Boeing Co., the world's largest aerospace company, was "deeply disappointed" to learn it lost a potential $7.7 billion deal to supply South Korea with 60 fighter jets, a spokeswoman said.
The Chicago-based company was widely expected to win the competition with an offer for its newly upgraded F-15SE after the country rejected bids for European Aeronautic, Defence & Space Co.'s Eurofighter Typhoon and Lockheed Martin Corp.'s F-35.
But in a stunning reversal, South Korea opted against Boeing's offer -- the cheapest of the three -- because of the need for stealth aircraft amid recent provocations by North Korea, according to an article today by the Yonhap News Agency, the country's largest news organization.
"Boeing is deeply disappointed by the Republic of Korea’s Defense Acquisition Program Executive Committee decision," Amy Horton, a spokeswoman for the company, said in an e-mailed statement.
"Boeing has rigorously followed the Defense Acquisition Program Administration’s instructions throughout the entire process," she said. "We await details from DAPA on its basis for the delay while evaluating our next options."
The company had pitched an upgraded version of the F-15 known as the Silent Eagle, with such improvements as stealth coatings and treatments for lower radar visibility, as well as redesigned fuel tanks for internal weapons carriage.
The panel's decision was apparently influenced by the recent actions of North Korea under the regime of Kim Jong Un, which earlier this year tested a nuclear bomb, pledged to restart a nuclear reactor and threatened to attack U.S. allies in the region. After the underground detonation in February, the U.S. military flew stealth aircraft, including F-22 fighter jets and nuclear-capable B-2 bombers, over the South in a show of force against the North.
"A majority of the committee members agreed to reject (F-15 SE) and restart the project, taking into consideration the recent security situation including North Korea's third nuclear test and latest aerospace technology development," defense ministry spokesman Kim Min-seok said, according to the article. "They agreed that South Korean Air Force needs fifth-generation combat jets to keep pace with the latest trend and to deter provocations by North Korea."
The reference to fifth-generation will certainly be welcomed by Bethesda, Md.-based Lockheed, whose F-35A was initially knocked out of the competition because of its higher cost. The F-35 Lightning II and the F-22 Raptor are the two fifth-generation fighters in the U.S. arsenal.
Lockheed "will continue to support the U.S. government in its offer of the F-35A to Korea," Eric Schnaible, a company spokesman, said in an e-mailed statement.
EADS, meanwhile, plans to restart discussions with South Korea and improve its bid, according to Bloomberg News.
South Korea now plans to restart the program, complete with an updated budget, quantity of planes and technical requirements. The selection process may take another year. The country's air force already flies American-made aircraft, including F-15K Slam Eagles made by Boeing and F-16 Fighting Falcons made by Lockheed. It also operates aging fleets of F-4s and F-5s.
Boeing investors weren't as fazed by the news. Shares of the company rose 1.3 percent to close at $119 in New York.
