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Lockheed, Italians may build a plane C-27J deal would return part of proceeds from a sale of 18 C-130s


Lockheed Martin Corp. has reached an agreement with a large Italian aerospace company to study the possibility of jointly developing and marketing a small military cargo plane that could generate up to $200 million in new business.

Under terms of the agreement with Alenia Aeronautica, a division of Italy's Finmeccanica, Lockheed would provide engines and cockpit equipment currently used on its C-130J Hercules military cargo plane to upgrade a smaller craft made by Alenia.

The new craft, designated the C-27J, would be based on the G222 cargo plane that Alenia has been producing for many years, said Douglas Oliver, a spokesman for Bethesda-based Lockheed Martin.

The plane would be built in Italy.

The C-27J would be a twin-engine craft that could be used to transport troops, carry cargo, serve as a hospital ship or a gun ship.

"It would have the ability to put troops almost anywhere in the world," said Mr. Oliver, noting that it could land on grass strips shorter than required for the larger, four-engine Hercules being built by Lockheed Martin at Marietta, Ga.

Mr. Oliver said a recent market study suggests that there is a worldwide market for at least 100 of the C-27Js.

The planes would be priced at about $20 million each and the two companies would share the business equally.

The announcement was made at the Asian Air Show being held in Singapore.

The possibility of developing the new plane originated during Lockheed Martin's negotiations to sell Italy 18 of its latest models of the C-130 cargo plane, which has been in production since 1955.

Italy is considering the purchase of the C-130 to fill the gap until it develops its own large cargo plane. The sale would be expected to total between $720 million and $900 million.

Italy would require that in exchange for its purchase of the C-130, a percentage of the proceeds be spent in Italy.

This so-called "industrial return" arrangement would be satisfied by the assembly of the C-27J in Italy.

"There is a tremendous worldwide market for a smaller, technically advanced tactical airlifter that is complementary to the Hercules, and the C-27J is an outstanding solution," Terry Graham, a vice president of Lockheed Martin, said in a statement.

He said the agreement could lead to a partnership between two companies and help Lockheed Martin broaden its product offering in the military cargo plane market.

Mr. Oliver said that some components of the C-27J could be assembled in the United States.

If the C-130 sale is not completed, Mr. Oliver said, Lockheed Martin would have to take another look at its involvement in the development of the C-27J.

Lockheed Martin has delivered more than 2,200 C-130 cargo planes which are used in 64 countries.

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