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U.S. arms companies see rising foreign demand

06/19/2013 | Reuters

PARIS (Reuters) - U.S. arms makers see rising foreign demand for fighter jets, missile defense systems and other weapons as countries modernize their forces and U.S. officials, facing tighter budgets, encourage allies to invest more in intelligence gathering and aerial refueling equipment.

U.S. Air Force arms sales doubled from 2005 to 2011 and will likely remain strong in coming years, a senior Air Force official said at the Paris air show on Monday.

The Paris gathering, which occurs every other year and is celebrating its 50th anniversary this year, has been dominated by the yearly scramble by Boeing Co (BA.N) and Airbus (EAD.PA) for commercial airplane orders, while the participation of U.S. military aircraft was prevented by across-the-board budget cuts.

But in meeting rooms and receptions across Paris and the Le Bourget airfield, U.S. executives and government officials say they can barely keep up with demand for briefings on military helicopters, fighter jets, missile defense systems, satellites and unmanned planes.

Heidi Grant, deputy undersecretary of the Air Force for international affairs, said that Air Force arms sales doubled from $4.7 billion in 2005 to $10.5 billion in 2011, before vaulting to $38.3 billion in 2012 because of a huge F-15 sale to Saudi Arabia. Grant said she expected Air Force arms sales to remain around $10 billion in the foreseeable future.

The Air Force currently oversees 2,800 foreign military sales cases valued at $138 billion in 100 countries, she said. "I see the caseload and the dollars continuing to increase."

William Swanson, chief executive of Raytheon Co (RTN.N), told Reuters in an interview that he and his top executives had planned 162 meetings over the coming days. "We are overbooked."

Raytheon expects its international sales to generate about 30 percent of revenues in coming years, up from around 26 percent now, he said.

"We see it from the point of view of growing our business and not shrinking our domestic (revenues) so the international goes up automatically," Swanson said. Raytheon hopes to conclude negotiations soon with several countries, including Kuwait, Qatar and Turkey for billions of dollars worth of missile defense systems and other equipment, he added.


Other U.S. companies including Sikorsky Aircraft, a unit of United Technologies Corp (UTX.N), say international sales may soon account for half or more of their annual military aircraft revenues.

The Air Force's Grant, who meets regularly with air defense chiefs from other countries, said mounting pressure on the U.S. defense budget made it more important for U.S. allies to increase their ability to carry out intelligence, surveillance and reconnaissance missions, as well as aerial refueling.

She said selling U.S. fighter jets and other weapons to U.S. allies laid the groundwork for closer military ties with the United States. She cited strong demand for Boeing's C-17 transport plane, Lockheed Martin Corp's C-130J transport, and the MQ-9 Reaper, an unmanned plane built by privately held General Atomics, which is based in San Diego.

"When they do choose the U.S. it establishes a 20-plus year relationship with the United States," Grant told Reuters in her first media interview since moving into the job three years ago.

Grant has been actively pressing for a U.S. winner in two multibillion dollar fighter competitions in Brazil and South Korea that are expected to wrap up this summer.

Boeing's F-15 fighter, Lockheed Martin Corp's F-35 fighter jet and the Eurofighter Typhoon, built by BAE Systems (BAES.L), European aerospace group EADS and Italy's Finmeccanica SpA (SIFI.MI), are competing for the South Korea order, which industry executives expect to be awarded in mid-July.

In Brazil, Boeing is hoping to sell its F/A-18 Super Hornet in a deal that would mark a significant jump in the security and strategic relationship between the two countries.

Chris Raymond, vice president of business development for Boeing's defense unit, said his company saw good prospects in Brazil for unmanned planes, infrastructure security and even satellites, as well as for fighter jets.

Chris Chadwick, president of Boeing's military aircraft division, also cited strong demand for the company's helicopters and the V-22 tiltrotor it builds together with Bell Helicopter, a unit of Textron Inc (TXT.N). He said the company could also sell 100 to 200 of its KC-46 refueling tankers to international customers in coming years.

Lockheed Martin also sees big export opportunities for its new F-35 fighters, as well as its C-130J transport planes, company officials told Reuters.

Jack Crisler, vice president of new business for Lockheed's air mobility, special operations and aeronautics programs, said the company was forecasting 150 to 200 additional C-130J sales over the next decade.

Steve O'Bryan, vice president of Lockheed's F-35 program, said he was upbeat on the fighter jet's prospects in the South Korea competition, and in Canada and Denmark, which helped to fund the plane's development but are re-examining their options.

"International is becoming a larger and larger part of Lockheed's overall business," he told Reuters in an interview.

(Reporting By Andrea Shalal-Esa; Editing by Edmund Klamann)

(This June 17 story was refiled to clarify when arms sales doubled in the second paragraph and replaces erroneous total in the fifth paragraph and adds further clarification)

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