The Boeing Co. (BA) announced that it’s delivered its 500th modified F/A-18 Super Hornet jet fighter-bomber to the U.S. Navy from the company’s Aerospace Support Center at Cecil Commerce Center, located near Jacksonville, Fla.

Boeing also detailed its plans for the upcoming Dubai Air Show, which opens Sunday and runs through to Thursday. It has emerged as one of the world’s key commercial air shows. And Dubai has emerged as a market investors must keep watching as the Middle Eastern nation continues to expand its sphere of economic and financial influence.

The "Super" New Hornet

The Cecil airfield – a former U.S. Naval air station – functions as a "drive-in/fly-out" facility that allows the modified fighter jets to be made available for deployment as soon the upgrade and modification work is finished.

To modernize and overhaul the jet fighters, Boeing and prime contractor Northrop Grumman Corp. (NOC) have been installing upgraded avionics and making key technological and structural enhancements to F/A-18s since the center opened in September 1999.

With more than 900 F/A-18s in U.S. Navy and Marine Corps squadrons, there’s still plenty of modification work to be done. The modifications bring the older planes up to par with the more-recently built "marks," or versions, of the Super Hornet. Inspectors look for cracks, corrosion and fatigue to determine if the life of the aircraft can be safely extended. The oldest and most heavily used Hornets are in the midst of an extensive inspection process aimed at boosting each aircraft’s lifespan from 6,000 to 10,000 flight hours.

Newer Hornets at Cecil Field receive upgraded display systems, miniaturized global-positioning system (GPS) receivers, helmet-mounted cueing systems and more advanced radios. The modifications give the Hornet improved communication and information systems and allow the F/A-18 strike fighter to carry the latest weapons, including the newest missiles and "smart bombs."

In January, Boeing’s Cecil Field facility will begin modifying F/A-18 C- and D-model aircraft for the U.S. Navy Blue Angels flight demonstration team, which has flown the A- and B-model Hornets since 1986.

"Cecil Field is vital to the health and performance of the U.S. Hornet fleet," said Mike Rudolf, Cecil Field F/A-18 programs manager. "We’ve proven for almost eight years that we can successfully perform modifications and repairs and return aircraft to the customer very quickly. That’s important for the [fighter pilot] in the field who depends on us to deliver improved capability. The bottom line is: We get the jets out on time."

The cost of new defense programs are soaring into the stratosphere. Aircraft programs are among the most expensive of all. As these costs rocket, retrofitting and modernizing existing aircraft has become a key strategy embraced by all branches of the U.S. military so that each service can stretch its budget allotments by keeping weapons systems in service for many additional years – if not for additional decades.

Indeed, consider the case of the U.S. Air Force Boeing B-52 Stratofortress, a high-winged strategic jet bomber that was brought into service in the middle 1950s. The B-52, also known as "The BUFF" – for Big Ugly Fat Fellow – has been retrofitted and modernized a number of times, which is the main reason it’s still a frontline aircraft – even though it’s much older than most of the men who fly them.

The company’s Cecil air station facility has reduced its work force in recent years as Navy programs on other aircraft have wound down, but Boeing is pursuing other work for the center. One possible source of work: The V-22 Osprey, the so-called "tilt-rotor" aircraft that the U.S. Marine Corps flies.

"We’re going to continue to grow Cecil Field," Don Davis, Boeing’s senior manager for naval integrated logistics support systems, said in a statement.

Demonstrations at Dubai

At the Dubai Air Show, Boeing intends to highlight a range of the products and services that have been contributing to the parent company’s record sales. The show will spotlight a wide range of offerings across Boeing’s commercial and defense divisions. The show opens Sunday and runs through to Thursday.

"Boeing is proud of a partnership with the Middle East that stretches back more than a half century, and we are committed to meeting the needs of our customers throughout this fast-growing region and to further developing and expanding our long-term partnerships," said Tom Downey, a Boeing senior vice president.

Boeing has long considered the Dubai Air Show to be one of the world’s premier aerospace exhibitions, which is why the firm said the exhibition will be well-staffed with people, products and services.

