The U.S. Air Force’s much-discussed plan to buy a pair of Boeing 747s abandoned by a bankrupt Russian airline makes for pretty poor optics, given the…let’s call it…increased focus on Russia-Trump connections these days. But from a business standpoint, it’s not a bad idea.
Last year, when then-President-elect Trump tweeted that the (projected) cost of a new Air Force jet was too high, I began reporting on ways to lower the cost. Sources tossed around all sorts of ideas:
- Refurbish the current VC-25s, which are modified versions of a 747 variant that has been out of production for more than two decades and is incredibly difficult to fix since parts manufacturers don’t exist anymore.
- Buy only one new 747-8, the latest model of the jetliner. But that would force the Air Force to fly the president on smaller, old Boeing 757s when the new 747 needs fixing and upkeep.
- Scale back the requirements, like the ability to withstand an electromagnetic pulse caused when a nuclear bomb explodes.
- And of course, the now-likely winner: Buy lightly used 747-8 aircraft. These planes are essentially brand-new, as they haven’t been used by an airline.
The Transaero planes (photos here) have been the subject of debate among financial analysts. Called “whitetails” — a term typically used for planes built on a company’s dime that don’t have an owner yet (and are usually painted white without any marking) — the aircraft are of particular interest to investors. With a average price tag of about $390 million each, that’s some $780 million in cash just collecting dust, literally, in the Mojave Desert.
A lot has happened since Trump’s damning December tweet about the high cost of a new Air Force One. Trump and Boeing CEO Dennis Muilenburg have a struck up a relationship that produced, among other things, the president’s February visit to the 787 Dreamliner plant in South Carolina. The firm’s stock has climbed some $100 per share.
Here are some things we don’t know about the soon-to-be-announced deal for new Air Force One aircraft. Sources tell me the Pentagon is getting a good deal on the planes, but the Air Force is not expected to disclose the what it paid.
My colleagues at Defense One sister publication Quartz talked to Benedict Sirimanne, president of CSDS Aircraft, an organization that buys, sells and leases aircraft. Sirimanne said he offered $175 million for the jets, but lost the bid; he suspects the Air Force paid less than $200 million apiece.
Another question: Since these 747s are already built, does that speed up when they’ll start flying the president? Most recently, the Air Force had been targeting that first presidential flight to happen in 2024. Could that move to 2021 or 2022? If so, is there money laying around to do that?
There’ll be lots more to come on this Air Force One deal. Stay tuned.
You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. It’s August, but will the pace slow down? Doubtful. As always, send you tips, feedback and random thoughts to email@example.com or on Twitter @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!
From Defense One
Trump Wanted a Cheaper Air Force One. So the USAF Is Buying a Bankrupt Russian Firm’s Undelivered 747s // Marcus Weisgerber
The service is reportedly getting a good deal on the jets, which list for around $390 million and are now sitting in the Mojave Desert.
Improve Hawai’i’s Missile Defenses — Now // Dan Leaf
The islands need interceptor missiles to fend off possible attack from North Korea.
Pentagon Now Offering Top Officials Classified Tablets // Joseph Marks
The Defense Department’s pilot program allows access to materials up to secret level.
New Deputy Defense Secretary Has a Full Plate
He’s only been in the Pentagon for two weeks, but Patrick Shanahan has been a busy guy. Among the items that have moved across his desk is a new 31-page report that details how the Defense Department will restructure its acquisition and chief management officer organizations following a Congressional overhaul. More specifically, it details how the Pentagon will break up the job of the undersecretary for acquisition, technology, and logistics into two new undersecretaries, one for research and engineering and the other for acquisition and sustainment. This week, Shanahan he met with reporters for his first on-the-record roundtable.
While the report was essentially written before Shanahan’s arrival, he made it abundantly clear that getting it to Congress on the Aug. 1 deadline was his top priority. “We’ve got to just move,” he said. “There’s just some clear things we have to go do.”
Defense Secretary Jim Mattis has told Shanahan: “I want people to come benchmark us. So when there’s an objective…don’t just do reforms, do it in such a way that we set a new performance standard.”
The DepSecDef also talked about making the military more lethal and “move the needle” on the readiness of forces, top priorities for Mattis.
Some other key takeaways: The former Boeing executive likened speed in the acquisition system to developing a professional baseball player. “You take a certain talent and it’s how quickly can you get it to the big leagues and win. Our whole system has to be about the same thing, player development. In our case it’s domains and then being able to field a team that can win. When you hear me talk about speed, in the back of my mind it’s really this farm system that we want to create. This [new research and engineering] structure is a way to enable it.”
Shanahan also compared the new undersecretary for research and engineering to the role of a company’s chief technology officer. “The CTO is not managing all of the programs in the company. The CTO is helping to make sure that farm league is running smoothly and that where the money is being placed is in the right spots and that the utilization is high, but the expertise is down in the programs. The partnership with the acquisition side is important, but it’s not on the top 3 focus areas. When we go to pick people [for the R&E position], the No. 1 criteria is that they can team. In this game, it’s just a total team sport. Our locker room, everybody has to get along.
On company-funded research and development: “The big companies are innovative, so they’re not purely going to look to us to say in a prescriptive way: ‘Do this.’ They’re always placing bets in different areas. So I see that their payoff in terms of the areas in which they’re investing in R&D, we want their payoff to go up.”
On making sure weapons are easily upgradeable: “In the areas where we can do a clean sheet [aka something brand new], those become more of the requirements. In some areas where systems weren’t designed to do it that fast, we’ve got to get creative.”
Two key quotes from the meeting: “Let’s make it easy to do business with the government.” and “How do we help the contractors and suppliers do more for less.”
Some Top Pentagon Jobs Get Filled
It might be August, but I was struck by the number of empty parking spaces outside of the Pentagon’s River Entrance where the military brass and political appointees park their cars. The lot has been noticeably vacant. But some of those parking spaces — and empty Pentagon offices — are about to be filled. The Senate recently confirmed eight nominees, most notably Richard Spencer (Navy secretary) and Ellen Lord (undersecretary for acquisition, technology and logistics). Matthew Donovan (Air Force undersecretary), Ryan McCarthy (Army undersecretary), Robert Hood (assistant secretary for legislative affairs), Robert Daigle (director of Cost Assessment and Program Evaluation), Lucian Niemeyer (assistant secretary of Defense for energy, installations and environment) and Elaine McCusker (deputy comptroller).
Lockheed Pours Money into New Satellite Factory
The defense firm is building a $350-million satellite facility so big a Space Shuttle could fit into its high bay. Slated to open in 2020 on its Denver campus, the facility will build both small and large satellites, the firm said. The investment is the latest response by a company positioning itself for a booming civil and military space market. Just a few weeks ago we told you about how Lockheed is working on a new small satellite project.
Two more recently departed Pentagon appointees have new jobs. Lisa Disbrow, most recently Air Force undersecretary (and acting secretary), has been elected to the board of Mercury Systems, a Massachusetts-based provider of secure sensor and mission processing subsystems. Disbrow’s chief of staff James Swartout recently joined the MITRE Corporation as a senior principal communications strategist. Swartout reports to Bill LaPlante (former assistant secretary of the Air Force for acquisition), who has taken the reins as senior vice president for MITRE’s national security portfolio.