REUTERS SUMMIT-BAE Systems US CEO says expects declining or flat sales

(For other news from Reuters Aerospace and Defense Summit, click on http://www.reuters.com/summit/Aero13)

By Alwyn Scott

WASHINGTON, Sept 3, (Reuters) - BAE Systems Holdings Inc sales are likely to be flat to down in 2014 and beyond as the U.S. unit of BAE Systems PLC (Other OTC: BAESF - news) of the UK contends with dwindling U.S. defense spending, the company's chief executive officer said on Tuesday.

"We see the next few years as either declining to maybe flat in a few areas, but the top line of the business not returning to growth for some time," Linda Hudson, CEO of the U.S. unit of BAE Systems PLC, told the Reuters Aerospace and Defense Summit.

The U.S. unit, a defense contractor which contributes about 40 percent of the revenue of the parent company, has cut costs as much as it believes prudent and is now trying to increase international sales and win market share from competitors, Hudson said at the event, held at Reuters' Washington, D.C., office.

"It's hard in my mind to see international sales completely offsetting declines in U.S. defense spending," she said, because the U.S. defense market is "so huge and everyone is fighting for the same slice of the international defense pie."

International sales will "moderate" the U.S. decline rather than "offsetting" it, so "a big focus of ours... is trying to take business away from our competitors," she said.

Hudson said one key battleground for increasing sales is competing to upgrade equipment made by other defense contractors. BAE Systems (LSE: BA.L - news) recently was selected to upgrade F-16 fighter planes in Korea, she said.

"We are making the point that we can compete on other people's equipment and we can provide a cost-effective solution," Hudson told the Reuters Aerospace and Defense Summit. The Pentagon is encouraging this trend.

The Lockheed Martin-made F-16, the most widely used fighter jet in the world, has further competition coming up from Singapore and other countries. The upgrade market is estimated at $3 billion to work on about 3,000 aircraft, according to a recent article in National Defense, and has drawn competition from Boeing (NYSE: BA - news) , Lockheed, Raytheon (NYSE: RTN - news) and Northrop Grumman.

"There are a lot of F-16s in the world, so it's a big opportunity," Hudson said.

Hudson also said BAE Systems is applying its skills to commercial jetliners, where it has partnerships with Boeing to produce avionics, for example.

"We plan to take our capabilities into the commercial world, which at least for now, is doing well," Hudson said, noting recent coverage of the potential for a decline in orders and production of commercial jetliners.

Follow Reuters Summits on Twitter @Reuters_Summits (Reporting by Alwyn Scott and Paige Gance; Editing by Diane Craft)