On the defense side, the company said it will showcase the capabilities of such fighter planes as the F-15E Strike Eagle and F/A-18 Super Hornet. Static displays will include the regional debut of Boeing’s 737 Airborne Early Warning and Control aircraft, in addition to the E-3 AWACS, the B-1B Lancer jet bomber, the C-17 Globemaster III military transport aircraft and a UAE Land Forces AH-64A Apache attack helicopter. On the commercial side, Boeing customer Royal Jet will display a Boeing business jet.

Boeing’s schedule begins on Saturday, with a press conference featuring its airliner division. On that same day, Boeing’s Integrated Defense Systems unit, with its Saudi Arabian partner Alsalam Aircraft Company, will co-sponsor the Middle East Air Chiefs conference.

On Tuesday, Boeing Capital Corp. will host a financiers and investors conference, recognizing Dubai’s role as an emerging center for global finance.

Issues With Emirates Airlines

Boeing executives may well use this time to try and overcome an emerging problem with the Dubai-based Emirates Airlines, a sought-after customer. Emirates says the U.S. airliner maker may fail to land a 100-plane contract worth $20 billion because of the airline’s belief that the biggest version of the much-hyped Boeing 787 Dreamliner lacks sufficient "thrust," or power, from its General Electric Co. (GE) engines.

According to a report by the Seattle Post-Intelligencer and Bloomberg News, Boeing’s 787-10, a 310-seat version of the under-development Dreamliner, doesn’t yet meet Emirates’ needs, airline President Tim Clark said. The Dubai-based airline would operate the plane to destinations including Los Angeles.

"It needs more thrust," Clark told Bloomberg during an interview in Cannes, France. "It’s not a view shared by Boeing, but my instinct tells me it needs more."

Meanwhile, Boeing nemesis Airbus SAS got an order from International Lease Finance Corp. for 20 A350 widebody jets, fewer than analysts expected and smaller than the company’s contract for Boeing’s 787. Even so, the deal is worth $4 billion at list prices, sources told Bloomberg.

Deals with the Los Angeles-based International Lease Finance are closely watched as the leasing firm is viewed as a bellwether customer in assessing the popularity and potential success of new models of aircraft. The firm placed an order for 12 A350s in 2005 before Airbus voided the deal by modifying the airplanes. ILF agreed to buy 52 787s in June, following an initial order for 22 in 2005.

Emirates is weighing the 787-10 against the Airbus A350-900 and may order as many as 100 planes, a deal with a potential value of $20 billion at list prices, Clark said. Concern about GE’s GEnx engine might mean that the carrier won’t reach a decision by the time of the air show, where it had originally intended to make an announcement, he said.

Rick Kennedy, a spokesman for the Fairfield, Conn.-based GE, told Bloomberg that the company was "gratified Emirates is interested in the Genx. [But] at this juncture, it’s premature, because the 787-10 hasn’t been formally offered to airlines."

Boeing has more than 700 orders for the Dreamliner, valued at about $120 billion. On Oct. 10, the first delivery was pushed back by six months after supplier problems and parts shortages made it clear the original schedule was unrealistic.

All Nippon Airways Co. will get the first plane in November or December 2008.

While the delayed 787 still will be delivered five years before the Airbus A350 – a controversial program that’s undergone five revisions – Emirates’ Clark said the Airbus airliner has benefited in terms of design, aerodynamics, materials and propulsion.

"The A350 is now an airplane we’re prepared to study seriously," Clark said told Bloomberg. "They listened, and from what we see of the A350, now it’s an essentially good airplane, and it matches the 787 offering from Boeing."

Rolls-Royce Group PLC (RYCEY) offers engines for both the A350 and the 787, and has a more powerful entrant whose thrust output may better satisfy the Emirates Airlines’ requirements, Clark said. Still, the CEO said he would prefer to have a choice. However, GE and Airbus have yet to reach an engine-supplier agreement.

Boeing’s Buyback and Dividend Payout

Boeing last week announced plans to buy back as much as $7 billion of its common stock, the latest leg of a share-repurchase program under which the aerospace company has bought back $8 billion worth of its shares since the program was resumed in 2004.

The aerospace-and-defense-contracting company also declared a regular quarterly dividend of 35 cents a share, payable Dec. 7 to shareholders of record as of Friday (Nov. 9).

