The contract builds on an agreement in 2011 to provide PNG student pilots with basic flying training at BAE's Australian facility at Tamworth City Airport in Tamworth, New South Wales.
Students soon will start an advanced 18-month training course to progress to the next stage of their flying careers, BAE said in a brief statement..
"We are looking forward to extending and developing the relationship with PNG by providing its defense force with the highest standard of flying instruction," BAE General Manager Aviation Solutions John Quaife said.
The air operations element of the defense force has a small number of light and rotary wing aircraft that support the army in logistics, resupply and medical evacuation roles as well helping with civilian disaster relief.
The defense force was part of the evacuation and relief operation during the early 2005 eruption of the Manam Island volcano.
Volcanic ash damaged crops and contaminated water resulting in the population reporting gastro-intestinal and breathing problems. Many villagers' houses collapsed under the weight of the ash.
The air element also supports army patrols along the country's 450-mile border with the restive Indonesian province of Papua.
PNG, a British protectorate administered by Australia until independence in 1975, occupies the eastern half of the island of Papua, north of Australia. Indonesia occupies the western half of the rugged and forested tropical island of nearly 180,000 square miles.
The terrain has made flying and landing difficult in many locations, with the last major air disaster in October 2011.
The commercial Airlines PNG Dash 8 plane crashed while flying from Lae to the resort of Madang, killing 28 of the 32 people on board. Two pilots -- one Australian and one New Zealander -- were among the four survivors.
BAE's flight training facility at Tamworth is based around its 6-year, $86 million deal signed in May 2011 with the Australian air force.
The contract also has six 1-year extension options, BAE said.
The course began in January last year and the first students graduated in mid-2012.
BAE needed to design, test and produce an enhanced crash-protection system for the course's CT-4B aircraft, a single piston-engined side-by-side trainer made by New Zealand company Pacific Aerospace.
Couple mistakenly served bag of cash at McDonald's drive-thru
Exploding whale video goes viral on Internet