By Andrea Shalal-Esa
WASHINGTON (Reuters) - The U.S. Defense Department has approved a deal under which Britain's BAE Systems Plc would upgrade 134 older F-16 fighter jets for South Korea, the Defense Security Cooperation Agency (DSCA) notified Congress on Monday.
U.S. lawmakers have 30 days to block the sale, but such action is rare.
The work would be done by a U.S. unit of BAE Systems, which is one of the Pentagon's largest defense contractors. DSCA is the arm of the Pentagon that oversees foreign military sales.
BAE beat out F-16 maker Lockheed Martin Corp to win the South Korean competition in 2012.
The first phase of the deal is valued at $200 million, and covers initial design and development efforts, according to the
Combined with the second phase, which will upgrade the F-16 C- and D-model fighter jets with new avionics and radars, the deal could be worth around $1.1 billion, according to Korean media reports.
DSCA said the sale would provide South Korea's air force with a detailed road map for improving the capabilities of its current fleet of F-16 fighter jets in order to better deter regional threats, strengthen its homeland defense and operate together with U.S. forces more effectively.
BAE welcomed the announcement by the Pentagon agency, saying the congressional notification marked a big step forward in the plan agreed by South Korea and the U.S. Air Force for BAE Systems to carry out the F-16 upgrades.
Erin Moseley, president of BAE Systems' Support Solutions sector, said Korea's decision in 2012 to award the contract to BAE reflected its confidence in BAE as "a viable, experienced and proven provider of F-16 upgrades and system integration."
Loren Thompson, chief operating officer of the Lexington Institute, said the deal marked a major break-through for Moseley's unit because it opened the door to similar deals in other countries in coming years.
Historically, the companies that make warplanes have also serviced them and carried out major upgrades. Given the dearth of major new acquisition programs, weapons makers are fighting hard for all new orders, including deals for upgrades of existing systems.
Because the F-16 is the most widely installed fighter in the world, the sustainment of that fleet over the next 20 years is a multibillion dollar opportunity," Thompson said.
"The BAE deal potentially sets a precedent that opens the door to similar deals in a dozen other countries," he said, predicting that Lockheed would fight hard for future contracts. "At the very least, it puts pressure on Lockheed's pricing," he said.
South Korea announced last week that it planned to buy 40 of Lockheed's newest fighter, the F-35 Joint Strike Fighter, with initial deliveries to begin in 2018.
(Reporting by Andrea Shalal-Esa; editing by Andrew Hay)