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Boeing wins $2.1 billion contract for 16 more P-8 spy planes

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013 file photo. REUTERS/Jim Young
The Boeing logo is seen at their headquarters in Chicago, April 24, 2013 file photo. REUTERS/Jim Young

WASHINGTON (Reuters) - Boeing Co has been awarded a $2.1 billion contract to build 16 P-8A Poseidon long-range maritime spy planes for the U.S. Navy, the U.S. Defense Department announced on Tuesday.

Boeing, the Pentagon's No. 2 supplier, said the contract was worth $2.4 billion in total, including funds awarded earlier for materials that take longer to procure. The order was approved as part of the Navy's budget for fiscal 2014.

The deal marks the first full-rate production contract for Boeing for the new planes, and follows a decision by Australia last week to buy eight P-8A planes for A$4 billion ($3.6 billion).

The aircraft, based on Boeing's 737-800 commercial airplane, will replace the U.S. Navy's P-3 spy planes, which have been in service for more than 40 years.

The Navy uses the new P-8A planes for anti-submarine, anti-surface warfare and surveillance work. Overall, the Navy plans to purchase 117 P-8As to replace its P-3 fleet.

Navy P-8A program manager Captain Scott Dillon said the new contract would help ensure continued "cost-effective procurement" of the maritime spy planes.

Rick Heerdt, Boeing vice president and P-8 program manager, said the company delivered eight aircraft on or ahead of schedule in 2013. "We intend to keep that streak going in 2014," he said.

The new order, to be completed by April 2017, will bring the number of aircraft ordered by the Navy to 53.

Boeing has delivered 13 P-8As to the Navy, which deployed its first patrol squadron to Kadena, Japan in December 2013 and has been conducting missions since then.

Boeing assembles the P-8A aircraft in the same facility where it builds all its 737 aircraft, modifying the planes while they are still in production, instead of taking a completed airliner and tearing it apart to make the military modifications.

Boeing officials say that strategy has helped them reduce the cost of the aircraft and keep the program on or ahead of schedule.

Other big contractors on the program include CFM International, a joint venture of General Electric and Snecma, a division of France's Safran , Northrop Grumman Corp , Raytheon Co , Spirit AeroSystems Holdings , BAE Systems and GE.

(Reporting by Andrea Shalal; Editing by Andre Grenon, Jonathan Oatis and Bernard Orr)

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