Boeing defense sees moderate sales growth

By Andrea Shalal-Esa

FARNBOROUGH, England (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 said.

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)

Boeing defense sees moderate sales growth