Lockheed
Beware: Boeing Gives Navy a Cut-Price Deal on New Fighter Jets
Boeing is
getting, while the getting is still relatively good.
Rich Smith
(TMFDitty)
Mar 12, 2017
at 8:13AM
According to
the military hardware experts at BGA-Aeroweb,
the average flyaway cost on a Boeing (NYSE:BA) F/A-18-E/F
Super Hornet fighter jet is $60.9 million. Upgrade that warbird to an
electronic warfare specialist like Boeing's EA-18G Growler, and you can expect
to pay much more -- $80.4 million per copy.
But has
Boeing got a deal for you! And by "you," I mean the U.S.
taxpayer.
Boeing's
(hopefully not) going-out-of business sale
Late last
month, in its daily digest of contracts awarded to its favorite
defense contractors, the U.S. Pentagon announced that it has just placed an
order with Boeing to deliver to the U.S. Navy "seven Lot 40 EA-18G
aircraft and associated airborne electronic attack kits and five F/A-18E
aircraft." Going by BGA's prices, you might expect an order of this
size to set the Pentagon back a good $867.3 million. But in fact, the Pentagon
says this entire order for 12 brand new fighter jets is going to cost it only
$678.7 million -- a $188.6 million savings on the sticker price.
That's a big
savings for the taxpayer -- about 22% below list. Indeed, even on the off
chance the Pentagon forgot to include the $119.4 million cost of the 24
F414-GE-400 engines manufactured by General Electric (NYSE:GE), which
are essential to the operation of the planes, that price would still be $69.2
million below the price you'd ordinarily expect these planes to cost, based on
the price Boeing quoted. Even in the unlikely scenario where the Pentagon is
ordering airplanes from Boeing in one contract and their essential engines from
General Electric in another, Boeing would still be giving the Pentagon a not
inconsiderable 8% discount off of its list prices.
Why would
Boeing do something crazy like that?
"Crazy
Boeing's discount fighter jets -- our prices are so low, it's insane!"
The answer
should be obvious to anyone who's been following President Donald Trump's
Twitter rants against the high cost of military aircraft produced by Boeing and Lockheed
Martin (NYSE:LMT).
In January,
Trump boasted proudly of how he had negotiated a $600 million discount off the
cost of 90 new F-35 fighter jets from Lockheed Martin. Presto chango... all of
a sudden, an airplane that candidate Trump had derided as "not very
good" has morphed into a "fantastic new F-35 jet fighter,"
praised by the President in his recent address before Congress. Not to put too
fine a point on it, but all of a sudden, Trump has stopped talking about getting
Boeing to build him a "comparable F-18 Super Hornet," and started talking up
Lockheed Martin's F-35, instead.
This means
that Boeing needs to act fast if it's to capitalize on delays in production of the F-35 by
selling the Pentagon more F/A-18s and EA-18Gs to fill the fighter gap in naval
aviation and deny Lockheed F-35 sales down the road. One way to sweeten the
deal and encourage the Navy to buy its planes, instead of Lockheed's, of
course, is to offer the Navy a big discount for buying its Super Hornets and
Growlers today, rather than wait for Lockheed Martin to ramp up production of
the F-35 tomorrow.
And that's
just what Boeing is doing.
Read complete
article at link fool.com
Related post:
F-18 Super Hornet: Details
EA-18G
Growler: Details
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