Boeing on Inside Track for Korean Fighter Contract

Boeing F15 Fighter
Boeing F15 Fighter

The defense division of Boeing Co. (NYSE: BA) is reportedly in position to win a $7.4 billion contract to supply the government of South Korea with 60 of the company's F-15 fighter planes. Boeing's bid was the only one to meet the price ceiling set by the country's arms procurement agency according to a Reuters report.

The other bidders for the contract were Eurofighter, a consortium of Britain's BAE Systems, Italy's Finmeccanica and EADS, and Lockheed Martin Corp. (NYSE: LMT).

The contract is one of the largest available and represents nearly half of Boeing's total 2012 revenues for military aircraft sales. The company's defense segment contributed about $32.6 billion in Boeing's 2012 revenues, compared with $49.1 billion from its commercial airplane segment.

At the end of the second quarter of 2013, Boeing's backlog in its military aircraft division totaled $39.1 billion, about 55% of the company's defense business. The company has delivered just 3 F-15 fighter aircraft in the first half of this year, compared with 8 in the first half of 2012. Winning this contract would clearly be a big boost for the company's defense business.

While the Korean fighter contract is unlikely to be decided on cost alone, Boeing appears to have the inside track as the only bidder able to meet the specified cost ceiling. No matter which company wins, though, one or another of the losers is likely to contest the decision, so it might be a little early to book this as a win for Boeing.

Boeing's stock closed at $103.47 on Friday and is inactive in premarket trading on Monday morning. The stock's 52-week range is $69.03 to $109.49.

Filed under: Aerospace & Defense Tagged: BA, LMT