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A-12 settlement won't extend Boeing's F/A-18 production line

By Andrea Shalal-Esa

NEW YORK (Reuters) - A settlement of a dispute over the canceled A-12 aircraft calls for Boeing Co to build three more EA-18G electronic attack planes for the U.S. Navy, but those jets will not extend the F/A-18 production line in St. Louis, according to Navy officials and company executives.

A new report by the Pentagon's top arms tester, meanwhile, criticized the Navy for failing to address longstanding deficiencies with the radar used on the F/A-18E/F model of the plane. It said the jet could not be effectively used in certain "threat environments," although details were classified.

The EA-18G electronic attack planes, by contrast, were proving operationally effective, the report said.

The U.S. Justice Department announced a $400 million settlement agreement with Boeing and General Dynamics Corp last week that includes providing the additional jets, which will be paid for by Boeing.

U.S. Navy officials this week said the planes would be built along with 21 Growlers already being funded in fiscal year 2014 and delivered in calendar year 2016.

Boeing officials said the additional jets would not extend production of the F/A-18 line beyond the currently planned date of the end of 2016.

The company is awaiting details of the Pentagon's budget plan to fiscal 2015 to see if any additional orders for F/A-18s or EA-18Gs will be included, although Pentagon officials have repeatedly said they do not plan additional orders.

Loren Thompson, analyst with the Virginia-based Lexington Institute, said he expected Boeing to launch a massive lobbying campaign to get more F/A-18s, also called Super Hornets, or electronic attack variants, added to the 2015 budget.

"Boeing is determined to get more Super Hornets into the defense budget because if that doesn't happen, they will soon have no fighter production line in the whole company," he said.

Thompson said the company faced an uphill climb, given continued pressure on military spending.

"In a budget environment where defense spending is capped, any money spent on a new initiative has to come out of some other program, which makes this an Olympic-scale selling job on Capitol Hill," Thompson said.

REDUCED RELIABILITY

The report by Michael Gilmore, chief U.S. weapons tester, said the plane's Active Electronically Scanned Array (AESA) radar continued to have software issues that reduced its reliability. Copies of the report circulated in Washington on Tuesday ahead of its formal release on Wednesday.

"Although the F/A-18E/F Super Hornet weapon system continues to be operationally effective and suitable for many threat environments, it has critical shortfalls," the report said, citing recent software and radar assessments.

It released no details on which environments posed problems, citing a separate classified report.

It said operational testing had not yet shown a statistically significant difference between the new radar and older systems used on earlier jets.

Boeing had no immediate comment on the Pentagon report.

Boeing says it needs to build about two F/A-18s a month to ensure economical production rates, which would require a foreign order, or a new U.S. order valued at just under $2 billion.

Canada, which helped fund development of Lockheed Martin Corp's F-35 fighter, is expected to make decisions in coming months about whether to proceed with F-35 orders or launch a new tender that could result in orders for the F/A-18 or other fighter planes.

Boeing's F-15 fighter line, also in St. Louis, is slated to continue through 2018, buoyed by a large Saudi Arabian order.

(Reporting by Andrea Shalal-Esa; Editing by Stephen Powell and Ron Popeski)

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