Boeing may have to share work on next Air Force One project

08/29/2014 3:09 PM

08/31/2014 9:30 AM

The U.S. Air Force will decide by December whether Boeing will have to share a multibillion-dollar project to provide the next Air Force One jetliner for the president, the service said.

The Air Force has budgeted $1.6 billion for research through 2019 and is “working toward release” of a request for proposals early next year with a schedule to purchase the first aircraft in fiscal 2016, according to spokesman Charles Gulick.

The military hasn’t ruled out buying 747-8 passenger planes from Chicago-based Boeing and then using other contractors to outfit them for the special needs of the presidential fleet. Airbus Group NV, the European aircraft company, said last year that it wouldn’t challenge Boeing to build the plane.

“The Air Force does not yet have an approved acquisition strategy,” and intends to present one “in fall 2014” for review by the Pentagon’s Defense Acquisition Board, Gulick said in an e-mailed statement.

While Air Force One is the designation for any plane carrying the president, it usually refers to one of two current planes outfitted with features including a presidential suite and conference room and advanced security and communications, according to the White House website. It can be refueled in midair and serve as a mobile command center if the U.S. comes under attack.

The Air Force is looking to replace its aging Boeing 747-200 aircraft, which will reach their planned 30-year service life in 2017. The first new Air Force One isn’t expected for delivery until 2018, when it will be tested before beginning operations in fiscal 2023, Gulick said.

The service has yet to determine how many of the aircraft it will buy or forecast a price for the project, he said. Research spending on the program is projected to surge to $528 million in fiscal 2019 from $11 million this year, according to Air Force budget documents.

The acquisition strategy will be assessed against a campaign by Frank Kendall, the Pentagon’s top weapons buyer, to increase competitive contracts and stiffen the process for justifying sole-source procurements.

“Over the past four years, the department has not met its competition goals,” Kendall wrote in an Aug. 21 memo. “In fact, we have experienced a declining competition rate, and we must take action to reverse this trend,” Kendall wrote.

The Air Force said it requires a large, four-engine commercial aircraft, which narrowed the potential contractors to Boeing’s 747-8 and the Airbus A380 made by Toulouse, France- based Airbus.

Asked whether the Air Force might stage a competition for contractors to convert basic aircraft acquired from Boeing, Gulick said “at this point, it would be premature to eliminate any viable approach.”

“The Air Force is continuing to conduct market research” to “determine the most appropriate acquisition strategy,” he said. Until Pentagon approval, “all acquisition strategies are under consideration,” he said.

The notion of competition “is illusory” without Airbus in the mix, Richard Aboulafia, vice president of analysis for the Teal Group, a Fairfax, Va.-based defense market forecasting firm, said in an e-mail. “Even if the very high entry barriers were lower, the time frame rules out newcomers,” he said.

While it’s “conceivable but unlikely” that the Air Force will propose splitting the airframe from the electronics, “Boeing has a very strong advantage with its familiarity with the platform,” Aboulafia said.

Caroline Hutcheson, a Boeing spokeswoman, said in an e-mailed statement that the company is “in an ongoing dialog with the Air Force.”

“Boeing has a 70-year history of helping fulfill this mission, and we believe that makes us best-qualified to build on our longstanding expertise and deliver the integrated capabilities this unique system requires,” she said.

Winning the next version of Air Force One would provide a boost to Boeing’s 747-8 Intercontinental, its largest and most expensive passenger jet with a list price of $367.8 million, as it slows production amid slumping sales for four-engine aircraft. Boeing has sold nine customized versions of the jumbo jets to clients that include foreign heads of state, according to the company.

Boeing has logged only one 747 order this year after flagging sales forced it to cut its production output twice last year to a tempo of 18 jets per year. The planemaker has a backlog of 50 jumbos, according to data compiled by Bloomberg Intelligence, sufficient to keep its assembly line going for three years if existing orders aren’t canceled or deferred.

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