Bloomberg News

Battle Over F-16 Combat-Jet Upgrades Unfolds Amid New Plane Push

July 03, 2013

The F-16 fighter jet, the most widely flown western combat aircraft in its 35 years in service, is getting a new lease on life as defense contractors Lockheed Martin Corp. (LMT:US) to BAE Systems Plc (BA/) vie to upgrade existing fleets.

Singapore, Taiwan and South Korea are among the countries looking to modernize their aging single-engine combat planes, with several thousand aircraft getting new radar, communications gear and displays in coming years, said Alan Garwood, business development director for London-based BAE.

The F-16 entered service in 1978 and remains in production at Lockheed Martin for clients such as Iraq and Oman even as the defense contractor shifts attention to the replacement F-35 Joint Strike Fighter, the Pentagon’s most expensive project ever. With the program delayed and over budget, modernizing the F-16 may extend by 50 percent the life of a combat jet typically built to fly about 8,000 hours.

“There are some 1,100 F-16s Block 30 and up that qualify for service life extension programs and mission-system updates,” said Mark A. Bobbi, an analyst for defense at IHS Research & Analysis Group. The modernization market may be worth $12 billion through 2022, he said.

The United Arab Emirates operates among the most up-to-date models, the F-16E/F, which participated in the air war in Libya in 2011. By contrast, the U.S., South Korea, and Taiwan programs represent by far the largest share of upgrades to be performed, with more than 600 units of the more than 800 due to be modernized in the coming decade, Bobbi said.

Battle Lines

The battle over who will manage the F-16 upgrades pits many of the same companies against each other that are also contesting sales of new combat jets.

South Korea is weighing a purchase of 60 jets, with Lockheed Martin offering the JSF, Boeing Co. the F-15, and the Typhoon, built by the Eurofighter Jagdflugzeug GmbH joint venture involving BAE, also in the running. The government last week announced a delay in awarding the contract as it sought lower prices.

Lockheed Martin, maker of more than 4,000 F-16s flown by 26 air forces, will manage the upgrade of U.S. Air Force fighters and expects to build on those ties to win business overseas, said Pat Dewar, head of the newly established Lockheed Martin International unit. Taiwan is set to follow the U.S., he said.

Electronics Upgrade

“The governments that want to have the U.S. common configuration will be working with us,” he said. “The tie and the relationship with the U.S. Air Force is extremely important for most air forces and that is certainly one of the elements of our value proposition.”

BAE Systems, Europe’s largest defense contractor, was selected last year by South Korea to upgrade 130 F-16s, with final negotiations continuing. Other candidates for the upgrade include European air forces flying the F-16, including Denmark and the Netherlands, Garwood said.

Boeing is “definitely interested” in pursuing F-16 upgrades as well, Chris Raymond, head of business development at the Chicago-based planemaker’s defense unit. said during the Paris Air Show last month. Boeing, maker of the rival F/A-18 and F-15 jets, would draw on experience it gained converting F-16s into target drones, Raymond said.

Defense electronics makers also have a stake in the upgrade. Raytheon Co. (RTN:US) and Northrop Grumman Corp. (NOC:US) have developed advanced radars to let F-16 pilots see further and track more targets. Raytheon won the first contest to supply its sensor to South Korea and is now awaiting the outcome of other campaigns, Chief Financial Officer David Wajsgras said in Paris.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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Companies Mentioned

  • LMT
    (Lockheed Martin Corp)
    • $196.43 USD
    • 0.66
    • 0.34%
  • RTN
    (Raytheon Co)
    • $110.47 USD
    • 0.29
    • 0.26%
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