June 25, 2018 / 9:24 AM / 6 months ago

South Korea picks Boeing P-8 for $1.7 billion maritime patrol aircraft contract

SEOUL (Reuters) - South Korea’s military has picked Boeing Co (BA.N) to supply the country’s maritime patrol aircraft in a contract worth around 1.9 trillion won ($1.71 billion), a senior company executive said on Monday.

FILE PHOTO: A Boeing logo is pictured during the European Business Aviation Convention & Exhibition (EBACE) at Geneva Airport, Switzerland May 28, 2018. REUTERS/Denis Balibouse/File Photo

The South Korean procurement agency Defense Acquisition Program Administration (DAPA) said separately that it had decided to buy the P-8 Poseidon aircraft through the U.S. government foreign military sales program.

Kang Hwan-seok, a DAPA spokesman, told a media briefing the decision was made after a comprehensive review of legal aspects, cost, schedule and performance.

Saab (SAABb.ST) and Airbus (AIR.PA) had also shown interest in meeting the government’s needs with the Swordfish and C295 MPA models respectively, but the Boeing contract was ultimately awarded on a “sole-source” basis that did not require a competitive tender process.

South Korea said in February that it would procure from overseas new maritime patrol aircraft with stronger anti-submarine capabilities in order to better respond to the threat of North Korea’s submarine-launched ballistic missiles.

The February decision came before relations between the two Koreas thawed rapidly this year, with United States and South Korea indefinitely suspending two military training exercises, after the summit between U.S. President Donald Trump and North Korean leader Kim Jong Un this month.

Boeing’s (BA.N) P-8A Poseidon had been the likely candidate as its features such as its large payload and distance of flight more than clears South Korea’s requirements, a military source with direct knowledge of the matter said earlier on Monday on condition of anonymity.

Yang Uk, a senior research fellow at the Korea Defence and Security Forum, said it was not a “bad choice,” given Poseidon’s features.

“Even if South Korea and U.S. decided not to hold military drills this year, we have to maintain security until North Korea fully denuclearizes and we also needed to replace our old maritime patrol aircraft,” Yang said.

South Korea has an existing fleet of aging Lockheed Martin (LMT.N) P-3 Orions.

Reporting by Christine Kim and Joyce Lee; Additional reporting by Jamie Freed and Jane Chung; Editing by Himani Sarkar and Vyas Mohan

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