(Bloomberg) -- The US Army on Monday selected Bell Textron Inc. to build the Future Long-Range Assault Aircraft in a contract worth up to $1.3 billion, beating out a Lockheed Martin Corp.-Boeing Co. team to replace the iconic Black Hawk helicopters by 2030.

The contract is one part of the Army’s Future Vertical Lift program to replace both the Black Hawk and Apache helicopters, and is seen as a crucial test of how the service can modernize without delay and cost overruns after some high-profile failures over the past 20 years.

Textron’s stock jumped as much as 11% in extended trading.

The contract is worth as much as $1.3 billion with development expected to take 19 months, according to the Army’s announcement.

In a statement, the Army said the new machine will “provide transformational increases in speed, range, payload and endurance to replace a portion of the Army’s current assault and utility aircraft fleet.”

The contract selection “is our chance to move to the next step in this vital program,” Douglas Bush, Army assistant secretary for acquisition, told reporters at the Pentagon on Monday. If all the options of this contract are exercised, it could go to $7 billion, Army officials said. That would also include the first initial low-rate production tranche of the new helicopter.

The Army had two different aircraft to pick from. One was an advanced tilt-rotor offered by Bell—called the V-280 Valor—which is derived from the V-22 Osprey, with its vertical lift and takeoff technology. The second is the coaxial lift compound rotor helicopter called Defiant X, built by the Lockheed-Boeing team.

For the winner, selection could establish a foothold as the Army’s aviation provider for decades, and reap the benefits of a market projected to be worth from $60 billion to $90 billion, according to congressional and Wall Street budget analysts.

In a statement, the Lockheed-Boeing group suggested it wasn’t done fighting for the contract.

“We remain confident Defiant X is the transformational aircraft the US Army requires to accomplish its complex missions today and well into the future,” the group said. “We will evaluate our next steps after reviewing feedback from the Army.”

The stakes were especially high for Textron’s Bell division, which is looking to offset declining sales for its V-22 Osprey. Without the contract, Bell Military revenue was expected to decline from $1.8 billion this year to $802 million by 2026, according to analyst Sheila Kahyaoglu of Jefferies. She estimated that at peak production, the Black Hawk replacement could reap $11 per share for Textron.

“The V-280 tilt rotor is a structurally better aircraft, despite a very strong showing from the LMT Sikorsky team,” Kahyaoglu wrote after the announcement. She said the helicopter should generate $66 billion in revenue through 2050.

Analysts Roman Schweizer and Cai von Rumohr of Cowen wrote: “For Textron, it is a generational win that rejuvenates Bell’s military franchise.” 

“For Boeing,” they said, “it opens long-term questions about its military helicopter business.”

Bell Textron was the favorite to win the contract because of the V-280’s “range, speed and maturity,” said JPMorgan Chase & Co. analyst Seth Seifman in an October report. The contract, which is 75% cost-plus and 25% fixed cost, would be worth several billion dollars initially and will cover development work, including six prototypes as well as eight low-rate initial production aircraft, the report said.

While it lost the contest, the news isn’t all bad for Lockheed. It is one of the largest contractors for the V-280, supplying the craft’s cockpit and avionics, Seifman said. The company will continue to build Black Hawk models until at least the middle of next decade. In June, the Army awarded it a multi-year contract for 120 Black Hawk’s with options for 135 more, he added.

The Army wants the new aircraft to fly at least twice as fast and twice as far as the helicopters it’s replacing, which have been its aerial mainstays since conflicts in Grenada, Panama and the first Gulf War. They’ll be in service for decades and fly for the other US armed forces.

The Army is staking its flying future on aircraft that can cruise like planes over vast expanses of the Pacific and Africa, hover like helicopters, and evade detection with swift maneuvers.

The Black Hawks have been in service for decades. Two of them were shot down during a 1993 raid in Somalia, a story that was told in the book “Black Hawk Down” by Mark Bowden. And in 2011, a stealth version of the Black Hawk famously crashed during the raid in Pakistan that led to the death of al-Qaeda leader Osama bin Laden.

The winner of the new assault helicopter contract is expected to produce prototypes in next fiscal year for a flight test in fiscal 2025.

--With assistance from Thomas Black and Julie Johnsson.

(Updates with analysts, in 13th paragraph. Previous versions corrected name of Seth Seifman, in the 15th paragraph, and corrected the listed company name to Textron, in third paragraph.)

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