RAF FAIRFORD, England (Reuters) -The U.S. Air Force said it has reached an agreement with Boeing to supply E-7 Wedgetail airborne warning and control aircraft and played down concerns that the company’s internal crisis would harm its ability to supply the Pentagon.
The tentative agreement covers rapid production of prototypes as the Air Force phases out the E-3 Sentry, or AWACS, airborne warning and control aircraft, and follows reports of disagreements over the price of 737-based Wedgetail planes.
“We reached an agreement with (Boeing)… We got a reasonable price that we can afford,” Air Force Secretary Frank Kendall told reporters at the Royal International Air Tattoo military air show in western England.
A formal contract will be finalized in August, he added.
It’s the first major contract announcement since Boeing agreed earlier this month to plead guilty to a criminal fraud conspiracy charge to resolve a U.S. Department of Justice investigation into fatal 737 MAX crashes more than five years ago.
Experts said the guilty plea, which the families of the crash victims oppose, potentially threatens the company’s ability to secure contracts with agencies such as the Defense Department and NASA, although it can apply for exemptions.
Asked how the plea deal affected the Pentagon’s ability to negotiate with Boeing, Kendall said: “The short answer is no; we continue to do business with Boeing.”
Under US rules, the Pentagon has to assess whether any supplier it does business with is a responsible company.
“We will be working in a coordinated manner… to understand what implications there may be from the court settlement, but I do not anticipate at this time that it will… lead to a significant disruption to our employment,” he said. Andrew Hunter, Air Force assistant secretary for acquisition, technology and logistics, told reporters.
Boeing is the Pentagon’s second-largest contractor and is widely considered to be competing with Lockheed Martin in a strategically important competition to replace the F-22 fighter jet.
The latest deal stems from the Air Force’s efforts to replace Cold War-era E-3s, whose distinctive rotating radar dome allows crews to track targets and direct aircraft in battle.
The transition between the two planes has been delayed amid pricing negotiations, raising some concerns in Congress about capacity gaps.
“We are very pleased to have an affordable foundation for the rapid prototyping program, which is the foundation for the production program going forward,” said Hunter.
Boeing welcomed the deal, which provides a boost to its defense business after a series of cost overruns and delays.
“We are focused on executing well and meeting the needs of our customers,” a spokesperson said.
(Reporting by Tim Hepher, editing by Alexandra Hudson)
