P-8 Orders for Boeing Spill Over into Canada

The Boeing (BA) manufactured P-8 Poseidon is the new maritime patrol and anti-submarine warfare aircraft for the U.S. Navy. A version has also been sold to India. The P-8 is based on the 737 commercial airliner and will ultimately replace the Cold War era P-3 Orion aircraft manufactured by Lockheed.

Boeing has recently received the Low Rate Initial Production (LRIP) orders from the Navy and the system is currently undergoing testing at NAS Patuxent River in Maryland. So far the contracts issued for the aircraft are well over $1.5 billion and ultimately 100 of them could be operated by the Navy. India has also ordered 12 of the new aircraft.

As with many new systems Boeing is providing not only the aircraft, but things like spares, support and training. As part of this they recently placed an order themselves with Canada’s CAE (CAE) for six more operational flight trainers to support the U.S. Navy’s program. These OFT are part of Boeing’s recent LRIP order.

The OFT’s along with Desktop Environment Trainers (AeDTE) are key components of the program and will support aircrew transitioning to the new aircraft as well as maintaining proficiency. Due to the high cost of operating aircraft more-and-more services are investing in high fidelity simulators and training devices to aid these efforts while reducing flight time on the actual aircraft.

CAE and its American subsidiary have over the last several years established themselves as one of the premier designers and manufacturers of simulators and training devices like these for the P-8.

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Lockheed Orders C-130J Trainers from CAE

Canada has been investing over the last several years in significant upgrades to its military as equipment from the Eighties ages and the demands of the fighting in Afghanistan have caused requirements for certain systems. Due to its availability and the need for integration with the larger American forces much of the new procurements are coming from the United States.

These include Boeing’s (BA) CH-47 helicopters and Lockheed Martin (LMT) C-130J transports and in the largest contract of all advanced F-35 Joint Strike Fighters to replace their CF-18 fighters. The JSF team is headed up by Lockheed as well.

Because Canada is buying from a non-domestic source they have written into a lot of their contacts offset rules that require a percentage of the value to be spent in Canada. For example Sikosrky, a UTC company, is providing S-92 helicopters to meet a search-and-rescue mission. In recent contract negotiations to settle delays the company agreed to invest a further $80 million in the Canadian economy beyond the initial contract plan.

As part of the massive JSF contract Lockheed will use a Canadian company, Bristol Aerospace, to build components for the aircraft. One advantage of this contract is that even if Canada reduces its buy or ends the contract Bristol Aerospace will still have the opportunity to make parts of the JSF aircraft being purchased by the U.S. and other Allies.

Then there are contracts that will go to Canadian companies anyway. CAE (CAE:TSX) is a Canadian based company that manufactures flight training devices and simulators for civil and military aircraft. It has operations and facilities all over the world including a substantial presence in the United States.

In the last week they announced they had received a series of contracts for simulators and training aids. These include one from Lockheed Martin to build C-130J weapon systems trainer, a fuselage trainer and a loadmaster part-task trainer. No value for the contract was given.

Even though this contract is not a direct result of the Canadian C-130J buy it illustrates how connected that country’s defense industry is to the American and world market. Canada is not making large systems for itself or other customers anymore but it is certainly providing supporting products and is able to use the offsets and investment by larger foriegn contractors to help its domestic defense industry and economy.

Photo from Stephen Edmond’s flickr photostream.

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