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A-12 settlement won't extend Boeing's F/A-18 production line

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[January 29, 2014]  NEW YORK (Reuters)  The settlement of a dispute over the cancelled A-12 aircraft calls for Boeing Co <BA.N> to build three more EA-18G electronic attack planes for the U.S. Navy, but those jets won't extend the F/A-18 production line in St. Louis, according to Navy officials and company executives.

The U.S. Justice Department announced a $400 million settlement agreement with Boeing and General Dynamics Corp <GD.N> last week that includes the additional jets, which will be paid for by Boeing.

U.S. Navy officials this week said the planes would be built along with 21 Growlers already being funded in fiscal year 2014 and delivered in calendar year 2016.

Boeing officials said the additional jets would not extend production of the F/A-18 line beyond the currently planned date of the end of 2016.

The company is awaiting details of the Pentagon's budget plan to fiscal 2015 to see if any additional orders for F/A-18s or EA-18Gs will be included, although Pentagon officials have repeatedly said they do not plan additional orders.

Loren Thompson, analyst with the Virginia-based Lexington Institute, said he expected Boeing to launch a massive lobbying campaign to get more F/A-18s, also called Super Hornets, or their electronic attack cousins, added to the 2015 budget.

"Boeing is determined to get more Super Hornets into the defense budget because if that doesn't happen they will soon have no fighter production line in the whole company," Thompson said.

He said the company faced an uphill climb given continued pressure on military spending.

"In a budget environment where defense spending is capped, any money spent on a new initiative has to come out of some other program, which makes this an Olympic-scale selling job on Capitol Hill," Thompson said.

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Boeing says it needs to build about two F/A-18s a month to ensure economical production rates, which would require a foreign order, or a new U.S. order valued at just under $2 billion.

Canada, which helped fund development of Lockheed Martin Corp's F-35 fighter, is expected to make decisions in coming months about whether to proceed with F-35 orders or launch a new tender that could result in orders for the F/A-18 or other fighter planes.

Boeing's F-15 fighter line, also in St. Louis, is slated to continue through 2018, buoyed by a large Saudi Arabian order.

(Reporting by Andrea Shalal-Esa; editing by Stephen Powell)

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