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Hartford Courant January 05, 2006

Pratt May Corner Market On F-35 Engines

Pentagon Plans To End Competing Development Program For Powering Fighter Jet, Sources Report

By Paul Marks

The Pentagon, seeking to trim expenses in its costliest warplane program, plans to make Pratt & Whitney the sole supplier of engines for the F-35 Joint Strike Fighter jet by ending a competing engine development program, according to defense analysts and recent published reports.

The 2007 defense budget, which President Bush is to present to Congress next month, will call for termination of a contract that has the British firm Rolls-Royce and General Electric Co. building a second engine for the F-35, the sources and reports say.

Pratt is developing the F135 engine for the Joint Strike Fighter under a $4.8 billion contract it won in 2001. The $2.47 billion contract for a competing engine was awarded last August with the idea of having competition keep prices lower for U.S. and foreign buyers. The Joint Strike Fighter is to enter service in 2012.

Deputy Defense Secretary Gordon England, in a Dec. 20 memo quoted by Bloomberg News, said that ending the competing engine contract would save an estimated $1.7 billion over five years, ending in 2011.

The Reuters news service reported Tuesday that British Prime Minister Tony Blair has written to Bush, urging him to save the Rolls-Royce contract. Great Britain plans to buy F-35s to replace its AV-8B Harrier "jump jets."

A White House spokesman did not return a call seeking comment Wednesday.

The change would require congressional approval. It is expected to encounter resistance from delegations representing Massachusetts, Indiana and Ohio, where Fairfield-based General Electric has production plants.

On Wednesday, Pratt & Whitney spokesman Mark Sullivan acknowledged reports that the competing engine program may be ended, but declined to comment. Noting that Pratt shipped the first flight-test F135 engine to Lockheed Martin Corp. two weeks ago, he said that "our total focus is on delivering our engines" on schedule.

Washington-based defense analyst Loren Thompson, citing information from senior Pentagon officials at the rank of general and senior defense industry officials, said Wednesday that defense planners "have killed the alternative engine."

The idea, said Thompson, of the Center for Strategic and Budgetary Assessments, a nonpartisan policy research institute, is to curb expenses in the $256 billion Joint Strike Fighter program.

He and other defense analysts said the Pentagon rejected an alternative approach to savings that involved dropping one of three variants of the jet. The Joint Strike Fighter, which will replace the F-16 and other aging warplanes, is designed to make conventional takeoffs and landings for the Air Force, and carrier takeoffs and landings for the Navy. For the Marines, there is a "short takeoff, vertical landing" variant.

Ending the competing engine program, which Congress ordered in 1995, would mean billions of dollars in additional sales for Pratt, Thompson said.

"What it means is that United Technologies' Pratt & Whitney unit would have a monopoly on the most popular military jet engine in the world for the next 30 years," Thompson said. "It's a very big deal."

Pratt has a policy of not disclosing the unit price of its engines because they are often heavily discounted when sold in groups, but Thompson estimated that each F135 engine would cost $5 million to $6 million.

However, he added, "Most of the revenue will come from not the initial sale of the engine, but from that ubiquitous aftermarket [for replacement parts and service] that will last 20 or 30 years" and involve customers around the world. "Each of those engine parts will be replaced two or three times."

General Electric spokesman Rick Kennedy said his company has not heard of the contract being canceled, and is "going full steam ahead" in development of the F136 engine. Testing of the engine is to start in February or March at a plant near Cincinnati, he said.

"We don't really know what's in the Department of Defense budget," he said.

Another Washington analyst specializing in military policy, who spoke on condition of not being identified, said he has seen a draft of the Pentagon budget and confirmed that it cuts the funding for the GE-Rolls-Royce contract.

Bloomberg reported that the memo from England, the deputy defense secretary, said that ending the backup-engine work would save $408 million in fiscal 2007 and $438 million the following year.

Philip Finnegan, an aerospace analyst at The Teal Group, a Fairfax, Va., consultant, said he did not know of the Pentagon's plan to end the backup engine contract, but was not surprised. "It would make sense because they're trying to find ways to save money in the JSF program," he said. "They've looked at whether to cancel a variant ... and this would be a way of saving the variants while also saving some money."

John E. Pike, director of an Alexandria, Va., defense consulting firm called GlobalSecurity.org, said the Department of Defense rarely awards two contracts for engine development for the same fighter plane. But he said some past fighter jets have been troubled by flawed engines, so there is some justification for having a backup in case problems should arise in the Pratt engine.

At the same time, he said, the Pentagon is under pressure to pare the cost of weapons systems so money can go to the Iraq war, and dumping a backup engine is an option. "You would have to say if you were looking around for some superfluous expense on the program, that one would certainly jump out at you," Pike said.

Copyright 2006, Hartford Courant