April 22 (Bloomberg) -- Northrop Grumman Corp., the surprise winner over Boeing Co. for a U.S. Air Force tanker program, defeated its larger rival for the second time in two months by winning a Navy unmanned spy-plane contest valued at as much as $3.74 billion.

Northrop's Global Hawk drone, which is already flown by the Air Force in Iraq and Afghanistan, beat Boeing and a third offer from Lockheed Martin Corp. The order is for as many as 68 aircraft, Captain Robert Dishman, the Navy's program manager, said at a briefing in the Pentagon today. The initial $1.16 billion development contract runs through September 2014.

The victory extends Northrop's lead in unpiloted planes over Lockheed and Boeing, which dominate the manned military aircraft market. Northrop's $5.7 billion Global Hawk order from the Air Force is already the U.S. military's largest drone program. During the 2003 invasion of Iraq, the aircraft supplied 55 percent of the target data used to destroy air defenses, while flying only 5 percent of the surveillance missions.

``It looked to be pretty clear Northrop had the best offer to match requirements,'' Myles Walton, an Oppenheimer & Co. analyst in Boston, said in an interview today. ``Global Hawk had the most proven operational capability. This solidifies their presence in the unmanned market.''

Surveillance Missions

The Navy contract may increase Los Angeles-based Northrop's earnings per share by 10 cents, or 1.4 percent, in 2011 from the $7.22 predicted without the contract, Walton said. He rates Northrop's shares ``outperform'' and doesn't own any.

Prior to the announcement, Walton had predicted Northrop had ``a better than 50 percent chance'' of winning the order. The win may also lift the shares by $1, he said.

The Navy's unmanned Broad Area Maritime Surveillance plane will detect and track threats to the fleet. The aircraft will operate around the clock from five bases worldwide, traveling as many as 2,000 miles and loitering for extended surveillance missions. The new drone would work with manned Navy planes such as Boeing's P-8A Poseidon, which is replacing Lockheed-built P-3 Orion aircraft used since 1962.

As part of the development contract, Northrop will provide two unmanned aircraft with payloads and communication suites, two mission control systems and an integration laboratory. The Navy wants the new planes in service by 2015 and to be used at five locations by 2019, Dishman said. The Navy plans to keep the planes in service for about 20 years, he said.

``It's a highly capable air vehicle,'' the Navy's Dishman said of Global Hawk. He declined to compare the bids.

Australia's Interest

Australia also included its requirements for a surveillance aircraft as part of the Navy contest and will have to decide by the end of this year whether it wants to proceed with buying Northrop's plane, Dishman said.

Global Hawk has recorded more than 15,700 combat hours in Iraq and Afghanistan. With a wingspan of 131 feet, it can fly to a height of more than 60,000 feet for a maximum duration of as much as 36 hours.

The aircraft holds the record for an unmanned flight of 33 hours, set on March 22. Powered by a single Rolls-Royce Group Plc engine, it has an average cruising speed of 310 knots.

Northrop is the third-largest U.S. defense contractor, after Bethesda, Maryland-based Lockheed, and Chicago-based Boeing. Northrop fell $1.52, or 2.1 percent, to $69.56 at 4:15 p.m. in New York Stock Exchange composite trading, before the announcement. Lockheed dropped $2.78, or 2.6 percent, to $103.79, while Boeing declined 53 cents to $78.56.

Boeing's Offer

Boeing's offer with partner General Dynamics Corp. was a modified Gulfstream G550 business jet. Powered by a pair of Rolls-Royce engines, it was the fastest aircraft offered in the contest at 440 knots, and had the advantage of 75 percent shared parts with mission systems on the Navy's P-8A, Boeing said.

It was the only one of the three without combat experience in Iraq, and also offered the shortest amount of surveillance time at more than 16 hours over a target. The aircraft had a 94- foot wingspan, and a maximum altitude of 51,000 feet.

Boeing's loss is its second recent defeat by Northrop after a February Air Force competition for refueling tankers. Northrop, which had never built a refueling aircraft, faced a Boeing team which supplied them for more than half a century. Northrop won that $35 billion program by offering a larger jet with more fuel capacity than Boeing.

Boeing is protesting that decision to the U.S. Government Accountability Office.

Boeing, Lockheed Responses

Boeing still believes its proposal best fit the Navy's needs, spokesman Chick Ramey said in a statement.

``After we have reviewed the details behind the award, we will make a decision concerning possible options,'' Ramey said.

For its Navy bid, Lockheed had joined with closely held General Atomics Aeronautical Systems Inc. of San Diego to modify the Predator drone, which has recorded more than 296,000 combat hours. The modified version offered to the Navy was called the Mariner, and featured an 88-foot wingspan and a maximum altitude of 50,000 feet.

Powered by a Honeywell International Inc. turboprop engine, Mariner was the only bid not using a jet engine, and the slowest of the three at 230 knots. It offered the longest proposed mission time of 48 hours.

Lockheed is ``very disappointed with the U.S. Navy's decision'' spokeswoman Tierney Helmers said. ``We will wait for the formal customer debrief to better understand the decision and criteria used to select'' the winner, she said.

To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net; Tony Capaccio at acapaccio@bloomberg.net.

Last Updated: April 22, 2008 19:32 EDT