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Boeing wins $3.9b Navy plane contract

WASHINGTON -- A team led by Boeing Co., which includes Raytheon Co., has won a $3.9 billion contract for a new US Navy patrol plane, the Pentagon said.

The contract to develop and demonstrate the new plane could lead to Boeing building 109 of the aircraft, said John Lockard, senior vice president and general manager at Boeing Naval Systems.

''Obviously, this is a terrific day for us and our customer the US Navy," he said.

Boeing was in fierce competition with Lockheed Martin for the contract for the planes, which will be used for submarine-hunting, maritime patrol, and other functions. Boeing's entry is based on converting its popular 737 commercial jet for military use.

Under the contract, Boeing and its subcontractors -- Raytheon, engine maker CFM International, Northrop Grumman Corp., and Smiths Aerospace -- will produce seven test aircraft. Plans eventually call for the Navy to replace its aging fleet of 223 P-3 Orion aircraft with 109 of the new planes.

Aerospace analyst Paul Nisbet of JSA Research called it Boeing's biggest contract victory this year, even though the planes will contribute only a small percentage to company revenues and estimates of Boeing's earnings are unlikely to be altered. The contract should boost production of the 737 line by about 5 percent, he estimated.

''It's a great win, and it'll go for many years, as long as those planes are alive, and that's probably 40 years from now," Nisbet said.

Lockheed Martin had based its proposal on an extensive upgrade of its propeller-driven P-3, long the Navy's primary patrol plane.

The Navy's decision comes as Boeing is waiting to hear whether it will be able to move forward with its deal to supply 100 airborne tankers to the US Air Force, based on a conversion of its 767 passenger jet.

Taken together, the contracts could mean billions of dollars for Boeing, at a time when its commercial airplane division badly needs the business.

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