Boeing Turns to Cost Reduction on C-17 Sales
Feb 13, 2009
By Amy Butler
Boeing officials have shifted their strategy on future C-17 sales from reducing the annual production rate and toward cutting per-unit cost instead, according to industry officials.
The new focus is possible because of new opportunities in the international market including, possibly, interest from countries disappointed in consistent delays by the European Aeronautic Defence and Space Co. (EADS) in delivering its A400M airlifter.
Last year, Boeing Military Aircraft President Chris Chadwick directed a review from his staff of the effect on the cost of the C-17 Globemaster III airlifter if annual production was lowered from its 12-15 unit pace. Underpinning the review was concern that the production rate would be reachable without more purchases from the U.S. Air Force - which has declined to formally fund the program in recent annual budget requests - or new interest from the international market.
Congress has repeatedly earmarked spending for more C-17s over Bush administration objections.
International interest, meantime, has grown while earmarked funding came through for 15 new USAF C-17s via 2008 war-related supplemental spending. Hoping for as much, Boeing has been carrying the cost of building new Globemasters on its own funding.
The total U.S. Air Force order now includes 205 aircraft. Additionally, the United Kingdom has ordered six, Australia and Canada have each bought four and NATO has signed on for three. Boeing declines to confirm the size of Qatar’s order, though it is thought to be for two C-17s with an option for two more.
One official close to the C-17 program says several options for future sales to the U.S. Air Force are under review at Boeing, including as many as 60 additional airlifters. This will depend heavily on the outcome of a sweeping mobility requirements study now under way at the Pentagon. Company officials have long held that 92,000-troop increase coming to U.S. ground forces will drive the need for even more airlift than planned just a few years ago.
Chadwick’s focus for the C-17s future has changed recently. He is now exploring cost reductions for the program, according to Boeing spokesman Damien Mills. “The market is different than it was even a few months back” he says. “There is reasonable market demand to hold to the current rate.”
Cost reductions are possible in overhead, design, structures and parts suppliers, he adds. Though the company has an internal savings target, Mills declined to disclose it citing concerns about competition.
International pricing is about $220 million per aircraft, with the United States paying just over $200 million each.
Discussions are occurring with the United Arab Emirates and additional sales are possible to the United Kingdom and Australia, according to the official close to the program. Meetings are also planned with France, Libya and India. France could be a key customer, as it is struggling to maintain support for EADS’ A400M among allies.
Photo: Boeing
