UPDATE 2-U.S. tentatively approves Delta-Aeromexico venture

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WASHINGTON/NEW YORK Delta Air Lines Inc (DAL.N) and Aeromexico can set prices and coordinate schedules for their U.S.-Mexico flights, but they must free up certain airport slots to bolster competition, the U.S. Transportation Department tentatively ruled on Friday.

The decision paves the way for the two companies to dominate the second-busiest market for travel to or from the United States. It comes after the U.S. airline industry has consolidated, with carriers operating more efficient itineraries and having more power to raise fares on some routes.

Opponents of the tentative ruling, which lets the airlines cooperate with immunity from U.S. antitrust law, have until Nov. 30 to raise objections.

The department said the decision benefits the public because Delta and Grupo Aeromexico SAB de CV (AEROMEX.MX) can plan shorter layovers, increase flights and offer more destinations. The U.S. government has approved similar arrangements for many other airlines.

However, the department has proposed that the carriers divest 24 takeoff and landing slots in Mexico City and six at New York's John F. Kennedy International Airport to give budget airlines room to add flights.

Slot allocation in Mexico City depends "on confusing and often unwritten rules, making it extremely difficult for new entrants," the department said. "This remedy would allow for new, competitive entry at these airports that would not otherwise be possible."

In an unusual move, the department also proposed limiting Delta and Aeromexico's antitrust immunity to five years because it was unclear whether the divestitures and reforms in Mexico City would be enough to ensure low fares for travelers.

In a statement, Delta said it was reviewing the tentative decision and looked forward to implementing a cooperation agreement with Aeromexico. It is in the process of buying 49 percent of Aeromexico, similar to stakes it has taken in other airlines to influence how they operate and where they fly.

Friday's ruling "really gives Delta a huge advantage" over United Continental Holdings Inc (UAL.N) and American Airlines Group Inc (AAL.O), which will be unable to compete for Mexico flights outside their major hubs, said industry consultant Robert Mann.

Delta's shares were up nearly 3 percent at $43.03 on Friday afternoon. Aeromexico's rose nearly 5 percent.

Budget carrier JetBlue Airways Corp (JBLU.O), which had wanted the airlines to divest at least 30 slots in Mexico City, said it commended the department for ensuring greater airport access.

Aeromexico did not immediately comment.

Mexico's federal competition commission approved the airlines' joint venture in May. Thanks.

UPDATE 1-Boeing CEO says will not cut 777 output rate by more than 2 a month

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NEW YORK Boeing Co (BA.N) will not cut production of the 777 jetliner by more than two planes a month and is taking more time to decide on whether a cut is even needed, Chief Executive Dennis Muilenburg said on Wednesday.

Boeing already plans to cut production of the wide-body plane to seven a month next year from 8.3 currently, and many experts expect a further cut to five a month due to slow sales and transition to a successor jet, the 777X.

The world's biggest planemaker also is studying whether to lift production of 787 Dreamliners to a planned 14 a month from 12, Muilenburg said. The company signaled that it wants to wait until several sales campaigns are finished in 2016 and 2017.

"We expect to have additional clarity on 777 production decisions in the next couple of months," Muilenburg said on a call with analysts.

"On the 787 program we have more time to further assess the implementation of the next production rate increase that is currently scheduled to ramp up to 14 per month at the end of the decade."

Boeing's production rates are bellwethers of market conditions, closely watched by investors for signs of the plane maker's future earnings and cash flow. Sales and profits at Boeing's many suppliers also are affected by changes in Boeing's factory rates.

While noting "hesitation" among airlines for buying wide-body planes such as the 777 and 787, Muilenburg said sales of narrow-body 737s are relatively strong.

He also said that even if Boeing decides to cut wide-body production "we continue to expect commercial aircraft deliveries to grow beyond 900 airplanes per year through the end of this decade," providing reassurance that overall deliveries will continue to rise from the 745 to 750 expected this year.

Earlier on Wednesday, the company beat profit expectations in the third quarter.

