This decade-plus long contract will not only boost the might of the US Air Force, but will stuff the wallets of investors’ who buy into these critical technology stocks…
It’s going to be the biggest overhaul to the Air Force in recent memory.
Hard to believe, but it’s been almost fifty years since the last of the mammoth Boeing (NYSE:BA) KC-135 refueling planes were introduced into the Air Force fleet.
These giant airliners were tasked with refueling fighter jets and bombers during the Vietnam War and later during Operation Desert Storm.
More than 700 of them were manufactured — and shockingly, a few hundred are still in service to this day.
Some studies have concluded that many of them are actually capable of being flown until 2040.
But as the speed of technology would have it, the existing KC-135s are clearly past their prime and getting increasingly expensive to maintain.
The Air Force did make a slight improvement to its fleet of refuelers in the 1980s when 60 McDonnell Douglas KC-10 tankers were built.
However, the KC-10s only make up a fraction of the 480 refuelers that continue to service the military’s aircrafts today (which goes to show how vital the old KC-135s are, despite their high maintenance costs).
If anything, the time to replace the aging tankers is long overdue. At this point, the cost effectiveness of having new planes in service is a no-brainer.
Thankfully, the Air Force recognized this early and in 2011, the decision was finally made to begin the process of retiring its half-century old fleet.
Introducing the Boeing KC-46 (see image above).
A military version of Boeing’s 767 commercial airliner, the KC-46 was selected by the Air Force to replace the oldest of its KC-135s.
It’s larger than its predecessor in nearly every way, along with a higher transfer fuel load and seating for up to 114 passengers (versus KC-135’s 37 seats).
One of the most impressive features is its cruising range, which is about 5-times what the KC-135 is able to fly, thus allowing it to better service other aircraft over longer distances.
The contract calls for Boeing to build 179 tankers, with the first 18 expected to be in service by 2017.
Each plane will cost between $250 and $300 million, bringing the total contract’s value to $52 billion.
No doubt it’s a major win for Boeing, but investors will be happy to know that a number of Boeing’s suppliers are also set to cash in on this huge project.
The Dream Team
According to Boeing, the KC-46 Tanker team will include more than 800 suppliers across 40 states — and provide nearly 50,000 jobs over the life time of the project.
The more notable publicly traded names include:
- Cobham plc (LSE:COB) ~ Davenport, Iowa: Refueling systems, including wing aerial refueling pods and centerline drogue system
- Eaton Aerospace (NYSE:ETN): Electromechanical and cargo door actuation systems (Grand Rapids, Mich.); hydraulic and fuel distribution subcomponents (Jackson, Mich.)
- GE Aviation Systems (NYSE:GE) ~ Grand Rapids, Mich. and Clearwater, Fla.: Mission control system
- Goodrich (NYSE:GR): Interiors (Colorado); landing gear (Ontario, Canada)
- Honeywell (NYSE:HON): Auxiliary power unit (Phoenix); cabin pressure control system (Tucson, Ariz.), air data inertial navigation (Coon Rapids, Minn.); lighting (Urbana, Ohio)
- Moog Inc. (NYSE:MOG.A): Electro-hydraulic servo valves, actuators, stabilize trim controls, leading edge slat actuator, inboard/outboard leading edge rotary actuators, autopilot actuators, elevator feel system (East Aurora, N.Y.; Wolverhampton, UK); refueling boom actuators (Torrance, Calif.)
- Northrop Grumman (NYSE:NOC) ~ Rolling Meadows, Ill.: Large Aircraft Infrared Countermeasures (LAIRCM)
- Parker Aerospace (NYSE:PH) ~ Arizona, California, Florida, Georgia, Michigan, New York, North Carolina, Ohio, Texas and Utah: Refueling components including the receptacle door actuator, aerial refueling interface control system, and wing refueling pod hydraulic power packs; primary flight controls and fuel equipment; pneumatic, fluid conveyance, and hydraulic equipment
- Pratt & Whitney — a subsidiary of United Technologies (NYSE:UTX) ~ Middletown, Conn.: Engines
- Raytheon Company (NYSE:RTN) ~ El Segundo, Calif.: Digital radar warning receiver and digital anti-jam receiver GPS
- Rockwell Collins (NYSE:COL) ~ Cedar Rapids, Iowa: Integrated display system featuring 15.1-inch diagonal crystal displays built on proven technology from the commercial 787; tactical situational awareness system; remote vision system 3-D and 2-D technology for the boom operator; communications, navigation, surveillance, networking and flight control systems
- Spirit AeroSystems (NYSE:SPR): Forward fuselage section; strut; nacelle components to include inlet, fan cowl and core cowl; fixed fan duct (Wichita, Kan.); fixed leading edge (Prestwick, Scotland)
- Triumph Group Inc. (NYSE:TGI): Horizontal stabilizer and aft body section, including pressure bulkhead; wing center section, doors, nacelles and other components including cowl doors, seal depressor panels, acoustic panels and aft wheel well bulkhead
- Woodward Inc. (NASDAQ:WWD) ~ Skokie, Ill.: Several elements of the aerial refueling boom, including the sensor system, control unit, and telescopic and flight control sticks.
While all of them will be happy to see their revenues rise over the next dozen years, investors should pay close attention to the companies that are taking on the more significant and eye-catching components.
Their roles are likely to garner greater media attention, which should help move the needle for investors, granted there are no technical hiccups during production.
In particular, keep an eye on TGI, COL, UTX, PH, and NOC.