Why the Air Force Wants to Buy Boeing's Aging Fighter

https://finance.yahoo.com/news/why-a...131400075.html

The Pentagon's annual budget request is a shopping list featuring some of the
most sophisticated, cutting-edge technologies available on the planet. But one
item that stood out in this year's request was the military's embrace of a
1960s-era fighter jet that the Air Force said it intends to acquire in
significant quantities in the years to come.

The Air Force has proposed buying up to 80 Boeing (NYSE: BA) F-15 fighters at a
total cost of nearly $8 billion over the next five years. The F-15 was developed
by eventual Boeing acquisition target McDonnell Douglas in the late 1960s but
has not been purchased by the U.S. military for nearly 20 years.

To be clear, this is not just 1960s technology. Through the years, Boeing has
continued to modernize the design; in 2015, it unveiled upgraded electronics and
other improvements that the company says should keep the fighter relevant
through 2040. But given the Pentagon's many options, the F-15 request is a
surprise, especially since the Air Force also wants to keep the pace of buying
the newer and more advanced Lockheed Martin (NYSE: LMT) F-35 flat.

There's a lot of palace intrigue surrounding the decision, and it's difficult to
predict whether this request will eventually be funded by Congress. But some of
the commentary about the decision by military officials provides valuable
insight into the way the Pentagon operates, and it helps lay out the bull case
for investing in defense stocks.

Finding the right tool for the job

At face value, the F-15 decision came down to the Pentagon wanting to squeeze as
much military might as possible from limited funding. The Pentagon's
explanation, as contained in its budget acquisition summary, is that the F-35
and the smaller F-22 Raptor are too valuable and too expensive to operate
against certain lesser threats.

The purchase, according to the Pentagon report, "reflects the Department's
strategy to layer capability to address different threat situations." The
government is buying F-35s "to address advance technology aircraft being
deployed by Russia and China," the report says. But to defeat lower-technology
platforms, it wants to use older designs "which nominally have lower operating
costs when compared to 5th generation combat jets such as the F-22 and the
F-35."



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