No A-10 Warthog for Afghanistan -- but Here's the Next Best Thing - The Motley Fool

For four long years, Afghanistan has been waiting for an air force. Now, they're finally going to get one -- courtesy of the U.S. Air Force.

Given their druthers, the Afghans would probably like an air force geared toward close-air support of their troops combating Taliban fighters on the ground. For that role, the A-10 Warthog is by all accounts the best plane for the job. But beggars can't be choosers. Instead of the A-10, the U.S. Air Force will outfit Afghanistan with 20 brand-new A-29 Super Tucano fighter planes from Embraer (NYSE: ERJ  ) .

As reported on DoDBuzz.com last month, Embraer and partner Sierra Nevada will begin delivering Super Tucanos to Afghanistan sometime in December. Deliveries are expected to be slow at first, then ramp up, with all 20 Super Tucanos due to be delivered by 2018.  

Perhaps best of all, the Super Tucano costs an estimated $500 an hour to operate -- a big selling point for a cash-strapped customer such as Afghanistan, In fact, that's about one-sixth the operating cost of Textron's ultra-cheap Scorpion light fighter jet. 

What it means to investorsThe U.S. Air Force awarded Embraer the contract to build 20 Super Tucanos for $427 million -- $355 million for the planes themselves, plus $72 million in additional costs incurred as the Air Force dealt with multiple challenges to the contract award. Back out those extra costs, and it looks like the Air Force is paying about $17.8 million per plane -- just under the likely cost to build a new A-10 Warthog today.

What's more, Afghanistan might buy more planes (or the Pentagon might do so for them). When first announced, in fact, the Super Tucano contract was said to be worth potentially$950 million to Embraer. That suggests long-range plans to buy as many as 52 Super Tucanos.  Read More

No A-10 Warthog for Afghanistan -- but Here's the Next …