Air Force and Boeing Reach Plan
To Sell C-17s to Private Shippers
By ANNE MARIE SQUEO
Staff Reporter of THE WALL STREET JOURNAL
Boeing Co. and the Air Force have crafted a novel plan that would enable the aerospace giant to sell its C-17 military cargo planes to private shipping companies -- provided the military gets access to the fleet in times of crisis.
The move comes as the Air Force and other military services seek innovative ways to cover a funding shortfall for new weapon systems. Air Force officials estimate this C-17 arrangement could save the service as much as $6 billion over the life of the 10 aircraft expected to be involved in the plan's first phase.
The arrangement calls for the Air Force to provide an upfront sum of money and annual payments to the buyer of the planes in exchange for access to the aircraft in times of need. Initial studies suggest the first payment could total as much as $30 million, or about 20% of the current $152 million cost for a C-17, said Air Force Col. Gregory Lockhart, who is running the program. Additional payments would be made if the planes were pulled to perform official military service.
"The plan is to see if there is any other way to acquire this airlift capacity without having to buy and support these planes over their 30-year lifecycle," Col. Lockhart said. "You don't need every one of these planes 24 hours a day, seven days a week; they're only needed in a war situation."
For Boeing, the plan would enable the Seattle company to position itself as the only supplier for the burgeoning market to airlift heavy, oversized equipment such as big power turbines or oil-exploration drills. Traditionally, such cargo has been moved via ship or rail, not by such military aircraft as the C-17. Russia, however, has been using its planes for such purposes. Boeing and the Air Force have reviewed data on the commercial use of Russia's Antonov-124 cargo aircraft -- the plane that recently carted the U.S.'s EP-3 spy plane back from China -- to get a sense for the demand for such planes.
"It's an evolving, embryonic market," said Chris Raymond, Boeing's project manager for the plan. In February, more than 35 interested parties showed up for a one-day event to see the C-17 plane and discuss its potential commercial uses. Next week, the Air Force plans to release its official request for proposals from private companies interested in the arrangement. World Airways Inc., a Herndon, Va., custom air-transport concern, has publicly expressed interest for the four-engine planes, which can carry as much as 169,000 pounds of cargo in their bellies.
Even as Boeing and the Air Force push ahead, the plan still requires approval from Congress and top Pentagon officials. In addition, there could be problems overcoming U.S. export controls. Because the C-17 is a military vehicle, an agreement must be worked out with the State Department to grant some sort of broad license to whatever private company plans to use the planes. Without such an arrangement, federal officials would have to sign off on every trip the planes made outside the U.S., government and company officials said.
The Air Force, under the tutelage of its top acquisitions officer, Darleen Druyen, has been the most aggressive service to try to reap the benefits of closer relationships between the military and commercial companies. But, even she has conceded that such uncharted courses come with risks.
Several years ago, the Air Force forged an agreement with Boeing and Lockheed Martin Corp., of Bethesda, Md., to develop new satellite-launch rockets that would be used for both government and commercial customers. The commercial-space business was expected to grow rapidly, and the government expected that the involvement of private companies would bring down its own costs to develop these systems. But, as the commercial business dried up in the past two years, the Air Force has found itself paying hundreds of millions of dollars extra for launches and other costs in order to sustain both Boeing and Lockheed in the market for such launch vehicles.