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11 Mar 03. The U.S. military will soon announce plans to buy 60 C-130J transport aircraft from Lockheed Martin Corp. (NYSE:LMT – News) as part of five-year contract valued at $4bn, sources close to the negotiations said on Tuesday.

Under the contract, the Air Force would get 40 stretch fuselage versions of the C-130J, an updated, highly computerized version of the C-130 Hercules — the most widely used light transport aircraft in the world. The Marine Corps would receive 20 tanker variants of the C-130J under the contract, which will cover the period through 2008, according to the sources.

By committing to purchasing a larger number of aircraft over several years, the Pentagon was able to trim some $400m off the cost of the aircraft, if it purchased them in smaller quantities a year at a time, the sources said.

Tom Jurkowsky, a spokesman for the company, could not confirm any details, but said the firm was hopeful the U.S. Defense Department would opt for a multiyear contract, which would save taxpayers money and allow the company to plan its production cycle further out.

The sources, who asked not to be identified, said the agreement had been difficult to finalize, especially given the high cost of a possible war with Iraq. Navy officials, in particular, were reluctant to make a five-year commitment, the sources said. The Navy handles procurement for the Marines.

Top Pentagon officials, including Comptroller Dov Zakheim, were giving the deal a final examination, with an announcement likely later this week or early next, the sources said.

Jurkowsky said Lockheed has sold 118 C-130Js to date, of which 94 have been delivered. This includes 32 sold to the Air Force, nine to the Marine Corps and 25 to Britain’s Royal Air Force. Denmark, Italy and Australia have also described as “a real workhorse of the fleet,” capable to performing a variety of missions, including hauling cargo, troops and ammunition.Jurkowsky acknowledged a report by the Pentagon’s director of operational test and evaluation, Thomas Christie, that concluded the plane has some deficiencies in hardware and could be vulnerable to small arms fire. He said like any new aircraft model, the C-130J had some problems, but they had been resolved. “The new variant has a few bugs here and there, but we’ve worked through those problems,” he said.

Comment: This order is good news for UK companies which have a substantial stake in the 130-J, these include GKN Aerospace, Ultra, Rolls-Royce and Smiths and allay fears that the 130-J line may be winding down.

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