How To Trade The Pentagon's Tanker Decision (BA, EADSY)

The U.S. Defense Department is going to announce the $35 billion contract to build its aerial-refueling tanker today, as was reported yesterday. Whoever wins the contract will be in line for a huge revenue boost, and this will give traders an idea how to play it. Boeing Co. BA and Europe's EADS EADSY are the top two contenders for the contract. The contract would provide tens of thousands of jobs to Americans, whichever company wins. The winner would received a contract to build 179 planes, which could then expand into replacing all 400 Eisenhower-era tankers currently in use. Boeing has spent over $5 million in printing costs trying to win the contract, while EADS has spent over $1 million. Analysts have said that an edge with EADS might be real because of its airliner design, but the loser will likely challenge the contract assignment to its competitor. The obvious play here is to go long Boeing BA or EADS, but component suppliers like Hexcel HXL or ATI Technologies ATI are likely to benefit no matter what.