Beechcraft's reaction to losing the U.S. Air Force's Light Air Support (LAS) contract a second time reveals as much about the company's post-bankruptcy financial worries as it does about the service's contracting credibility.

With the Air Force's checkered track record on procurement, the company has nothing to lose by once again turning to the Government Accountability Office (GAO) with another protest and petitioning the U.S. Court of Federal Claims to halt further work by the Sierra Nevada/Embraer team in building the small attack aircraft for delivery to Afghanistan. In February, Beechcraft's AT-6 again lost the LAS competition to the A-29 Super Tucano. After protesting the same outcome last year, Beechcraft managed to force a new competition. While the strategy bought the company time to improve the AT-6, which was seen as inferior to the Super Tucano, it was not enough for a win.

The permanent loss of the LAS contract could be a substantial setback for the Wichita-based company, which is trying to regain its footing after emerging from Chapter 11 bankruptcy protection only days before the Air Force announced the A-29 award. While modest in terms of military contracts, Sierra Nevada/Embraer won $427.5 million worth of work for the first 20 aircraft slated for delivery to Afghanistan starting next year.

But that is just the beginning. The contract allows for orders totaling nearly $1 billion for deliveries to other allies.

Beechcraft CEO Bill Boisture is under heavy pressure from shareholders eager to turn the company around after bankruptcy. So, the protest is likely as much about sending a message to investors that the restructured Beechcraft is sound as it is about winning the work. “The stakes are a lot higher for Beechcraft here” than they were in the KC-46 tanker competition for Boeing, which protested its loss of the Air Force's KC-135 replacement competition and eventually won the work, says Byron Callan of Capital Alpha Partners. “Getting the U.S. to buy in on a program is the Good Housekeeping seal of approval.”

And, there is the chance that another misstep could be found in the Air Force's process, though service officials seem confident of their work.

A win would have been a much-needed boost for T-6/AT-6 production, securing a years-long future for the growing defense side of Beechcraft's work. During the economic downturn, the trainer/attack segment grew from just 17% of company revenue in 2009 to 26% in 2011. At the same time, the trainer/attack business grew to account for nearly one-third of the $1.078 billion backlog at the end of 2011.

Meanwhile, Embraer has signed a 10-year lease for an A-29 final assembly facility at the Jacksonville (Fla.) International Airport after the Air Force lifted a stop-work order issued after Beechcraft filed its latest protest. The service cited the importance of delivering the aircraft to Afghanistan quickly, since U.S. forces plan to withdraw next year. After botching the first procurement, deliveries are now slated to begin next summer, about 14 months late.

This new Florida facility is a key part of Embraer's strategy to grow its U.S. presence. Securing “the American market opens the door. We cannot even measure how much [business] this will be,” says Luis Aguiar, CEO of Embraer Defense and Security.

Underscoring Beechcraft's challenge is that few U.S.-developed aircraft that have lost contract awards at home have succeeded internationally. But, Beechcraft CEO Boisture remains optimistic. “The loss of LAS doesn't preclude us from heaving a healthy program for years to come,” he says, adding several countries—though he declined to identify them—have inquired about the AT-6. Boisture says these potential sales could far exceed those for the LAS program. Still, however, the A-29 will be part of the service's foreign military sales program, offering benefits for countries in the market for this capability and wishing to interoperate with U.S. forces.

While in bankruptcy, Beechcraft restructured, shedding its unprofitable business jet lines and focusing on the trainer/attack segment, along with its piston/turboprop lines.

Boisture says the military business still accounts for one-quarter of revenue for the privately owned company.

Its best seller has been the T-6. Derived from the Pilatus PC-9, the aircraft was selected for the U.S. Air Force/Navy Joint Primary Aircraft Training System (JPATS) program, which led to significant foreign orders. Beechcraft recently delivered the 800th T-6 to the Navy. But the program has orders only through 2016, prompting Beechcraft to reduce the production rate and furlough 240 employees.

Beechcraft continues to have success with placing the King Air in special mission roles—an area bolstered by the unique requirements of the Iraq and Afghanistan wars—and there is little competition for the venerable twin-turboprop line. But most of those contracts involve small procurements.

Even so, Boisture says there's life for both the trainer and the attack variants. “The outlook on light-attack is a very positive one because we have an excellent weapon system that we developed,” he tells Aviation Week. “We are optimistic.”

The AT-6 is not an unknown in international markets, as the trainer has been used in 25 countries. The stigma has been that the AT-6 grew out of modifications to a platform designed for training, while the Super Tucano was designed specifically for the attack role.

Though some foreign buyers expressed concern during bankruptcy, Boisture says confidence is returning. The company's financial woes did not figure in the Air Force's decision, he adds, noting Beechcraft has met its T-6 commitments, with seven of eight deliveries in 2013 defect-free.

But, having just emerged from bankruptcy, Boisture is loathe to be seen accepting such an important loss without a fight, especially when the Air Force has had major procurement missteps in recent years. In the first LAS competition, the Air Force acknowledged poor documentation, which led to its willingness to solicit new bids.

Beechcraft's protest strategy also speaks to its home base. Kansas lawmakers are backing the company and demanding an explanation from Defense Secretary Chuck Hagel; they say Beechcraft's bid was up to 30% less expensive.

They have also pushed a “Made In the USA” argument, saying the loss of LAS could eliminate 1,400 U.S. jobs, all associated with winding down the T-6 line. But Embraer is firing back, citing a plan to hire at least 800 people and noting that they have established three new service centers on U.S. soil in seven years.

The Air Force's concern about the AT-6's eligibility for certification is unfounded, according to U.S. Sens. Pat Roberts and Jerry Moran, both (R-Kan.), and Rep. Mike Pompeo (R), whose district includes Wichita.

Beechcraft, which plans to continue AT-6 development, says the aircraft is ready for certification.

Referring to the Air Force's selection of the Super Tucano as “perplexing,” Boisture says the company is poised to adjust to the results of the GAO review. “I have a business disagreement,” he says, but “what happens, happens . . . . Would a negative outcome mean the beginning of the end of the defense business? It's absolutely not over,” he says.

David Berteau, senior vice president and director of the CSIS International Security Program, says that the Beechcraft protest is “uncharted territory” because so many factors are at play, not just whether the Air Force followed procurement rules. The urgency of the Afghanistan mission is also important. The Air Force lifting the stop-work order “is a powerful indication of how serious the national security impact would be of a delay,” he says. “The clock is ticking on Afghanistan.” Another issue is whether the fate of a U.S. aerospace company in dire straits should be considered. Federal procurement rules prevent that from being a factor. But, U.S. politicians may balk. “I don't think we—the government—have a framework for looking at this through all those prisms simultaneously,” Berteau says.