Highlights include The Boeing Company (BA) and Northrop Grumman (NOC).

Boeing: Light at the End of the Chunnel?

Louis Gallois, the CEO of EADS (the acronym for the European Aeronautic Defense and Space Company, which, in turn, is the parent of Airbus) is reported to have said that his company would probably bid on the oft-delayed $35 billion Air Force tanker program, even (or, perhaps, especially) if the contract was split between the EADS/Northrop Grumman (NOC) team and Boeing — as long as EADS/NOC could build a minimum of 12 planes per year, which, in turn, would make it worthwhile for EADS/NOC to build a factory in Mobile, AL (where some fear that Airbus would then start producing commercial airliners, though not for awhile).

Secretary of Defense Gates apparently doesn’t like that idea. However, several members of Congress do, and they have some sway in the matter. There is a bit of history supporting the use of more than one type of tanker aircraft: the KC-10 Extender cargo/tanker, which was derived from the DC-10-30, which was built by McDonnell Douglas, which was acquired by The Boeing Company (BA). Secretary Gates apparently fears that the Pentagon would lose some of its ability to control costs if there are two types of tankers; that may be a specious concern, as the DoD supposedly is going to add some twenty thousand acquisition officers to its managerial quiver and, surely, they could handle two tanker contracts.

Perhaps more importantly, we could get down to the business of building airplanes — which, in this case, will have different characteristics — and that might be a good thing for an ever-changing threat scenario, as well as the economy — both here in Washington as well as Alabama. Boeing wouldn’t have to spend as much on the bidding process, and probably would be the first in the air, as personnel become available from the declining commercial side.

The other glimmer of white light is that the Army’s $159 billion Future Combat System — for which Boeing is a co-program manager (with SAIC) — may be resurrected in a somewhat different form. Instead of developing all new vehicles, the program would use current and modified versions of the existing MRAPs — the acronym for mine resistant ambush protected armored vehicles — while still pursuing advanced technology which would allow our armed services to better-handle the current wide-spread threats of guerilla warfare.

Read the full analyst report on “NOC”
Zacks Investment Research

Last 5 posts by Zacks Market Commentaries

• CNP & FPL Ink Pipeline Deal - Analyst Blog - November 20th, 2009
• Buffett Borrows for Rail Acquisition - Analyst Blog - November 20th, 2009
• Stone Energy Outdoes Estimates - Analyst Blog - November 20th, 2009
• Smucker's Beats, Raises Guidance - Analyst Blog - November 20th, 2009
• GameStop Meets Expectations - Analyst Blog - November 20th, 2009