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Boeing ( BA ) and Lockheed vying for F-22 replacement contract

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New sixth-generation fighter to fight alongside drones

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Winner could eventually receive hundreds of billions of dollars in orders

(Changes headline, recasts lead, adds cost cutting context.)

By Mike Stone

WASHINGTON, March 20 (Reuters) -

U.S. President Donald Trump will personally announce the Pentagon's decision on a next-generation fighter jet contract worth at least $20 billion as soon as Friday, despite concerns about budget constraints and shifting priorities, sources briefed on the plan said.

The Next Generation Air Dominance (NGAD) program will replace Lockheed Martin's ( LMT ) F-22 Raptor with a crewed aircraft built to enter combat alongside drones. The plane's design remains a closely held secret, but would most likely include stealthiness, advanced sensors and cutting-edge engines.

Lockheed and Boeing ( BA ) are competing for the winner-take-all engineering and manufacturing development contract, worth more than $20 billion. The winner will eventually receive hundreds of billions of dollars in orders over the contract's multi-decade lifetime.

For Boeing ( BA ), a win would mark a sharp reversal of fortunes for a company that has struggled on both the commercial and defense sides of its business; a loss could be devastating. A victory for Lockheed Martin ( LMT ), the world's largest defense contractor, would keep its high-end offerings - it also makes the stealthy F-35 - on an upward trajectory.

An Air Force spokesperson and Boeing ( BA ) and Lockheed representatives did not immediately respond to requests for comment.

Trump's Friday schedule showed an 11 a.m. (1500 GMT) Oval Office announcement alongside Secretary of Defense Pete Hegseth. A U.S. official briefed on the plan said the announcement was slated for that time.

The announcement comes as Trump has been working to cut costs throughout the U.S. government, although the size and legality of the efforts

have been challenged

. On Thursday he signed an

executive order meant to dismantle

the Department of Education.

NGAD was conceived as a "family of systems" centered around a sixth-generation fighter to counter near-peer adversaries such as China and Russia.

Under President Donald Trump's administration, which took office in January, the program has moved forward after a period of uncertainty that cast doubt on the future of the next-generation fighter jet.

Billionaire and presidential adviser Elon Musk has voiced skepticism on the effectiveness of crewed high-end fighters, saying cheaper drones were a better option.

Last year, the program faced potential delays or scope reductions because of budget pressures and cost overruns in other Air Force programs.

The anticipated announcement on Friday, however, signals that a design finalized last year will be chosen for NGAD.

Boeing ( BA ) is fighting headwinds for both its commercial and defense businesses. A win would be a shot in the arm for its St. Louis, Missouri, fighter jet production businesses.

Lockheed was recently eliminated from the competition to build the Navy's next-generation carrier-based stealth fighter. If it loses the NGAD contract, it will likely double down on its F-35 fighter program and international sales of its F-16 jets. (Reporting by Mike Stone; Editing by Sandra Maler, Jamie Freed and Gerry Doyle)