Boeing expects overseas defense sales to rise in Asia
Boeing Co. expects defense revenue from outside the U.S. to rise to much as 25 percent of all its defense business in five years on demand for fighter jets and helicopters from Asia-Pacific countries.
International revenue makes up about 16 percent of the defense division's total sales, Dennis Muilenburg, the head of the unit, said in Singapore today. Business from the Asia- Pacific, which accounts for about half of international revenue, will increase 50 percent during the next five years, he said.
"We see some growth certainly in countries like India and Australia," Muilenburg said. "We have seen some moderations and flattening in the U.S. defense budget and that has impacted us. We see our core business being stable."
Boeing is bidding for an order of 126 fighter jets from India, the world's biggest now in play, as countries in the region upgrade and expand their air forces. The Chicago-based company is seeking growth in Asia as military spending in the U.S. continues to be under "significant budget pressures," Chief Executive Officer Jim McNerney said in April.
The defense unit's profits declined about 6.3 percent in the first quarter to $664 million, as sales decreased 1.4 percent to $7.61 billion, Boeing said April 22.
Boeing fell 3 cents to $64.31 in New York trading yesterday. The shares have gained 19 percent this year.
International growth will be driven by F-15 and F/A-18 Super Hornet warplanes as well as helicopters such as the Apache and Chinook, Muilenburg said. Demand for the P-8A and Airborne Early Warning and Control aircraft will also gain, he said.
Indian Order
India's Air Force has completed flight tests for the fighter order, Boeing Vice President Mark Kronenberg said at the same conference. India's government has said the deal should cost about $10 billion.
The south Asian country is evaluating Boeing's F/A-18 E/F Super Hornet, Dassault Aviation SA's Rafale, Lockheed Martin Corp.'s F-16, Russia's MiG-35, Saab AB's Gripen and the Eurofighter Typhoon from a joint venture of Airbus SAS, BAE Systems Plc and Italy's Finmeccanica SpA.
Boeing and larger rival Lockheed made their first defense sales to India in the past two years as the south Asian country and the U.S. forged closer nuclear-energy and military ties. India has also put out a letter of request for 10 C-17 military cargo planes, Muilenburg said.
If Boeing wins the order, the C-17 production line could be extended by another year to 2013, he said.
Government Aid
Muilenburg also said it's important to have a "fair and level playing field" in the $35 billion U.S. Air Force refueling tanker bid.
The Chicago-based company has been asking U.S. lawmakers and the Pentagon to consider the cost of government aid provided to Airbus SAS, whose parent European Aeronautic Defence & Space Co. is bidding for the contract.
EADS won a 60-day extension from the U.S. Defense Department to bid for the project after former partner Northrop Grumman Corp. dropped out. Northrop said in March the competition rules favored Boeing's 767-based tanker, a smaller plane than the Airbus A330-based aircraft that Northrop and EADS proposed. Bids in the tanker competition are now due July 9.
Muilenburg said the company is currently delivering F-15s to Singapore and South Korea. Japan and South Korea are also considering their next-generation fighters, he said.
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