June 3 (Bloomberg) -- Boeing Co. expects governments combating pirates and drug runners on the open seas will create a new market for long-range patrol jets, boosting demand 50 percent higher than the U.S. military’s purchases.
Foreign sales of the P-8, a military version of Boeing’s best-selling 737 single-aisle jet, are estimated at more than 60 over the next decade, said Egan Greenstein, business development director for the P-8 program. That would add to the U.S. Navy’s plans to purchase 117 of the planes.
Piracy “is part of a growing market trend,” Greenstein said in a presentation at Boeing’s Renton, Washington, factory. “We’re getting interest from countries that have never had fixed-wing maritime patrol.”
Boeing’s defense unit is pushing for more sales abroad to make up for budget cuts that have curbed sales at home. While a coordinated crackdown on pirates operating off the Somali coast has reduced attacks on ships, governments are more attuned to the risk and equipping themselves to deal with it, said Cyrus Mody, assistant director for the International Maritime Bureau, which has been monitoring piracy since 1992.
“The threat is still present,” Mody said in a telephone interview from his London office today. “There are still pirate groups being reported on the water.”
This year through May 23, 106 incidents of maritime piracy have been reported, according to the maritime bureau, which is part of the International Chamber of Commerce. Last year, 297 ships were attacked, down from 439 in 2011.
The best way to combat piracy is through aerial surveillance coupled with patrol ships, Mody said. Countries along the African coastline can’t rely solely on the navies of developed nations, he said.
“At the end of the day, it would have to be the individual country or a region that comes together to protect its own waters,” Mody said. “As the capacity in the region increases, they will need to have these sorts of surveillance tools available to them.”
India has ordered eight of Boeing’s patrol planes, with the first delivered on May 15. Australia has signed an agreement to order the aircraft and may take from eight to 12, Greenstein said in last week’s presentation. International sales now make up 28 percent of revenue at Chicago-based Boeing’s defense unit, compared with 7 percent in 2004.
The P-8 is the first military derivative of a commercial airplane that has its own designated production line, Greenstein said. In the past, Boeing’s defense unit took fully produced jets and modified them for military uses. The P-8 production system laid the groundwork for Boeing’s manufacture of the KC-46 tanker plane on the 767 commercial jet line.
In September, the Navy awarded Boeing a $1.9 billion contract for 11 P-8 planes, valuing them at about $172 million each and bringing the total under contract to 24 aircraft. The U.S. Navy’s version of the plane is designed for anti-submarine and anti-surface warfare as well as surveillance.
Along with pirates and smugglers, border disputes, terrorism and protection of fishing rights are also driving demand for the plane, especially on the African coasts and South China Sea, Greenstein said.
“It’s a growing market,” he said. “I have been surprised -- as I have been in this business for 10 years -- of the countries who I would have not have thought of having a requirement, that are embracing maritime patrol as something important.”
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