Tuesday, March 31, 2015

Northrop: Euro Hawk Program Not Dead Yet

Defense contractor Northrop Grumman (NYSE: NOC  ) today clarified the status of a proposed $1.3 billion deal to sell Euro Hawk unmanned aerial vehicles to the German government.

In a telephone interview, Northrop Director of Communications Tim Paynter said media reports describing Germany's cancellation of the contract are inaccurate. Regarding reports that the company refused to share technical data needed by German regulators to approve the drone system for flight in civilian airspace over Germany, Paynter countered that Northrop granted the German government "unlimited access" to more than 4,000 documents.

Additionally, reports of the death of the deal may have been greatly exaggerated. According to Paynter, Northrop has not yet received official notification from the German government that it is canceling the Euro Hawk program. Indeed, Northrop is still "working with the German government ... to define a path forward for the program," and the program is expected to come up for official discussion at a meeting of the Bundestag Defence Committee on June 5.

Euro Hawk is an unarmed surveillance drone derived largely from Northrop's RQ-4 Global Hawk HALE UAS -- an acronym denoting a "high-altitude, long-endurance unmanned aerial system." Based on the Block 20 Global Hawk configuration, the Euro Hawk measures 131 feet wingtip to wingtip, is 48 feet long and 15 feet tall. It flies at altitudes as high as 60,000 feet and can remain airborne longer than 30 hours before needing to refuel.

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Embraer Lands Potential $8.2 Billion SkyWest Contract

More and more often, when a U.S. airline buys a new airplane, it's Brazil that gets the money.

On Tuesday, this happened again, when Brazilian planemaker Embraer (NYSE: ERJ  ) announced that it has received a firm order from United Continental (NYSE: UAL  ) feeder airline SkyWest (NASDAQ: SKYW  ) for the purchase of E175 aircraft.

Embraer notes that SkyWest may buy a further 60 planes, conditioned on SkyWest's securing "capacity purchase agreements," such as the one it has with United, with other major U.S. airlines. Finally -- and increasing the total potential size of this contract to a level five times the original announcement -- Embraer says SkyWest has optioned a further 100 E175s.

For now, Embraer is putting only the first 40 planes in its backlog. But if all goes well, this contract could be worth $4.1 billion (at list prices) for the first 100 planes, and an additional $4.1 billion for the next 100.

Embraer's E175 jet is a dual-class, 76-seat regional airplane. With more than 150 planes in service already, it is flown by 60 airlines based in 40 countries around the globe.