Pentagon and Lockheed Martin (LMT.US) reach framework agreement to accelerate production of new air-to-air missiles

The Zhitong Finance App learned that the Pentagon and Lockheed Martin (LMT.US) are speeding up production of a new type of classified air-to-air missile for the US Air Force and Navy fighter. The company and the US Department of Defense said that the two sides have reached an extensive framework agreement and will eventually reach a multi-year joint advanced tactical missile (JATM) production contract. The missile is still under development, but it is close to entering production.

Once deployed, the missile will be the most advanced air-to-air missile in the US arsenal. For a long time, this position was occupied by Thor Technology (RTX.US)'s continuously upgraded AIM-120 Advanced Medium-Range Air-to-Air Missile (AMRAAM) series, which was launched in 1993.

The Pentagon said in a statement issued on Thursday that the agreement is critical to ensure Lockheed Martin and the ammunition supply chain can make long-term labor and capacity investments.

“We will deliver JATM at the speed required by our country and allies while providing value to taxpayers and shareholders,” Lockheed Martin's Missile and Fire Control Division President Tim Cahill said in a statement.

This is the first confidential systems framework agreement led by Michael Duffy, the US Department of Defense's top procurement official. His office has completed framework agreements for a number of high-profile systems, including the most advanced version of the Patriot surface-to-air missile, Tomahawk cruise missile, and the interceptor for the terminal high-altitude area defense system (Saad).

In the Trump administration's budget for the fiscal year beginning October 1, the new missile project received an additional $2 billion in funding, indicating that the project could speed up production and deploy soon. The US Air Force and Navy are seeking to allocate $2.9 billion for missile development and orders in 2027, compared to only $894 million this fiscal year.

Guggenheim recently reported that with the support of geopolitical threats, weapons inventory replenishment, and military modernization, defense spending is expected to continue into the next decade, so the defense sector pullback instead poses a layout opportunity.

Lockheed Martin was initially awarded this confidential development contract in August 2017. The Pentagon also revealed in March that it would sell 460 missiles and test equipment to Australia for 3.1 billion US dollars.

The new JATM missile, also known as AIM-260, is designed to be installed in the internal weapons compartments of F-22 and F-35 fighters, but the US Air Force says it can also be integrated into F-16 and F-15 fighters.

Before the US stock market on Thursday, as of press release, Lockheed Martin and Thor Technology were up nearly 1%.