Here’s a New Flight for GE and Lockheed Martin
On Wednesday morning, two large aeronautics companies announced major aircraft orders, Lockheed Martin (NYSE:LMT) and GE Capital Aviation Services, the commercial aircraft leasing and financing arm of General Electric (NYSE:GE).
According to a report published in Reuters, senior-level negotiations between the Pentagon and Lockheed Martin for a fifth shipment of F-35 fighter planes are approaching an agreement.
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Lockheed has already begun construction on the fifth batch of fighter planes under an earlier contract that provided preliminary funds, but the manufacturer needs to finalize the contract in order to finish the job.
Negotiations have been held up due to disputes over price, and a small amount of animosity on both sides has tainted the discussions as well. The government has pressing Lockheed for more information on its cost structures than in previous contract discussions. According to Reuters, Lockheed Chief Executive Robert Stevens told investors early this year that the company had been required to provide thousand of extra pages of information beyond the bid it originally submitted.
In turn, Pentagon officials have argued that Lockheed was late with some of the data and has been reluctant to provide the amount of detail the government requires. Furthermore, at the annual Air Force Association conference in September, the deputy F-35 program manager, Air Force Major General Christopher Bogdan, said relations between Lockheed and the government were the worst he had ever seen. He also criticized the manufacturer’s performance on the $396 billion F-35 Joint Strike Fighter.
However, while most issues have now been resolved, the two sides still disagree over $100 million in costs. Lockheed, who accepted terms it considered too ambitious for the fourth batch of jets, remains concerned that government costs goals cannot be achieved.
While cost disputes have delayed Lockheed’s government contract, the commercial aircraft leasing and financing arm of General Electric, GE Capital Aviation Services or GECAS, has had no such problems.
General Electric has finalized an order for eighty-five 737 Boeing (NYSE:BA) airplanes, worth approximately $6 billion. The order, which was first announced at the Farnborough Airshow in July, also allows for up to 15 additional 737-800s.
“The 737 MAX will be a perfect complement to our broad portfolio of modern, fuel efficient aircraft that offer our airline customers the lowest operating costs,” GECAS President and CEO Norman C.T. Liu said Wednesday in a statement. GE Capital Aviation Services has a fleet of over 1,710 owned and serviced aircraft, with approximately 235 airlines in over 75 countries.
With this order, GECAS has ordered 580 airplanes directly from Boeing since 1995.
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