Boeing proposes plan to cut Air Force One cost

New York

BOEING Co executives have told officials on US president-elect Donald Trump's transition team that the cost of a new version of Air Force One could be lowered if the government agrees to reduce its requirements for the plane, people familiar with the discussions said.

The executives reached out to Mr Trump's staff after he said on Twitter on Tuesday that plans for a new Air Force One should be cancelled because of "ridiculous" costs.

"Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than US$4 billion," Mr Trump said in his tweet. "Cancel order!"

The company, which is the US's largest exporter, is the latest to be singled out by Mr Trump, who last week announced a deal with United Technologies Corp to keep a US factory open instead of moving production to Mexico.

The president-elect, who turned jobs and trade into defining issues of his campaign, tweeted about Boeing days after chief executive Dennis Muilenburg called on him and Congress to ensure that US companies have the tools to compete in a global economy.

The company's planes have been used to ferry US presidents since 1943, when Franklin D Roosevelt rode a Boeing 314 flying boat across the Atlantic for a wartime meeting with British Prime Minister Winston Churchill.

"We are currently under contract for US$170 million to help determine the capabilities of this complex military aircraft that serves the unique requirements of the President of the United States," Boeing spokesman Todd Blecher said in an e-mail. "We look forward to working with the US Air Force on subsequent phases of the program allowing us to deliver the best plane for the president at the best value for the American taxpayer."

The Pentagon is budgeting US$3.2 billion for research and development, military construction and acquisition of two of the Air Force One planes through fiscal 2021, said Kevin Brancato, an analyst for Bloomberg Government. More money is anticipated in the two years after that.

Boeing 747-8 planes average about US$225 million each, he said, which means most of the expenses will go to outfitting the planes for presidential use.

The air force and Boeing are still conducting work to reduce the programme's technical risks before the company is awarded an advanced development contract, Michael Hertzog, a spokesman for the air force, said in an e-mail. Budgeted spending can be expected "to change as the program matures with the completion of the risk reduction activities".

"This is what an Air Force One costs," Richard Aboulafia, an aerospace analyst at Teal Group, said of Mr Trump's tweet. "There have been no cost overruns. The ability to fly the president during a war is fundamentally expensive."

The Boeing executives who contacted Trump officials suggested that the price of the new planes could be reduced if the air force and Secret Service revise their specifications for the aircraft, the people familiar with the discussions said.

The air force expects the planes to have the range to fly between continents and to have comparable interiors to the current 747 aircraft, whose features include work and sleeping quarters for the president and first family. Beyond such amenities, the planes must be outfitted for highly advanced, secure communications and classified defensive capabilities that make them flying fortresses.

President George W Bush stayed airborne for much of the first few hours after the Sept 11, 2001, terrorist attacks.

The new planes will also be equipped for mid-air refuelling.

"This is madness," Mr Aboulafia said of Mr Trump's tweet. "I think about the complications, for example, if the president and his staff had to run the nation on 9-11 and afterwards without an Air Force One and my mind is kind of scrambled on that."

The Pentagon is looking to replace its ageing fleet of Boeing 747-200 aircraft, which were built in the 1980s and will reach the planned 30-year service life in 2017. Officials have said the next Air Force One 747-8 jets are estimated to begin operations in fiscal 2023.

There's no clear alternative to Chicago-based Boeing for building a new Air Force One, especially not for a president who wants to buy US products. The only other option for a four-engine plane the air force is seeking would come from Europe's Airbus Group, which said in 2013 that it wouldn't make a proposal.

The air force said last year it was giving Boeing the contract without competition because its plane is the only one manufactured in the US "that when fully missionised meets the necessary critically important capabilities" that a president needs. But the service also said it would encourage other companies to bid for the special equipment needed to convert the aircraft for presidential use.

"The plane is totally out of control," Mr Trump said in a brief appearance in the lobby of Trump Tower in New York on Tuesday. "I think Boeing is doing a little bit of a number. We want Boeing to make a lot of money, but not that much money."

John McCain, the Arizona Republican who heads the Senate Armed Services Committee, said he counted himself among those who think there are too many bells and whistles on Air Force One. "I think it ought to be reviewed," he told reporters. "I think it's a legitimate concern."

The dispute is reminiscent of the controversy over the Pentagon's efforts to develop a replacement for the helicopters used to ferry the president and executive branch officials known as Marine One.

A programme managed by Lockheed Martin Corp to build as many as 28 helicopters was cancelled in 2009 after about US$3.1 billion was spent and the planned US$6.1 billion project soared to a projected US$13 billion. In 2009, President Barack Obama cited it as "an example of the procurement process gone amok".

In 2014, the Pentagon tried again, awarding an initial US$1.24 billion contract to a team led by Sikorsky Aircraft. Since then, Lockheed has acquired Sikorsky so it's back in charge of the helicopter project.

Trump transition spokesman Jason Miller said he couldn't answer whether the president-elect or his top advisers had been in contact with Boeing or the Pentagon. Details about Mr Trump's goal, whether to scrap the plane or renegotiate the cost, will emerge after he's sworn in in January, he said.

"This really speaks to the president-elect's focus on keeping costs down across the board," Mr Miller told reporters. The plane's price "is a very big number".

Mr Trump previously held stock in Boeing but sold all his equity holdings in companies in June, Mr Miller said.

On Sunday, discussing the deal with the Carrier unit of United Technologies to keep some jobs in the US, vice-president-elect Mike Pence said on ABC's This Week that Mr Trump would decide whether to intervene with specific companies "on a day-by-day basis".

Tuesday's tweet wasn't the first time Mr Trump has mentioned Boeing. At a February rally in South Carolina, where the company makes the 787 Dreamliner, he said Boeing "is building massive plants in China".

To bolster its standing in the Asian nation, Boeing recently announced plans to open a plant there to install seats on single-aisle 737 jetliners being delivered to Chinese airlines. BLOOMBERG