FAIRFORD, England (Reuters) – The U.S. Air Force said it had reached an agreement with Boeing Co to supply E-7 Wedgetail early warning and control aircraft, downplaying concerns that the company’s internal crisis could hurt its ability to supply the Pentagon.
The interim deal includes rapid production of prototypes as the Air Force phases out its E-3 Sentry, or AWACS, early warning and control aircraft, and comes on the heels of reports of disagreements over the price of 737-based Wedgetail aircraft.
“We have reached an agreement with (Boeing)… we have got a reasonable price that we can afford,” Air Force Minister Frank Kendall told reporters at the Royal International Military Air Show in western England.
He added that the official contract will be completed next August.
It is the first major contract announcement since Boeing agreed earlier this month to plead guilty to a criminal fraud conspiracy charge to resolve the U.S. Justice Department’s investigation into deadly 737 Max crashes more than five years ago.
Experts said the guilty plea, which is opposed by the families of the crash victims, could threaten the company’s ability to secure contracts from agencies such as the Defense Department and NASA, although it may seek waivers.
Asked how the plea deal would affect the Pentagon’s ability to negotiate with Boeing, Kendall said: “The short answer is it didn’t, and we continue to deal with Boeing.”
Under U.S. rules, the Pentagon must assess whether any supplier it deals with is a responsible company.
“We will work in a coordinated manner … to understand what the implications of the plea deal may be, but I do not anticipate at this point that it will … result in a significant disruption to our contracting,” Andrew Hunter, assistant secretary of the Air Force for acquisition, technology and logistics, told reporters.
Boeing is the Pentagon’s second-largest contractor, and is widely reported to be competing with Lockheed Martin (NYSE:) in a strategically important competition to replace the F-22 fighter.
The latest deal comes as the Air Force seeks to replace its Cold War-era E-3s, whose distinctive rotating radar dome allows crews to track targets and guide aircraft in combat.
The transition between the two aircraft has been delayed amid negotiations over price, raising some concerns in Congress about capability gaps.
“We are very pleased to have an affordable foundation for our rapid prototyping program, which forms the basis for our future production program,” Hunter said.
Boeing welcomed the deal, which would give a boost to its defense business after a series of cost overruns and delays.
“We are focused on good execution and meeting our customers’ needs,” the company spokesperson said.