US awards Boeing $2 bn contract for spy planes

The Pentagon has awarded Boeing a $2.1 billion contract to build 16 more P-8A maritime surveillance aircraft for the US Navy, according to defense officials.

The long-range Poseidon spy plane is based on Boeing's 737 commercial airliner and the Navy is anxious to move ahead to replace its aging fleet of P-3 Orion aircraft, which have been flying for decades.

The performance of the plane's radars and anti-submarine weapons have come under question in some Pentagon tests but the contract decision indicated officials were ready to press ahead.

Boeing already has a major contract to modify 767 commercial airliners for the US Air Force's new aerial refueling tanker.

Analysts say the company hopes to apply the same approach to future military contracts.

"Converting commercial jetliners to military aircraft could eventually become Boeing's biggest defense line, as the Pentagon looks for efficient ways of replacing aging surveillance, transport and command aircraft," said Loren Thompson of the Lexington Institute, which has ties to defense contractors.

Most of the work for the P-8 contract will be carried out at Boeing's plant in Seattle, Washington, and should be completed by 2017, according to a Defense Department statement on Tuesday.

The Navy has plans to eventually buy 117 of the P-8 planes to replace the P-3 aircraft.