Oct 26 U.S. weapons maker Northrop Grumman Corp reported a 16.7 percent rise in quarterly profit on Wednesday, helped by higher sales in its aerospace systems business that makes the center fuselage of the F-35 fighter jets.

* Shares fall as much as 12 pct to $36.91 (Adds comment from conference call; updates shares)

 MOSCOW/STOCKHOLM Russia is sharply upgrading the firepower of its Baltic Fleet by adding warships armed with long-range cruise missiles to counter NATO's build-up in the region, Russian media reported on Wednesday. Thanks.

UPDATE 2-Lockheed Martin's quarterly profit handily beats estimates

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Lockheed Martin Corp (LMT.N), the world's largest defense contractor, reported a quarterly profit on Tuesday that handily beat analysts' expectations, as sales of its Sikorsky helicopters pushed total revenue up 14.8 percent.

Lockheed's shares were up about 7 percent in afternoon trading following the company's earnings conference call.

The company also raised its adjusted profit and sales outlook for the year.

Results from the Pentagon's No. 1 weapons supplier are often seen as a bellwether for the U.S. defense sector. Northrop Grumman Corp (NOC.N) and Raytheon Co (RTN.N) are due to report quarterly results later this week.

The company said third-quarter sales in its rotary and mission systems business unit jumped 55 percent to $3.35 billion, which included about $1.2 billion from sales of Sikorsky military and commercial helicopters. Lockheed completed the $9 billion acquisition of Sikorsky from United Technologies Corp (UTX.N) last year.

Lockheed said sales in its aeronautics business, the biggest division, increased 6.8 percent due to higher net sales of approximately $300 million for the F-35 jet program due to higher aircraft production and sustainment activities.

Only 10 F-35 aircraft were produced this quarter compared with 12 for the same period last year. On their quarterly results conference call, management said a problem with the insulation in the F-35's fuel lines and fuel tanks, and the subsequent fix for aircraft still on the production line, was the reason for "lighter" F-35 deliveries this quarter.

Lockheed is developing and building F-35s for the U.S. military and eight other countries. With estimated development and procurement costs of $391 billion for the United States alone, the F-35 is the world's most expensive weapons program.

Lockheed's space systems division, the third largest unit at the Bethesda, Maryland-based company, delivered $185 million in additional operating profit for the quarter, a 70 percent increase over the same period last year.

According to Thomson Reuters I/B/E/S calculations, the company's income from continuing operations was $3.27 per share, versus the average analyst estimate of $2.87.

Net income more than doubled to $2.40 billion, or $7.93 per share, in the third quarter ended Sept. 25, from $865 million, or $2.77 per share, a year earlier.

"Most investors who take a look at the trading chart will conclude that this result is more than enough for a stock that has underperformed sharply of late," Barclays analyst Carter Copeland said in a research note.

Lockheed's net income included a one-time special cash payment of $1.8 billion from the company's $5 billion tax-free deal to merge its information systems and global solutions business with Leidos Holdings Inc (LDOS.N) earlier this year.

The company said it expected 2017 net sales to increase by 7 percent compared to 2016. The company also said it expected business segment operating margins to be between 10 and 10.5 percent.

Lockheed raised its adjusted outlook 2016 profit forecast of $11.15 to $11.45 per share to $12.10 and said its forecast for adjusted sales of $45 billion to $46.2 billion had been raised to $46.5 billion.

Net sales rose to $11.55 billion from $10.06 billion a year earlier.


MANCHESTER, N.H./ST. AUGUSTINE, Fla. U.S. Democratic presidential candidate Hillary Clinton slammed rival Donald Trump on Monday for saying that the week-old effort to retake the Iraqi city of Mosul from the control of Islamic State was going badly.


MOSCOW Two Moscow airport workers involved in a plane crash in which Christophe de Margerie, the CEO of Total, was killed had been drinking alcohol, Russia's aviation regulator said on Tuesday, saying the accident could have been avoided altogether.

 PARIS The sale of aerospace firm Thales's rail signaling business to transport company Alstom is no longer on the agenda, a government source told Reuters on Tuesday. Thanks.