Boeing is the No. 1 U.S. exporter, and is a stock that several of Money Morning’s contributors and advisory panelists have identified as one of the globally focused U.S.-based companies investors might want to research further [In fact, to see a copy of our special investing research report, "Investments for a Weak Dollar World," one of several of our research reports that list Boeing among the U.S.-based companies that will really benefit from the falling greenback, please click here. The report is free of charge].

News and Related Story Links:

• Money Morning Investment Research Report:
  Boeing Announces $7 Billion Stock Buyback, Declares Dividend.

• 
  The Boeing Co:
  Boeing Delivers 500th Modified F/A-18.

• 
  The Boeing Co:
  Boeing to Showcase Advanced Range of Products, Services at Dubai Airshow 2007.
• The Dubai Airshow:
  Home Page.
  
• Bizjournals.com:
  Boeing delivers 500th modified F/A-18.
  
• Money Morning Investment Analysis:
  Investments for a Weak Dollar World.
  
• CNNMoney.com:
  Boeing OKs $7 Billion Stock Buyback.
  
• Money Morning Investment Analysis:
  
  DP World’s IPO May Trigger Billions in Investments of State-Controlled Companies.
  
• F/A-18 Super Hornet:
  Images.
  
• Wikipedia:
  F/A-18 Super Hornet.

• Reuters:
  Boeing Exec Says Orders Might Level Off in 2008.

• Money Morning Financial Analysis:
  Third-Quarter Earnings Seesawed By Commodity Spikes, Credit Woes, International Growth.
  
• The Seattle Post-Intelligencer:
  787 Lacks Enough Power for Emirates.
  

• The Blue Angels U.S. Navy Flight Demonstration Team:
  Official Web Site.

• Wikipedia:
  Boeing 787 Dreamliner.

• Reuters:
  Boeing Profit up, Cuts 2008 Revenue Forecast.

• Money Morning Investment Report:
  Eleven Ways to Profit From the Falling U.S. Dollar.

• Money Morning Investment Report:
  Four Ways to Beat the Credit Crunch and Profit From Global Growth.

• Money Morning News:
  Honeywell Snags a $16 Billion Contract for Airbus’ A350 Aircraft.

• Money Morning News:
  Germany Eyes Ownership Stake in Airbus Parent EADS.

• Money Morning News Analysis:
  Airbus and Parent EADS Experience Turbulence Over Insider Trading Scandal.

The United Nations awarded defense contractor Lockheed Martin Corp. (LMT) a $250 million contract to build five new camps in Sudan’s civil-war-ravaged Darfur region, and in the neighboring Kordofan regions for 4,100 U.N. and African Union personnel, The Associated Press reported yesterday (Tuesday).

Specifically, the six-month contract was awarded to California-based Pacific Architect Engineers Inc. – which Lockheed Martin bought in August 2006 – without bidding because of complex requirements and a short the timeline for completion, U.N. spokeswoman Michele Montas told The AP.

It is rare to see international business conducted in Darfur, but Lockheed Martin is no stranger to working in contested areas. Such is a reason why 84% of the company’s net sales were made to the biggest customer in the world, the United States government.

Although the contract won’t have a meaningful financial impact on the bottom line of this $45 billion company, the reputation that will follow if the project if successful is a reward. A defense company that can turn an A+ job in Darfur can pretty much prove it can handle operations anywhere.

News and Related Story Links:

• CNN Money:
  Lockheed Martin Unit Gets $250 Million UN Pact To Build Darfur Camps.
• Money Morning News:
  Aluminum Giant Alcoa Awarded Major Parts Contract for New Stealth Jet.

Defense contractor Lockheed Martin Corp., (LMT) has awarded aluminum giant Alcoa Inc.(AA) a $360 million contract to supply special castings for the special new stealth fighter jet known as the ‘Joint Strike Fighter.’

The U.S. military will use the Lockheed Martin F-35 Lightning II Joint Strike Fighter (JSF) replace such jet fighters as the F-16 Fighting Falcon, the F/A-18 Hornet and the Harrier jump jet currently being flown by the Air Force, Navy and Marines. It’s one of the largest and most-expensive defense-procurement programs ever, with an estimated total cost of $275 billion.

