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Aviation History
1990
1990 - 2126.PDF
N EWS A NALYSIS BY JOHN BAILEY Losing the development con tract for the US Navy's P-7A maritime patrol aircraft, although painful, may ultimately prove to be something of a blessing in disguise for Lockheed. The $600 million fixed-price contract, awarded in January 1989, had into turned a major headache for the company, gen erating a $300 million write-off by the fourth quarter of last year, and provoking a prolonged wran gle with the Navy over terms and conditions. If production had gone ahead under the Navy's terms, Lockheed would have in curred a loss "comparable to or more than" the original write off, according to chairman Daniel Tellep. The cancellation, although ap parently costing Lockheed up to $5 billion in Navy business, with foreign orders to follow, leaves the P-7's mission intact. The Navy will still have to find an aircraft to replace its fleet of P-3C Orions in the maritime patrol role by early in the next century, while most of Lock heed's nine foreign P-3 custom ers will eventually require follow- on aircraft. Analyst Lawrence Harris, of the Los Angeles stockbroking firm Bateman Eichler, says: "The cancellation of the P-7 is unfor tunate, but the development por tion of the programme was being conducted at a $300 million loss. It was also likely that the initial production lots would have been completed at no better than a break-even basis, so from a fi nancial perspective it is probably just as well that the programme is terminated at this point." Although the Navy has not yet announced any decision as to how it will replace the aircraft, the current squeeze on defence spending makes it highly un likely that the service will re open the competition for the P-7, originally known as the long-range air anti-submarine warfare-capable aircraft (LRAACA). Lockheed's P-3 de rivative design was chosen ahead of two much more expensive alternatives, both derivatives of commercial aircraft, the Boeing 757 and McDonnell Douglas MD-90. Although Lockheed's pricing estimates eventually proved over- Lockheed P-7 is consigned to the history boohs LOCKHEED LOSES TO SURVIVE ambitious, Harris says: "It should be noted that it is un likely that the Navy will go ahead with an alternative contract, since any other company that would bid on this programme would bid in such a way as to ensure a profit, given the fixed-price con tract environment. The Navy's best option is to upgrade the existing P-3C with the Boeing Update IV avionics, and make other modifications to the airframe as necessary to extend its useful life". Lockheed plans to shut down the P-3 line after deliver)' of the final aircraft, a Canadian CP-140 Arcturus, in September 1991, and has, so far, heard nothing to alter that decision. The company says: "The Navy has said nothing to Lockheed about what its fu ture plans might be. The fact is that when we build the last P-3 on order, the line will cease to function, because we are not going to build white-tailed P-3s in the hope that we can sell them in the future. The P-3 produc tion line will exist only as long as "Lockheed is not going to build white-tailed P-3s in the hope that it can sell them in the future" there are orders for the aircraft." If the Navy does decide to extend production of the P-3, no quick announcement would be necessary, because Lockheed planned to move P-7 production to Marietta, Georgia, and would probably base any continued P-3 production there as well. Given the requirement to keep costs down, any structural modifica tions to increase the P-3's pay- load would be minimal, and would probably involve re- engining the aircraft, possibly with the T407 turboprops in tended for the P-7. Boeing, which was under con tract to retrofit the Update IV mission avionics package into P-3Cs in advance of the P-7's appearance, says the cancellation of the P-7 will not affect Update IV development for the time being. The company says: "We are scheduled to deliver the first prototype P-3 with Update IV in October 1991. We have an agree ment for some follow-on pro duction work beyond that, but those numbers are being dis cussed with the Navy." Lockheed states it has not yet 20 FLIGHT INTERNATIONAL 1 - 7 August 1990
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