Daily Management Review

More F/A-18 Fighters Possibly to be Self Funded by Boeing: Reuters


More F/A-18 Fighters Possibly to be Self Funded by Boeing: Reuters
As Boeing Co waits for the U.S. government to approve a delayed order by Kuwait for 28 jets, it is nearing a decision to invest "a significant amount" to keep a F/A-18E/F fighter jet production line in St. Louis running, reports Reuters.
The company would decide in coming weeks whether to buy titanium and other materials needed to start work on the jets, even before the Kuwait deal and potential U.S. Navy orders are finalized, said Reuters quoting Dan Gillian, who runs Boeing's F/A-18E/F and EA-18G electronic attack jet programs.
Against the risk that the orders could still fail, Boeing would weigh strong expected demand for the warplanes, he said.
Even as its commercial division faces job cuts and a federal investigation into whether it properly accounted for two jetliners, the 747 and 787, delays in orders for the jets mean Boeing must decide whether to invest hundreds of millions of dollars into the F/A-18 program.
"Based on the demand signals we see today, I’m confident that we’ll be building F/A-18s into the 2020s," Gillian told Reuters on Thursday.
The U.S. Navy's proposed funding to buy two F/A-18E/F Super Hornets in a supplemental war budget as well as the announcement to buy 14 more jets in the fiscal 2018 base budget had encouraged Boeing, Gillian said.
Gillian said that Boeing needs the Kuwait order to be finalized soon to keep production going until the Navy's expected fiscal 2018 orders as the company has already slowed production from three planes a month to two planes. The Kuwait order could be worth more than $3 billion to Boeing, analysts have said.
According to a U.S. official and industry sources who were not authorized to speak publicly, the U.S. Navy may also add a dozen more F/A-18 fighter jets to its list of "unfunded priorities" in fiscal 2017. This is a document used by lawmakers to adjust funding in the Pentagon's annual budget request.
To help the Navy deal with a shortfall in carrier-based fighter, Congress approved a similar request last year. With the aim to buy five F/A-18E/F Super Hornets and seven EA-18G Growlers, lawmakers ultimately added $1.1 billion to the Navy's fiscal 2016 budget.
Gillian said that the St. Louis plant line could continue into the early 2020s if the additional Navy and Kuwait orders are approved while the current Navy orders will keep the line running through June 2018. He added that it would further strengthen the position of Boeing to run for potential orders from Finland, Belgium, Spain and Denmark.
As the Obama administration negotiates a 10-year agreement with Israel on U.S. military aid, the Kuwait Super Hornet order and a separate Boeing F-15 sale to Qatar have both stalled.
Given the consequences for the industrial base concerns have been raised by U.S. defense officials which included Navy Secretary Ray Mabus about the slow pace of arms sales approvals and particularly the Kuwait F/A-18 sale.
According to sources familiar with the matter, Qatar has already started pursuing a separate deal with France's Dassault Aviation for 24 Rafale fighter jets and have halved its expected purchase of F-15s.