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Boeing and Airbus at Loggerheads for S. Korea Refueling Contract?

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As per a media report, The Boeing Co. (BA - Free Report) and Airbus were among the three international bidders for a sensitive South Korean refueling tanker aircraft contract. The third bidder for the contract was Israel Aerospace Industries Ltd.

South Korean Refueling Tanker Program

The South Korean government initiated the process to add refueling tankers in March this year to strengthen its airborne operations.  The rising tension in the region could have prompted South Korea to proceed with its 1.4 trillion won ($1.38 billion) tanker program. The government is expected to close the deal before the end of this year.

Also in Mar 2014, the South Korean republic had agreed to purchase 40 advanced F-35 fighter jets from Lockheed Martin Corporation (LMT - Free Report) to replace its F-4 and F-5 fighter fleet. Interestingly, the F-35 won over Boeing’s F-15SE and Eurofighter’s Typhoon.  The Boeing tanker jets will nonetheless play a crucial role in the Asia-Pacific theater of war.
Importance of Refueling Air Tankers

The refueling tankers play an important role in modern day warfare. These tanker airplanes carry jet fuel and are used to refuel fighter jets and other warplanes during flight, saving precious time in strike missions.

A Battle of Equals?

Both Boeing and Airbus have expertise in manufacturing refueling tankers. In 2011, the U.S. Air Force had selected Boeing to supply 179 KC-46 refueling planes to replace its aging KC-135 tankers.  At present, Airbus’ refueling tankers are used by six international customers

Who will Win It ?

Since the two biggest operators are battling it out for the tanker contract, it is difficult to predict who will win. The existing international ties between the U.S. and South Korea might play a role in the decision making. In Mar 2013, the two countries signed a defense pact in which the U.S. decided to support South Korea against threats from its archrival North Korea.

Zacks Rank

Boeing carries a Zacks Rank #3 (Hold). Investors interested in the aerospace and defense industry may consider stocks like General Dynamics Corp. (GD - Free Report) and Northrop Grumman Corporation (NOC - Free Report) . Both these stocks carry a Zacks Rank #2 (Buy).

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