The contract calls for Alcoa’s Cleveland-based division – a specialist in cast and forged products – will design and produce large aluminum structural die forgings for more than 1,200 aircraft over the next 10 years. The forgings consist of 15 large wing- and engine-supporting bulkheads and six wing-box parts per plane.

Lockheed Martin expects to build more than 4,000 of the aircraft for the United States and international forces, Alcoa said.

Alcoa is expecting still more contracts related to the F-35. Other Alcoa units will provide such components as fasteners, alloy plate and high-pressure turbine blades. Those contracts are still being negotiated.

"Our engineers, operations managers and designers have worked collaboratively to offer complex die forgings that will meet weight reduction requirements and extremely tight time frames that will allow our customer to stay on schedule," Joseph E. Haniford, vice president and general manager of the Alcoa unit, said in a statement.

As part of the contract, Alcoa plans to invest $24 million in its Cleveland facility, mainly for new machinery, equipment and infrastructure improvements, said the Pittsburgh- based company, with has executive offices in New York City.

Going Long on Lockheed

Lockheed has a storied history as an aircraft company. During the so-called "Golden Age" of aviation – which lasted from the 1920s until the latter part of the 1930s – Lockheed built such fine civil-aviation airplanes as the Lockheed Vega and the Lockheed Electra. Both were flown to records by famed aviatrix Amelia Earhardt, [click on links to see both of Earhardt's Lockheed aircraft, one of which is on display a the National Air and Space Museum in Washington]. It was a modified Electra that Earhardt was flying on a record-seeking around-the-world flight when she and navigator Fred Noonan disappeared somewhere in the vicinity of tiny Howland Island in the South Pacific in 1937.

Neither Earhardt nor Noonan were ever seen again, and the Electra was never found. The mystery – which many consider as the greatest mystery in the field of aviation – continues to intrigue flying enthusiasts, even today. The Delaware-based International Group for Historic Aircraft Recovery (TIGHAR), headed by the charismatic and controversial Ric Gillespie, continues to investigate the mystery to this day.

When World War II started, Lockheed became a key part of the "Arsenal of Democracy," developing the Lockheed Hudson Mk I twin-engine medium bomber, the first U.S.-built aircraft to be used operationally by the British Royal Air Force during that conflict. Though a bomber, when a Hudson flamed a German Dornier flying boat off the cost of Jutland in October 1939, it recorded the first German aircraft shot down by the RAF in WWII.

But it was with a fighter plane that Lockheed really cemented its reputation – the "first" Lightning, the P-38, the airplane serving as the namesake for the new Joint Strike Fighter.

The P-38 Lightning was a twin-engine, twin-tailed aircraft that the German Luftwaffe nicknamed "The Fork-Tailed Devil." It was even more effective in the Pacific Theater, where the top two U.S. aces of all time – Major Richard "Dick" Bong, with 40 kills, and Maj. Thomas "Tommy" McGuire, with 38 – both flew Lightnings. Atlantic solo flight pioneer Charles "The Lone Eagle" Lindbergh, of Spirit of St. Louis fame, was a civilian advisor in the Pacific Theater, teaching U.S. Army Air Corps pilots how to stretch the range on their P-38s. He often accompanied Army pilots on long missions, flying a P-38 himself, and reportedly even shot down an enemy aircraft.

In more recent years, Lockheed has remained the same innovative aircraft pioneer. With its famed "Skunk Works" project-development unit, Lockheed developed a number of "black budget" aircraft, such as the SR-71 Blackbird, a reconnaissance aircraft that could fly so fast and so high that it was never hit by enemy fire on any of its secret missions. The aircraft has been retired for years, but many of its performance standards and achievements remain classified.

The Skunk Works scored again when it developed the F-117 Nighthawk Stealth Fighter, the odd-looking, faceted fighter-bomber that was able to pierce the night skies over heavily defended Baghdad in the First Gulf War and never trigger the Iraqi air-defense systems.

Lockheed Martin is the prime contractor on the F/A-22 Raptor, the newest Stealth jet fighter to joint the U.S. air arsenal. It beat out Northrop Grumman and its technically advanced YF-23 in a multi-year fly-off, and production aircraft are being fielded operationally.

The F-35 is even more advanced that the F-22, because of vectored-thrust technologies, which will have a major impact on takeoff and landings, and on in-flight maneuverability.

