The unexpected decision by the U.S. Air Force to select a team led by Northrop Grumman Corp. to build the next generation of aerial refueling tankers has riled political leaders across the nation, but it's turned into welcome news for Los Angeles.
The $35 billion tanker program one of the largest defense contracts in years will be a major boon for the local aerospace industry, and not just because Northrop is headquartered in Century City. Though final plane assembly will be done in Alabama, Northrop has said the program will support thousands of Southern California jobs, particularly in Los Angeles. Click here to see Northrop's latest estimates on the number of jobs that will be created by the tanker award.
"It will be a boost to the L.A. area, which has been losing aerospace jobs continuously for the past 10 to 15 years," said Bob Jacques, vice president of sales and marketing for Esterline Mason, a Sylmar-based manufacturer that will supply components for the new aircraft. "It's a substantial contract."
The company, a subsidiary of Esterline Technologies Corp., is one of 42 California businesses identified by Northrop as a supplier for the new plane, known as the KC-45A. The California companies, which are heavily concentrated in and around Los Angeles, supply a range of aircraft components, including fasteners, electrical wiring and cockpit controls.
Northrop's competitor for the contract, Chicago-based plane maker Boeing Co., would have used a number of local suppliers as well, and initially it was unclear which proposal would have been better for Los Angeles. But a breakdown of the supplier networks for each bid now shows Northrop's tanker will support about twice the number of local jobs and have a larger economic impact, topping $300 million annually.
Of the 42 California companies, all but one are in Southern California, and about half are in L.A. County. Some 7,500 people will work on the program, according to Northrop tanker program spokesman Randy Belote.
Boeing's program by its own estimates would have supported about 4,000 jobs in California only about half the total for Northrop's plane.
Northrop expects to sign contracts with its suppliers in the next few months. But for at least a couple of years, those contracts will likely remain small while production is limited to four or five test aircraft, said Paul Nisbet, an analyst with JSA Research.
"About 2011 they'll get contracts for the actual airplanes," he said. "That's when they'll start building one a month."
Shock and awe
The Air Force surprised many observers when it bypassed Boeing, which has built tankers for the military for almost 50 years, and awarded the hefty contract for 179 planes to Northrop and its partner European Aeronautic Defence & Space Co., the Netherlands-based parent of Airbus.
Northrop's plane, a modified version of the European Airbus A330 commercial airliner, has a wingspan of nearly 200 feet and can hold 226 passengers and about 250,000 pounds of fuel. The planes are considerably larger than both the current tankers in use and Boeing's proposed aircraft, a key factor in Northrop's win, Air Force officials said.
Last week, lawmakers upset over the contract being given to a team that included a European aircraft manufacturer threatened to kill the deal if the Air Force does not adequately explain why the Northrop/EADS team was selected. Air Force officials testified before Congress that the jet was superior or at least equal to Boeing's in every category considered.
Moreover, Northrop has been quick to point out that while the plane will be mostly built in Europe, the final assembly will be done in the United States and about 60 percent of the plane's parts will come from domestic suppliers, supporting 25,000 U.S. jobs, Belote said.
Esterline has already supplied active side sticks small devices that help control the tail boom to tankers built by EADS for the Australian military. Jacques, the company's vice president of sales and marketing, said he expects the components it will supply to the KC-45A to be similar.
Another supplier that is gearing up for the program is Alcoa Fastening Systems in Torrance. The company, a subsidiary of Alcoa Inc., is one of a handful of suppliers that makes fasteners, which hold all of the pieces of the plane together.
Rick Sharpe, senior vice president of global aerospace customers and marketing, is scheduled to fly to Toulouse, France, this week to meet with Airbus executives and discuss details of the tanker program. He expects there will be more than one million fasteners on the plane, which could mean a substantial deal for Alcoa and other local suppliers.
"We're certainly very excited about it," Sharpe said. "It's going to mean an increase in business in Southern California. It's a good thing for the industry."
Indeed, while the initial contract is for $35 billion, additional orders are expected to push the program's total value over $100 billion.
The local aerospace industry is looking for all the help it can get after years of steady decline. Aerospace manufacturing currently employs about 37,800 workers in the county, down significantly from 1990, when the sector supported 130,100 people.
Boeing still operates the large C-17 cargo jet assembly plant in Long Beach, which employs 6,000 workers. But the program struggles on an annual basis to get funding and is expected to close within the next several years.
Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said the tanker program will help stem the job losses in the county and lessen the impact when the C-17 plant does close.
"It will act as a stabilizer," he said. "This will be very good news for a lot of these companies."
For reprint and licensing requests for this article, CLICK HERE.