AIRSHOW-UPDATE 1-Boeing defense sees moderate sales growth

* International sales to expand to 25 pct of revenue

* Export reforms needed

* Strong demand for C-17 cargo planes

By Andrea Shalal-Esa

FARNBOROUGH, England, July 18 (BestGrowthStock) – Boeing Co’s
(BA.N: ) defense business expects moderate growth in revenue next
year after relatively flat results in 2010, said Dennis
Muilenburg, president of Boeing Defense, Space and Security.

Boeing’s defense revenue would be bolstered by
international sales of existing planes, as well as expansion
into adjacent markets such as unmanned vehicles, offsetting the
loss of several big Boeing programs canceled by the Pentagon
last year, Muilenburg said ahead of the Farnborough Airshow.

The company is also locked in fierce competition with
Europe’s EADS (EAD.PA: ) and a team including Ukraine’s Antonov,
to build 179 refueling tankers for the U.S. Air Force.

The competition is worth up to $50 billion, and the
Pentagon is expecting to award a contract sometime this fall.

“We expect to see a return of moderate growth next year,”
Muilenburg told reporters.

He said nine acquisitions in recent years, rotorcraft
sales, and international arms sales had all helped to offset
the loss of the Future Combat Systems Army modernization
program and some missile defense programs that were canceled or
scaled down by Defense Secretary Robert Gates last year.

Boeing strongly supported the Pentagon’s drive to lower
overhead costs in weapons programs, and had been aiming to trim
fat from its programs for years, Muilenburg said. But he
expressed concern about declining Pentagon investment in
research and development of future weapons programs.

For now, Boeing and other companies were funding research
on their own to keep advanced design teams working, but at some
point that would no longer be sustainable, said Chris Raymond,
Boeing’s vice president for business development.

Twenty years ago the aerospace and defense sector had more
than 10 new development programs at any given time, but that
number had dwindled to just over a handful during the last
decade, and the flow was now down to one or two, Muilenburg

That made it tough to recruit new talent and posed a “real
challenge” to the industry, he added.

Muilenburg said reforms of cumbersome U.S. export
regulations were also sorely needed to help support the growing
importance of exports.

Given flat U.S. defense budgets, Boeing’s goal was to
expand international sales to make up about 25 percent of
defense revenues, up from 16 percent currently, he said.

But the overall split of commercial and military revenues
would remain around 50-50 with the larger Boeing company.

Mark Kronenberg, vice president of international business
development, cited strong overseas demand for the C-17 cargo
plane, and said Boeing expected to sell about 30 more of the
troop- and cargo-transporters in the next five years.

That number includes an order of 10 planes that has already
been announced for India, enough business to extend production
through 2013, Muilenburg said.

Until the deal was signed, he said Boeing was investing its
own money to keep critical suppliers on board.

He said Boeing was also in talks with Britain and buyers in
the Middle East and Asian-Pacific regions about the C-17.
(Andrea Shalal-Esa in Farnborough; +1 202 898 8400,
[email protected]; editing by Gunna

AIRSHOW-UPDATE 1-Boeing defense sees moderate sales growth