Dec. 23 (Bloomberg) -- Boeing Co.’s new Navy P-8 patrol aircraft for spotting enemy submarines and ships faces a cut of more than $900 million in the Defense Department’s proposed fiscal 2010 budget in order to pay for a new warship, according to budget documents.

Deputy Defense Secretary Gordon England, in an Oct. 31 budget memo, approved shifting away as much as $940 million to complete payment for a new DDG-1000 destroyer that Congress partially funded this fiscal year. The ship is the last of three the service says it will buy from Northrop Grumman Corp. and General Dynamics Corp.

The proposal is an indication the Navy is willing to cut new aviation programs -- even one designed to replace P-3 maritime patrol craft in operation since the 1950s --to sustain its long- range shipbuilding goal. The Navy wants to have 313 vessels in the fleet by 2020, including new ships added as others retire, up from 283 deployable vessels today.

The Navy proposed getting two aircraft instead of six in the initial production of a program that would eventually have 113 planes and cost $32.8 billion, according to charts prepared this month by the Pentagon Office of Program Analysis and Evaluation.

The Navy “has identified four P-8s and operating and maintenance” funds to pay for the destroyer, the charts showed.

Half of Revenue

Navy spokesman Lieutenant Commander Victor Chen said the Navy won’t discuss any aspect of its fiscal 2010 plan. Boeing spokesman Charles Ramey said in an e-mail today the Chicago-based company wasn’t aware of any proposed reductions. Boeing, which gets about half of its revenue from defense, is also the world’s second-largest commercial-plane maker.

“The program is progressing per plan and the feedback we’ve received from the Navy has been very positive,” he said.

The aircraft, a military derivative of the 737-800, is in its design and development phase, with the first test flight and delivery to the Navy of the test aircraft next year, Ramey said.

Boeing is assembling the aircraft at its facility in Renton, Washington.

Boeing’s P-8 partners include Northrop Grumman and Raytheon Co., which are making radar and electronics. CFM International, a joint venture of General Electric Co. and French-owned Snecma SA, will make the engines.

The proposed P-8 cut is part of a $580.8 billion budget -- about $68.7 billion, or 13.4 percent, larger than this year’s budget, according to charts prepared this month by acting Pentagon Comptroller Douglas Brook.

Revised Plan

The proposed budget adds $3.3 billion for Navy shipbuilding overall, the second-largest category of new spending after $5 billion for tactical aircraft.

The fiscal 2010 ship plan also includes the purchase of two more DDG-51 destroyers, which the Navy said this year it wanted to continue buying instead of up to seven DDG-1000 vessels, according to the documents.

The 2010 plan also requires the Navy this month to submit for Pentagon review a revised long-range shipbuilding plan that accounts for reduced defense budgets.

Boeing fell 97 cents to $40.15 at 4:15 p.m. in New York Stock Exchange composite trading.

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Last Updated: December 23, 2008 16:52 EST