of Boeing military aircrafts and global services and supports.
But, we are concerned about proposed cutbacks in the U.S. defense budget and risks related to project executions and order cancellations.
Boeing currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Headquartered in Chicago, The Boeing Company is a premier jet aircraft manufacturer and one of the largest defense contractors in the U.S.