Military

Are Military Fighter Planes Finished at Boeing?

Boeing F15 Fighter
Courtesy Boeing Co.
The U.S. government has spent billions of dollars since the early days of aviation on aircraft of all descriptions, from fighter jets to trainers. The first fighter jet designed and built by Boeing Co. (NYSE: BA) took its first flight in 1923, seven years after the company was first incorporated as the Pacific Aero Products Co. Boeing build 157 copies of that first fighter, the PW-9, between 1923 and 1928.

So far this year Boeing has delivered nine of its F-15 Eagle fighters and 31 F/A-18E/F Super Hornets and EA-18G Growlers. At its current pace of production of four per month, the Super Hornet/Growler will deliver a total of 47 airplanes in 2014. The F-15 has no set monthly delivery schedule: Boeing shipped two planes in the months of January, April and June; one plane in February, March and July; and none in May or August.

The Wall Street Journal noted in a story on the company’s fighter jets last week that production of the F/A-18 could end in 2017 and the last of the F-15 line could close production in 2019. Both planes are manufactured in Boeing’s St. Louis plant, and the loss of both programs could be fatal. Boeing has already said it will close its Long Beach military cargo jet plant next year.

The $52 billion contract Boeing recently won to produce a new tanker for the U.S. Air Force, the KC-46A, will make up for some of the losses. Boeing expects to get about $30 billion in annual revenue from its total military and space program, according to CEO Jim McNerney, who told an investor conference in July that the company could make up for the fighter jet losses with new military contracts for a long-range strike bomber, an Air Force trainer, and a Navy carrier-based drone program.

None of those programs is likely to make up for the company’s loss of the Joint Strike Fighter program, however, a contract worth some $400 billion that went to Lockheed Martin Corp. (NYSE: LMT) more than a decade ago.

Rival aircraft maker Airbus will also be reducing its efforts in the defense business as governments facing tight budgets are cutting spending on military gear.

Boeing’s stock is up about 11% over the past 12 month, but has dropped nearly 5.5% since January. And its P/E ratio is currently a rich 19.59, indicating perhaps that the stock is still a bit overbought.

ALSO READ: Airbus to Pare ts Defense Business and Focus on Commercial Jets

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