The future of plane-making in St. Louis took another hit Tuesday when South Korea turned down Boeing Co.’s bid to sell 60 F-15s.
Despite upgrades to the decades-old warplane, military officials in the Asian nation said they’d decided they needed a stealthier, more-sophisticated jet to counter threats from North Korea. So they decided to put the $7.7 billion contract back out to bid.
It’s a surprising reversal. Boeing had been widely favored to win the job after it provided the only one of three proposals that met South Korea’s budget. It’s also a blow to the future of the F-15, which now faces a dwindling pool of potential customers.
Beyond a contract to build 84 for Saudi Arabia through 2020, it’s not clear who else wants to buy the plane, which has been a staple of the U.S. Air Force fleet for decades but now is built just for foreign allies.
Of those allies, South Korea was the biggest fish on the line. A 60-jet order would probably have extended production by several years, protecting an estimated 2,000 area jobs, though Boeing last week wouldn’t say exactly how many of the planes it would build annually.
The company said Tuesday that “interest remains high” from countries in the Middle East and Asia. But defense analyst Richard Aboulafia of The Teal Group said any new orders would probably be small.
“It’s always been a very limited user pool,” he said, noting that only five countries, including the U.S., fly the F-15. “I don’t think you’re going to add a new user at this point. Maybe the Saudis will buy a few more. Conceivably a few more for Singapore. That’s it.”
Part of the issue is this: Even as foreign sales become even more important to the bottom line at Boeing’s St. Louis-based defense unit, foreign allies are becoming more willing to throw in their lot with Lockheed Martin’s F-35 Joint Strike Fighter. Japan and Israel, which also fly F-15s, have already placed F-35 orders. Just last week the Netherlands agreed to buy 35 for $6 billion.
After years of delay and huge cost overruns, the F-35 has started to make more consistent progress in the last year, Pentagon officials say, lowering costs and hitting benchmarks on flight tests. That has industry executives anticipating a wave of international orders from countries choosing the so-called “fifth generation” F-35 over cheaper, better-established options such as the F-15 or F/A-18 Super Hornet.
That appears to be the decision South Korea is making.
Lockheed Martin’s F-35 and Eurofighter’s Typhoon were both in contention for the contract, but both were knocked out when they couldn’t meet budget requirements. Still, as South Korea’s decision date neared, some in the country urged the Defense Ministry to reconsider, including 15 retired Air Force chiefs of staff who urged President Park Geun-hye to buy a stealthier plane capable of striking targets in neighboring North Korea, if necessary.
On Tuesday, a spokesman for the South Korean Defense Ministry said officials there ultimately decided their nation needed better air power in line with an international trend to develop “fifth generation” fighters, and said the rejection of Boeing’s bid was made in consideration of North Korea’s nuclear weapons program and other factors.
“It’s pretty simple,” said defense analyst Loren Thompson at the Washington-area think-tank The Lexington Institute. “You can’t let cost decide the outcome of a weapons competition when national survival is at stake. The F-15 has better price. The F-35 has better performance.”
Korea will re-bid the contract and now hopes to make a decision next year. Given the close ties between the two nations, they are widely expected to buy an American-built plane. Thompson said he expected Lockheed would offer the F-35 at a lower price, and perhaps South Korea would buy fewer than originally planned. Aboulafia generally agreed.
“This seems to be heading in the F-35’s direction,” he said. “But until we get clarity on what’s political and what’s a change in requirements, it’s hard to say for sure.”
Boeing, for its part, said it was “deeply disappointed” in South Korea’s decision. The company has made no decision yet on whether to re-bid.
“We await details from (the Korean Defense Ministry) on its basis for the delay while evaluating our next options,” Boeing said in a statement.
The Associated Press contributed to this report.
