BAE, Boeing to Challenge Lockheed on F-16 Work

Lockheed Martin Corp., the world’s largest defense contractor, is expected to square off against BAE Systems Plc and Boeing Co. on competitions to upgrade foreign fleets of F-16 fighter jets.

Lockheed, the Bethesda, Md.-based contractor that makes the aircraft, had a lock on the work until last year, when London-based BAE successfully challenged it on a deal to refurbish more than 130 of South Korea’s jets. Chicago-based Boeing has also expressed an interest in the business.

Contractors are increasingly looking at opportunities to upgrade F-16s as defense budgets decline in the U.S. and Europe, threatening funding for the production of new aircraft.

“Most of our F-16 customers recognize and enjoy the benefit of the economies of scale that the F-16 program brings, as well as the interoperability benefits between the air forces around the world,” Mark Johnson, a Lockheed spokesman, said in an e-mail.

Like other popular U.S. military aircraft, the F-16 won’t be on display at the upcoming Paris Air Show due budget cutbacks in Washington, D.C.

More than 4,500 of the fourth-generation fighter aircraft, known in the U.S. as the Fighting Falcon, have been built since production began in the mid-1970s. General Dynamics Corp. initially manufactured the planes before selling its aircraft unit to Lockheed in the 1990s.

About half of those jets were purchased by the U.S. military. The rest were bought by more than two dozen countries, including Israel, Turkey, Taiwan, Iraq and Pakistan.

Lockheed has already upgraded more than 1,000 of the aircraft. A couple months after it lost the South Korea decision, the company was awarded a $1.85 billion contract from the U.S. Air Force to upgrade more than 140 of Taiwan’s F-16s with new radar, global positioning and electronic warfare systems.

In the U.S., Lockheed is the main contractor on a $2.8 billion Air Force program to upgrade about 350 of the single-engine fighters’ airframes and avionics systems. The multi-year effort slated for certain Block 40 and Block 50 versions is designed to keep the aircraft viable after 2025 in part because of delays to the F-35 Joint Strike Fighter, the Pentagon’s most expensive weapons acquisition program.

The Air Force effort is the basis for all F-16 upgrades within the Defense Department’s so-called Foreign Military Sales program, Johnson said.

In a foreign military sale, the U.S. buys weapons or equipment on behalf of a foreign government. Countries approved to participate in the program may obtain military hardware or services by using their own funding or money provided through U.S.-sponsored assistance programs, according to the Pentagon’s Defense Security Cooperation Agency, which announces the deals.

“Many countries will follow the USAF lead for the upgrade of the F-16 aircraft,” Johnson said. “Doing so yields significant benefits for the country as well as the USAF as they partner in the development of the upgrade program.”

The avionics enhancements include an active electronically scanned array radar, which boosts the plane’s ability to destroy enemy air defenses; a higher-resolution display unit; single-point access for electronic warfare control; and an integrated broadcast system for intelligence feeds, according to Pentagon budget documents.

Lockheed’s aeronautics unit, which accounted for about a third of the company’s overall 2012 revenue of $47.2 billion, is conducting a competition between Waltham, Mass.-based Raytheon Co. and Falls Church, Va.-based Northrop Grumman Corp. to supply the new radar, Johnson said.

Boeing has contracts with the U.S. military to modify retired F-16 aircraft into unmanned aerial targets for training exercises. BAE also performs some of the work, which involves the installation of electronic control equipment. Spokesmen for the two companies didn’t respond to requests seeking comment.