U.S. Navy Wants More Boeing Poseidons After Rejecting the Hornet

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While it struggles to maintain the volume needed to keep its F/A-18 Super Hornet production lines open and move the remaining stock of its early generation 787 Dreamliners, Boeing (NYSE:BA) has landed a renewed government contract worth $2.1 billion for 16 P-8A Poseidon long-range maritime spy planes, the Pentagon recently announced.

That makes for the first full-rate production contract for the Chicago-based company for the new planes, Reuters reports, and follows up on a $3.6 billion deal to supply eight P-8A type planes for Australia. The Navy’s order is meant to replace the P-3 spy planes, which have been in use for about four decades.

The P-8 is based on Boeing’s popular 737 commercial jet but is specially outfitted for anti-submarine, anti-surface warfare and surveillance work. The purchase is one of many: the Navy planes to buy 117 of the planes to replace the aging P-3s.

The new order will bring the total replaced planes to 53 and is expected to be completed by April 2017. Boeing’s first delivery of P-8s was put into service in Japan in December.

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To save on costs, Boeing is manufacturing the P-8s in the same facility where it builds the 737s, likely to take advantage of economies of scale. The planes are modified to suit the Navy’s needs while still in production, rather than being retrofit afterwards. Boeing says this approach has helped it reduce the cost of the aircraft and keep the program on or ahead of schedule.

Dow Jones Business News says that the switch in the U.S. military strategy to focus more on the Pacific and away from central Asia has caused a spike in demand for the Poseidon and other equipment that has given the Navy more protection from budget cuts than other branches of the military. The latest P-8 buy comes from the Navy’s fiscal 2014 budget, according to the wire service.

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