Northrop: ‘Multiple‘ B-21s in Ground Test, Production Increase in Negotiations

Multiple B-21s are undergoing ground tests and being prepared to join the two aircraft now in test flight, and the Northrop Grumman is negotiating with the Air Force about how expanded production for the bomber could be accomplished, president and CEO Kathy Warden said Oct. 21. She also suggested a deal on expanded production could reopen what the company charges for the aircraft.

Warden, speaking on a Northrop earnings call, noted that the second B-21 started flying in September and “our testing campaign also involves multiple B-21 aircraft undergoing ground tests prior to flying, which is validating performance and minimizing risk.”

She said the second B-21 advances the test campaign from purely aircraft handling qualities to “integrating weapons and mission systems.”

The progress paves the way for the Air Force to award low-rate initial production Lot 3 and Lot 5 advanced procurement contracts by the end of 2025, Warden said.   

“We are in active discussions with the customer that would enable that acceleration of production rate,” Warden added, referring to Congress’ provision of $4.5 billion for expansion of B-21 production capacity in its reconciliation bill earlier this year.

“The actual production rates, the timing, and ultimately the outcome of those negotiations with the Air Force” will define the B-21 financial picture, she said, noting that it is early in the process.

“We are in the midst of those discussions. They’ve been held up a bit because of the government shutdown and the availability of resources to continue those discussions during this time, but we expect those to resume, and we still expect that in the coming months, we would have more clarity on what that acceleration might look like,” Warden said.

If a deal is reached, “we expect to deploy additional investments to achieve the increased rate, with the opportunity to earn improved returns,” suggesting Northrop could earn more per airplane.

She made a distinction between expanding production capacity and talks about increasing the number to be bought, saying “that would be a separate discussion.”

Warden has previously said the B-21 to date has largely been a break-even effort for the company, which is building initial lots of the bomber on a fixed-price basis. In April, the company said it had taken a $477 million loss on the effort, chalking it up to a “process change” that would allow faster production.

An increase in B-21 production “would increase our amount of sales, which in the early days … on production, are at the zero margin, and we would expect to need to invest in that ramp.” Over the long-term, “we would expect to have increased returns to offset the cost of that additional investment.”

CFO Ken Crews said that during the third quarter, Northrop “reviewed our estimate to complete the [low rate initial production] phase of the B-21 program, and made no significant changes to the previously recognized loss.”

Crews clarified that while higher-than-expected costs on flight test aircraft increased estimates for the LRIP aircraft, they were largely offset by a “contract restructure.”

Expanded B-21 production wasn’t counted in Northrop’s projections for future growth, Warden said, nor is a “potential win on F/A-XX,” the Navy’s version of the Next-Generation Air Dominance program. Boeing won the Air Force version of the NGAD in the spring; it has since been named the F-47.

Warden said a win in the F/A-XX would not mean an immediate surge in Northrop’s coffers.

“It would be development revenue, which tends to be lower margins than our overall…but it is a cost-plus program, so we expect reasonable return if we were to win that program, and it would require some investment.”