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EAC, Australia in Firefighting Deal

Zacks Equity Research

Erickson Air-Crane Inc. (EAC) has entered into a new, multi-year aerial firefighting contract worth $60 million to support National Aerial Firefighting Centre (“NAFC”) operations in Australia. Per the contract, the company in collaboration with Kestrel Aviation will provide six Aircrane helicopters with the option for additional aircraft as required based on fire conditions and pending aircraft availability.

The contract is for three years with two optional one-year extensions. Specifically, per the contract, the company will provide six S-64 Aircrane helicopters, a 2,650-gallon fire suppression system, a detachable water tank with multiple refill options and eight coverage levels for targeted fire suppression.

Initially, two Aircranes will be positioned in Victoria, two in New South Wales, one in South Australia, and one in Western Australia.

To date, this is the largest Australian firefighting contract for the company. In Aug 2013, Erickson Air-Crane and Kestrel formed a partnership to operate the versatile heavy-lift Erickson S26 Aircranes in Australia. Erickson is a leader in high volume aerial firebombing and is currently the largest provider of heavy heli-tanker firefighting aircraft to the U.S. Forest Service.

The combination of Kestrel’s well-equipped fleet with Erickson’s renowned Aircranes, technical expertise and global firefighting experience will provide competent helicopter firefighting capability in Australia. The company has been providing fire fighting services in Australia for 16 years. The contract reflects the company’s excellent track record, high standard of service and cost-effective solution.

Despite the threat of sequestration and the partial U.S. government shutdown, the company has continuously been receiving contracts on the strength of its global aviation services.

In Sep 2013, Erickson Air Crane Inc. signed a Master Agreement with Sikorsky Aircraft Corp., a unit of United Technologies Corp. (UTX), for manufacturing fabricated aircraft assemblies. The contract is priced over $5.6 million. Prior to that, Erickson Air-Crane had entered into a five-year lease contract with Los Angeles County that has an annual value of $2.7 million. The three-year base contract includes two optional years thereafter. Per the contract, the company will provide Los Angeles County a provision for aerial firefighting services, including personnel, equipment, tools, material, maintenance and supervision required to support operations.

Erickson Air-Crane presently has a short-term Zacks Rank #2 (Buy). Other stocks worth considering in the space are Lockheed Martin Corp. (LMT) and Northrop Grumman Corp. (NOC). While Lockheed Martin carries a Zacks Rank #1 (Strong Buy), Northrop Grumman holds a Zacks Rank #2 (Buy).

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