Boeing says optimistic about extending fighter line

By Andrea Shalal

WASHINGTON (Reuters) - Boeing Co (BA.N) said on Tuesday it was optimistic about extending production of its F/A-18E/F and EA-18G fighter jets beyond 2017 given possible foreign orders and U.S. Navy officials' recent statements about the need for more planes.

Dan Gillian, who runs both fighter programs for Boeing, told Reuters the company expected Denmark to announce the outcome of its fighter competition in June or July, and that a Middle East order could come as early as the second quarter.

Boeing has been pursuing a possible order from Kuwait for years for an uncertain number of jets to be built in 2018.

Gillian said Boeing needed to decide by midyear, even before Congress passes a budget for fiscal 2016, whether to continue to support the production of the aircraft, or prepare for its closure after current orders run out at the end of 2017.

But he said the current difficult U.S. budget environment and the threat of resumed congressional budget caps in fiscal 2016 meant Boeing was unlikely to be as bullish in supporting the fighter line as it was during the last years of the C-17 production line in Long Beach, California.

"I'm optimistic about extending production and building more airplanes, but you have to make a balanced decision about where to put all your eggs," Gillian said in an interview.

"It’s a very tough budget environment ... and I don't think that you'll see Boeing do what we've done perhaps in the past," Gillian said. "Business risk is business risk."

Northrop Grumman Corp (NOC.N) is a key supplier to Boeing on the F/A-18 and EA-18G jets, which are expected to remain in service through 2040, flying together with the new F-35 fighter jets built by Lockheed Martin Corp (LMT.N).

Boeing is also working on a range of upgrades for the jets.

Gillian said Boeing would decide in coming weeks whether to mount another major lobbying campaign for the production line.

U.S. Chief of Naval Operations Admiral Jonathan Greenert said on Tuesday he expected to complete work this week on a list of "unfunded priorities" for Congress that may include some F/A-18E/F Super Hornet fighter jets.

He said the Navy faced a possible shortfall of two to three squadrons of strike fighters, or up to 36 airplanes, on aircraft carriers in the 2020s, given problems with servicing older F/A-18 aircraft, also called legacy Hornets.

But it remains unclear whether Congress will fund any additional Boeing aircraft given competing demands for resources and uncertainty about whether lawmakers will agree to lift congressional budget caps that are due to go back into effect in fiscal 2016.

Boeing signed a memorandum of understanding with the Navy in December about slowing production to two planes a month from three, beginning in the first quarter of 2016, which would help extend production through the end of 2017, Gillian said.

He said Boeing planned to avoid layoffs through attrition and shifting workers to other programs.

Gillian said the company hoped to sign a contract with the Navy in the second quarter for 15 EA-18G electronic attack planes funded by Congress in the fiscal 2015 budget.

(Reporting by Andrea Shalal; Editing by Peter Cooney)