Huntington Ingalls Industries (HII.N) on Sunday welcomed news that the U.S. Defense Department would not cut its fleet of 11 aircraft carriers to help trim the budget deficit, but naval experts say they are still awaiting details about work on the next such vessel.
Defense Secretary Leon Panetta, addressing about 1,700 sailors aboard the USS Enterprise aircraft carrier, on Saturday said heightened tensions with Iran underscored the importance of the enormous ships to national security.
The U.S. Navy said the USS Abraham Lincoln carrier sailed through the Strait of Hormuz and into the Gulf without incident on Sunday, a day after Iran backed away from an earlier threat to take action if an American carrier returned to the strategic waterway.
Huntington Ingalls, the shipbuilding unit spun off from Northrop Grumman Corp (NOC.N) last year, welcomed Panetta's stated commitment to an 11-carrier fleet.
The company is building the first of the new Ford class of carrier ships at its Newport News, Virginia shipyard, and also handles refueling and overhaul of the giant nuclear-powered vessels - work that could be lost if the Navy does not replace its aging carriers when they need to be retired.
"We are pleased to hear that Secretary Panetta is committed to maintaining an eleven carrier fleet and recognizes the importance of these ships that are statements of national purpose," the company said in a statement.
Naval analyst Bob Nugent said the news, which comes just days before Panetta unveils highlights of the Pentagon's fiscal 2013 budget request, was positive for the company and its many suppliers. But he said it remained unclear whether the Navy would award a contract for the next carrier, CVN 79, on time.
"The devil's in the details," said Nugent, vice president at AMI International. He noted that the Navy had already signaled that it would retire some aging cruisers, and could push off the start of construction on the next carrier to save more money.
There had been some talk of shrinking the carrier fleet, perhaps by slowing construction of ships to replace older ones like the Enterprise, but the Pentagon's new focus on the vast Asia Pacific region made continued operation of carriers more important than ever, analysts say.
There will already be a nearly three-year gap between the time that the Enterprise goes offline in November and its replacement, the USS Gerald R. Ford, comes online in 2015.
Huntington Ingalls Chief Executive Mike Petters told Reuters this month that his company was focused heavily on reducing the cost of building the USS Gerald R. Ford (CVN 78) aircraft carrier, which is reported to be $884 million over budget.
Petters said it was critical to start work on the next carrier as soon as possible, to maintain the momentum and lessons learned on the Ford.
He said Huntington Ingalls was urging the Navy to proceed with awarding a contract for the next Ford-class carrier in 2013, rather than delaying it as some have suggested.
"The more you push this thing out, the higher the price goes," Petters said. "The most efficient way to build it is to contract on time."
Huntington Ingalls shares closed down 31 cents or nearly 1 percent at $33.74 on the New York Stock Exchange on Friday.
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