South Korea picks KAI, with Lockheed, for $7.9 billion fighter jet development

Mon Mar 30, 2015 1:12am EDT
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By Joyce Lee

SEOUL (Reuters) - South Korea chose on Monday Korea Aerospace Industries Ltd (047810.KS: Quote), which expects to partner Lockheed Martin Corp (LMT.N: Quote), to develop a mid-level fighter jet that will cost around 8.7 trillion won ($7.88 billion).

The Defense Acquisition Program Administration (DAPA) also confirmed its decision to upgrade South Korea's Patriot missile system, with Raytheon Co (RTN.N: Quote) chosen to upgrade the launch systems. PAC-3 missiles will be bought from the United States.

South Korea has been trying to bolster its arsenal in the face of a missile threat from North Korea.

"Once the Patriot upgrades are completed, the warheads of North Korean ballistic missiles can be struck directly, and minimizing damage to the ground," DAPA said in a statement.

Reclusive North Korea sporadically test fires missiles on the Korean peninsula, most recently in protest against annual U.S.-South Korean military exercises.

The KF-X mid-level fighter jet program will aim to develop jets to replace aging F-4 and F-5 fighters by 2025, as well as adding air defense for its sole foreign partner, Indonesia, which is paying a fifth of the development cost.

KAI beat out Korean Air Lines (003490.KS: Quote), which had partnered with Airbus (AIR.PA: Quote).

The PAC-3 missiles will be built by Lockheed Martin. The total upgrade is expected to cost about 1.3 trillion won ($1.18 billion), two people with knowledge of the matter said.   Continued...

Officials stand at Korean aircraft industry Korea Aerospace Industries (KAI) booth at the Baghdad International Fair for Defence and Security, March 1, 2014. REUTERS/Ahmed Saad