BAE Butts into Lockheed’s $3 Billion F-16 Servicing Work

January 8, 2013

BAE Systems Plc (BA/) is encroaching on a $3 billion market for F-16 upgrades dominated by Lockheed Martin Corp. (LMT), which makes the fighter jets.

BAE last year beat the Pentagon’s biggest contractor for a deal to refurbish about 130 of South Korea’s jets. It was the first time a company other than Lockheed has won such work through the U.S. Foreign Military Sales program, according to Dave Herr, president of BAE’s support solutions business.

Now, London-based BAE wants to boost international sales by taking even more of Lockheed’s F-16 business. “We’re looking at potentially where to take this next,” Herr said in a phone interview. “It’s a big opportunity for us.”

Shrinking defense budgets in the U.S. and Europe and a lack of affordable new fighter jets have heightened competition for aircraft upgrades, said Kevin Brancato, a Washington-based defense analyst at Bloomberg Government. For Lockheed, this means defending its turf from rivals that may soon include Boeing Co., the Pentagon’s No. 2 contractor.

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