Other Lockheed Contract

Lockheed on Friday said it was awarded a $1.24 million contract from the Defense Advanced Research Projects Agency. The contract is the third phase of a program that enables the U.S. Navy to improve situation awareness in maritime operations.

Lockheed Martin will provide software upgrades to the program, called "Fast Connectivity for Coalitions and Agents Program," and install the operations at several U.S. Navy commands as part of the deal.

For investors seeking a top defense contractor for their portfolio, here are the key factors to consider about Lockheed Martin: Based in Bethesda, Md., it is the country’s largest aerospace and defense contractor. During 2007, Lockheed’s shares soared more than 46%, due to strong sales of everything from jet fighters-including the F-35 and the F-22 Raptor-to satellites.

News and Related Story Links:

• The San Jose Mercury News:
  Alcoa awarded fighter jet parts deal.

• CNNMoney.com/Thomson Financial:
  Alcoa Wins $360 Million Aluminum Forgings Contract From Lockheed Martin.

• Forbes.com/The Associated Press:
  Lockheed Martin Wins New Contract.

• Lockheed Martin Corporate Press Release:
  Lockheed Martin to Transition Technology That Dramatically Improves Situation Awareness in Maritime Domains.

• Wikipedia:
  Lockheed Aircraft.

• Wikipedia:
  Skunk Works (Lockheed).

• Wikipedia:
  Lockheed P-38 Lightning (The Fork-Tailed Devil).

• Wikipedia:
  The Golden Age of Aviation.

• Wikipedia:
  Amelia Earhardt.

• The International Group for Historic Aircraft Recovery (TIGHAR):
  The Amelia Earhardt Disappearance Investigation.

References:

• Crosby, Francis, The Complete Guide to Fighters & Bombers of the World, Herme’s House, 2006.
• Eden, Paul (Editor), The Encyclopedia of Modern Military Aircraft, Amber Books, 2004 and 2006.

China’s No. 1 network-equipment maker – a firm alleged to have ties to Beijing’s military, as well as past links to Saddam Hussein and the Taliban in Afghanistan – could gain access to U.S. defense-network technology in the proposed buyout of 3Com Corp. (COMS), the Washington Times newspaper reported yesterday (Wednesday).

3Com on Friday agreed to be acquired by the duo of Bain Capital Partners LLC and Huawei Technologies in a deal valued at $2.2 billion. Bain Capital is a Boston-based private-equity firm that was co-founded by former Mass. Gov. Mitt Romney, currently a Republican presidential candidate, who retired from Bain in 1999.

In announcing the buyout last week, 3Com said that Huawei will "become a commercial and strategic partner of 3Com."

Huawei, a privately held firm based in the southern China city of Shenzhen, is China’s largest network-equipment company, and will own less than 20% of 3Com when the deal is done, according to all parties involved. Unfortunately, it doesn’t have a pristine reputation. Its highly reclusive CEO, Ren Zhengfei, is a former officer in the People’s Liberation Army – the Chinese military. The company was founded in 1988 and got its start building military communications networks for the Chinese army. That’s bad enough, but Ren and other company officials now repeatedly deny that there is any kind of a connection between Huawei and the PLA – a protestation virtually no one believes. As Business Week columnist Bruce Einhorn recently noted: "The company does have an image problem that makes expansion in the U.S. difficult."

And Huawei apparently really does want to expand in the U.S. market. Its domestic arch-rival, ZTE, a company that is based in the same city and that plays to the same market as Huawei, recently cut a deal to sell equipment to Sprint Nextel Corp. (S). And last year, ZTE managed to sign a collaboration deal with U.S. leader Cisco Systems Inc. (CSCO). At the same time, all Huawei was able to achieve was to get hauled into court by Cisco for allegedly infringing on its technology patents (a Texas judge ordered the Chinese company to change its products so that Cisco’s technology wasn’t utilized).

Huawei Technologies has been linked to the United Nations ‘oil-for-food’ scandal, which is alleged to have involved millions of dollars in payoffs to Saddam’s regime during a time of U.N. sanctions.

