World | North America

November 23, 2016

Canada seeks to buy Boeing jets as interim defense measure

Canada on Thursday unveiled plans to buy 18 Boeing Corp Super Hornets as a stop-gap measure while it prepared an open five-year competition to replace its aging fleet of fighter jets.

Procurement Minister Judy Foote told a news conference the government would launch immediate talks with Boeing for the Super Hornets, in a victory for the U.S. plane maker if the order goes ahead.

One defense contractor said the choice could be interpreted as giving Boeing a long-term advantage but Foote, speaking in a phone interview, later said Ottawa would run "a real, open, transparent competition" where any firm could compete.

The decision on how to replace Canada's CF-18 jets - some of which have been flying for 35 years - is politically sensitive and has been repeatedly put off.

Defence Minister Harjit Sajjan said the CF-18s could no longer meet Canada's international military commitments.

"Because they were not replaced, we now have a capability gap ... we need additional planes as soon as possible for an interim period," he told the news conference.

The former Conservative administration said in 2010 it would buy 65 Lockheed Martin Corp F-35 jets for C$9 billion ($6.7 billion). During last year's successful election campaign, the Liberals vowed not to buy the planes on the grounds they were too costly.

Sajjan said Canada would remain a member of the nine-nation consortium that helped fund development of the F-35.

Lockheed Martin said that while it was disappointed with the choice of an interim fighter it was "confident the F-35 is the best solution", according to a statement.

Ottawa insists the winner of the open competition must provide industrial benefits to Canadian firms. It also wants the companies to have a chance of getting work from the interim order with Boeing, Foote said.

Boeing will try hard to give Canadian companies contracts that would equal the total amount Ottawa pays for the 18 Super Hornets, said Scott Day, spokesman at Boeing Defense.

Foote said talks would start immediately with Boeing though a final decision would only be made once the discussions were over. Sajjan, though, said he was confident the Boeing plane met Canada's requirements.

The government declined to answer any questions on cost, in particular whether the money set aside for the interim order would come out of the initial budget for the planes.

Boeing's stock rose after the announcement and closed up 1.7 percent at $149.52, while Lockheed Martin shares pared gains to end the day at $264.66, up 0.5 percent.

Text by CNBC
 

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