Tags: Boeing | Trump

Boeing: Lower Costs for Air Force One if Requirements Reduced

Boeing: Lower Costs for Air Force One if Requirements Reduced


Wednesday, 07 December 2016 08:36 AM EST

Boeing Co. executives told officials on President-elect Donald Trump's transition team that the cost of a new version of Air Force One could be lowered if the government agrees to reduce its requirements for the plane, people familiar with the discussions said.

The company's executives reached out to Trump's staff after the Republican said on Twitter on Tuesday that plans for a new Air Force One should be canceled because of "ridiculous" costs. The missive put in Trump's sights both a plane that is one of the most visible symbols of the American presidency and a firm that is the nation's largest exporter.

"Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion," Trump said in his tweet. "Cancel order!"

The company is the latest to be singled out by Trump, who last week announced a deal with United Technologies Corp. to keep a U.S. factory open instead of moving production to Mexico. The president-elect, who turned jobs and trade into defining issues of his campaign, tweeted about Boeing days after Chief Executive Officer Dennis Muilenburg called on him and Congress to ensure that U.S. companies have the tools to compete in a global economy.

Boeing rose 8 cents to $151.24 in New York. The company's planes have been used to ferry presidents since 1943, when Franklin D. Roosevelt rode a Boeing 314 flying boat across the Atlantic for a wartime meeting with British Prime Minister Winston Churchill.

"We are currently under contract for $170 million to help determine the capabilities of this complex military aircraft that serves the unique requirements of the President of the United States," Boeing spokesman Todd Blecher said in an e-mail. "We look forward to working with the U.S. Air Force on subsequent phases of the program allowing us to deliver the best plane for the president at the best value for the American taxpayer."

Pentagon Budget

The Pentagon already is budgeting $3.2 billion for research and development, military construction and acquisition of two of the Air Force One planes through fiscal 2021, said Kevin Brancato, the lead government contracts analyst for Bloomberg Government. More money is anticipated in the two years after that. Boeing 747-8 planes average about $225 million each, he said, which means most of the expenses will go to outfitting the planes for presidential use.

The Air Force and Boeing are still conducting work to reduce the program's technical risks before the company is awarded an advanced development contract, Captain Michael Hertzog, a spokesman for the service branch, said in an e-mail. Budgeted spending can be expected "to change as the program matures with the completion of the risk reduction activities," he said.

"This is what an Air Force One costs," Richard Aboulafia, an aerospace analyst at Teal Group, said of Trump's tweet. "There have been no cost overruns. The ability to fly the president during a war is fundamentally expensive."

The Boeing executives who contacted Trump officials suggested that the price of the new planes could be reduced if the Air Force and Secret Service revise their specifications for the aircraft, the people familiar with the discussions said. The company was not told in advance that Trump would tweet about the plane, the people said.

Aircraft Capabilities

The Air Force expects the planes to have the range to fly between continents and to have comparable interiors to the current 747 aircraft, whose features include work and sleeping quarters for the president and first family. Beyond such amenities, the planes must be outfitted for highly advanced, secure communications and classified defensive capabilities that make them flying fortresses.

President George W. Bush stayed airborne for much of the first few hours after the Sept. 11 terrorist attacks. The new planes will also be equipped for mid-air refueling.

"This is madness," Aboulafia said of Trump's tweet. "I think about the complications, for example, if the president and his staff had to run the nation on 9/11 and afterwards without an Air Force One and my mind is kind of scrambled on that."

Aging Fleet

The Pentagon is looking to replace its aging fleet of Boeing 747-200 aircraft, which were built in the 1980s and will reach the planned 30-year service life in 2017. Officials have said the next Air Force One 747-8 jets are estimated to begin operations in fiscal 2023.

There's no clear alternative to Chicago-based Boeing to build a new Air Force One, especially not for a president who wants to buy U.S. products. The only other option for a four-engine plane the Air Force is seeking would come from Europe's Airbus Group SE, which said in 2013 that it wouldn't make a proposal.

The Air Force said last year that it was giving Boeing the contract without competition because its plane is the only one manufactured in the U.S. "that when fully missionized meets the necessary critically important capabilities" that a president needs. But the service also said it would encourage other companies to bid for the special equipment needed to convert the aircraft for presidential use.

"The plane is totally out of control," Trump said in a brief appearance in the lobby of Trump Tower in New York on Tuesday. "I think Boeing is doing a little bit of a number. We want Boeing to make a lot of money, but not that much money."

Senator John McCain, the Arizona Republican who heads the Senate Armed Services Committee, said he counted himself among those who think there are too many bells and whistles on Air Force One. "I think it ought to be reviewed," he told reporters at the Capitol. "I think it's a legitimate concern."

Marine One

The dispute is reminiscent of the controversy over the Pentagon's efforts to develop a replacement for the helicopters used to ferry the president and executive branch officials, known as Marine One when the president is on board.

A program managed by Lockheed Martin Corp. to build as many as 28 helicopters was canceled in 2009 after about $3.1 billion was spent and the planned $6.1 billion project soared to a projected $13 billion. In 2009, President Barack Obama cited it as "an example of the procurement process gone amok."

In 2014, the Pentagon tried again, awarding an initial $1.24 billion contract to a team led by Sikorsky Aircraft. Since then, Lockheed acquired Sikorsky. So it's back in charge of the helicopter project.

Stock Sales

Trump transition spokesman Jason Miller said he couldn't answer whether the president-elect or his top advisers had been in contact with Boeing or the Pentagon. Details about Trump's goal, whether to scrap the plane or renegotiate the cost, will emerge after he's sworn in next month, he said.

"This really speaks to the president-elect's focus on keeping costs down across the board," Miller told reporters on a conference call. The plane's price "is a very big number."

Trump previously held stock in Boeing but sold all his equity holdings in companies in June, Miller said.

Boeing Focus

On Sunday, discussing the deal with the Carrier unit of United Technologies to keep some jobs in the U.S., Vice President-elect Mike Pence said on ABC's "This Week" that Trump would decide whether to intervene with specific companies "on a day-by-day basis."

Tuesday's tweet wasn't the first time Trump has mentioned Boeing. At a February rally in South Carolina, where the company makes the 787 Dreamliner, he said Boeing "is building massive plants in China."

To bolster its standing in the Asian nation, Boeing recently announced plans to open a plant there to install seats on single-aisle 737 jetliners being delivered to Chinese airlines.


© Copyright 2024 Bloomberg News. All rights reserved.

Boeing Co. executives told officials on President-elect Donald Trump's transition team that the cost of a new version of Air Force One could be lowered if the government agrees to reduce its requirements for the plane, people familiar with the discussions said....
Boeing, Trump
Wednesday, 07 December 2016 08:36 AM
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