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UTX's Sikorsky Wins $1.24B U.S. Navy Copter Deal

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Sikorsky Aircraft Corp., a unit of United Technologies Corp. (UTX), bagged a $1.24 billion worth contract from the U.S. Navy to develop and build the new U.S. presidential helicopter fleet. The new choppers will replace the Marine One copters, also built by Sikorsky, that presently ferry the U.S. president and executive branch officials.

The Pentagon has been attempting to replace the said fleet for years. A previous program led by Lockheed Martin Corp. (LMT) was terminated by former Defense Secretary Robert Gates, owing to significant cost overruns and failure to meet scheduled delivery deadlines, as well as unrealistic and inconsistent criteria on the part of the Pentagon.

The Contract

Under the deal, Sikorsky will build 6 new choppers as the first stride towards Pentagon’s intended fleet of 21 new helicopters by 2023.

The contract has a fixed-price-plus-incentive structure, wherein a cost ceiling is set, with additional rewards for beating cost targets. Per the contract, Sikorsky will build, test and deliver 6 S-92 helicopters as certified by the Federal Aviation Administration, along with 2 trainer simulators to the U.S. Marine Corps.

The U.S. Navy will order 17 production aircraft in 3 phases, the first of which is expected to commence in early 2019. Sikorsky aspires to deliver these aircraft by 2023.

Sikorsky’s Squad

According to media reports, Sikorsky will spearhead a team comprising of Lockheed Martin, Rockwell Collins Inc. (COL), Honeywell International Inc. (HON), United Technologies Aerospace Systems and L-3 Communications Holdings, for the execution of the helicopter contract.

Fairfield, CT-based General Electric Co. (GE) will reportedly supply engines for the aircraft, while Lockheed will act as the key subcontractor to Sikorsky. The Naval Air Systems Command will manage the project.

S-92 Helicopters

Sikorsky, a global pioneer in designing, manufacturing and servicing helicopters, is Pentagon’s leading helicopter supplier. Its S-92 platform is the most advanced in its civil line and adheres to the most stringent safety requirements. Its advanced health and usage monitoring system facilitates cutting-edge fleet management services.

Presently, the dual-engine, medium-lift S-92 helicopter is employed by ten nations to fly their heads of state. In the last decade, Sikorsky had delivered over 200 S-92 helicopters, with a majority of them serving the global offshore oil and gas industry, and civil search and rescue operations.

United Technologies currently holds a Zacks Rank #3 (Hold).

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