The Washington Times article and other published reports say that Huawei has been involved in illicit projects in several "hot spots" around the world, especially in areas hostile to the United States. Huawei technicians also allegedly violated U.N. sanctions in Iraq in the early 2000s, by providing a fiber-optic telecommunications network that Iraq military is said to have used to tie together its air-defense network. The CIA-led Iraq Survey Group stated in its final report that Huawei and two other Chinese firms "illicitly provided transmission switches" for fiber-optic communications in Iraq from 1999 to 2002. When the United States discovered the network and what it was being used for – the air-defense system fired missiles at allied aircraft enforcing the "no-fly-zone" rules – it launched an air strike and bombed the China-engineered high-speed fiber-optic network.

Huawei did work for the ruling Taliban militia before it was pushed from power in the early part of this decade. The Chinese company either provided components for, or helped build, a telecommunications-switching network in Kabul, Afghanistan.

The newspaper reported that the merger deal follows a July computer attack on the Pentagon that U.S. intelligence officials say was engineered by Chinese military hackers. The hackers were detected breaking into Pentagon computers, including an e-mail system close to Defense Secretary Robert M. Gates. An unnamed defense official told the newspaper that this deal comes just as the Pentagon has moved to thwart the "large numbers" of attempted computer intrusions from Chinese computer "hackers and spies."

"And now we are proposing to sell the PLA a key to our front door. This is a very dangerous trend," that unnamed defense official told the Washington Times.

Said another defense official, who is also very concerned about this deal: "Huawei is up to its eyeballs with the Chinese military."

California Republican Rep. Duncan Hunter, a ranking member of the House Armed Services Committee, said he is worried the deal will lead to the loss of sensitive technology to China.

According to The Associated Press, Bain announced yesterday that it would submit the deal to a national security review, a process usually conducted by the federal Committee on Foreign Investment in the United States, or CFIUS, a 12-member group of top White House economic-policy experts and several cabinet-level officials. CFIUS was formed in 1988, the same year as Huawei. The group will study how much control, influence and involvement Huawei will have, including access to both core and defense-related technologies.

According to published reports, a 3Com subsidiary does provide both the U.S. Army and the Pentagon itself with intrusion-detection equipment, and some defense insiders worry that these contracts will enable Huawei to deduce vulnerabilities in key computer networks.

Despite the security concerns, a business case can be made for the deal.

In a conference call that discussed the deal, 3Com CEO Edgar Masri said that Bain has great connections in China as well as in Europe, markets where the networking company is seeking to expand.

Although there’s been tremendous concern about the involvement of Huawei, and China, 3Com already previously operated a joint venture with Huawei in China called Huawei-3Com Ltd.

But 3Com bought out its partner earlier this year, paying $886 million to do so. The joint venture had been started in 2003, and was said to have been fairly successful. Indeed, 3Com’s China business may well be the most valuable part of the company going forward, which makes sense that Huawei would want it all.

3Com was once a much bigger player in the U.S. market, but kept losing ground to Cisco Systems and others and its stock has basically traded in a fairly narrow range ever since, as it has struggled to regain past greatness.

In its most recent fiscal year ended in May, however, 3Com experienced somewhat of resurgence, aided in large part by its Chinese venture. The company boosted revenue by nearly 60%, to $1.27 billion from $794 million generated during fiscal 2006.

Masri said 3Com reviewed a number of "strategic alternatives" before settling on a sale to Bain and Huawei. The deal is expected to close in early 2008, 3Com said.

Because Huawei ranks as the largest maker of network equipment in China, that company increasingly finds itself squaring off against such traditional industry rivals as Cisco Systems (CSCO) and Motorola Inc. (MOT), both of which already do extensive business there.

Experts theorize that any more by U.S. lawmakers to block Huawei would likely lead to retaliation in China.

The all-cash offer values Marlborough, Mass.-based 3Com Corp. (COMS) at more than $5.30 a share. The bid represented a 44% premium over 3Com’s closing price last Thursday of $3.68. The shares gained 34.24% for the week.

News and Related Story Links:

• MarketWatch.com:
  3Com to be Sold to Bain and Huawei.
• The Washington Times:
  Merger Opens U.S. Defense to China; Deal Includes Firm That Aided Saddam, Taliban.

• The Associated Press:
  Bain Capital agrees to security review of $2.2B buyout of 3Com.

• BusinessWeek.com:
  Why Huawei Wants a Part of 3Com.