Boeing Offers Big Discount to Bolster C-17

By DAVID GREENBERG

Staff Reporter

Boeing Co. has slashed $46 million off the cost of its C-17s in hopes of securing 60 additional orders from the Air Force a move that, if successful, would guarantee that military plane making remains in Los Angeles County into 2009.

In an unsolicited proposal to the Air Force, Boeing’s Long Beach operation promised to build the planes for $152 million each if Congress would appropriate the funding for 15 planes per year beginning in 2004.

That’s when the current agreement for 120 planes at $198.3 million each expires. Boeing delivered its 79th plane last week.

The Air Force has for years made it known that it needs an additional 60 planes to meet its strategic airlift requirements. But defense-spending reductions during the 1990s prevented congressional approval. Now, in the wake of the Sept. 11 terrorist attacks, the defense budget is being beefed up, all but assuring Boeing will reach its sales goal.

“I don’t have the slightest question Congress will fund at least 60 more,” said Richard Aboulafia, aviation director for the Teal Group, a Fairfax, Va.-based nonpartisan defense think tank.

Industry observers estimate that the defense budget could hit $400 billion in fiscal year 2003, up from the projected $340 billion to $350 billion in a delayed budget for fiscal 2002, which began Oct. 1.

Although Boeing’s Long Beach plant could be reconfigured to assemble as many as 25 C-17s per year, it is operating at its current maximum production rate of 15 planes annually. A 60-plane extension at the same production rate would not lead to an increase in the project’s workforce, which currently totals 7,500 employees, said George Sillia, Boeing spokesman for the C-17 program.

Sillia said the price cut was offered because Boeing does not want to assume increased defense budgets would include the C-17 at its current price.

“There are lots of programs that want that money,” Sillia said. “It’s always best to come in with your best possible price. (The C-17 is) the only large strategic airlifter being built today. We’re actually increasing the capability of the airplane while reducing its price.”

Boeing officials originally had set a deadline for Congress to approve funding for the reduced-price C-17s, but that deadline has passed and company officials, anxious to secure an agreement, acknowledged that it has been extended indefinitely.