In an era of extreme defense retrenchment, there are basically three things you can do, as a company highly dependent on defense contracts:
- You can hope for the budget climate to turn around, while funding your own existence, at least, until the money runs out. This is what Evergreen Air Cargo tried to do; they lost.
- You can try to diversify from government-contract to commercial-contract business. This is too much of a cultural leap for companies addicted to the crack of cost-plus government contracts (we’re lookin’ at you, Booz-Allen) to do. If your company is already running both government and commercial operations, you might not be able to use all your .gov capacity on the .com side, which means wrenching cuts and layoffs. To try to shift your doomed military contract business towards the growth side of government is a variant of this play, but it certainly isn’t possible for everybody. Another variant is to try to sell to foreign militaries, but many of them are themselves addicted to the crack of the DOD Foreign Military Sales aid budget, and with that too declining, doors worldwide are slamming shut to US prime contractors.
- You can just roll the defense side up. You can call it a hiatus or going into standby mode, but once you’ve lost the talent and the tribal knowledge that was your defense operation, you can’t get it back economically.
Boeing Military Aircraft Company has tried #1 and all variations of #2, and is looking at #3 in the short-term future. Boeing’s military side started with the company’s own bomber plant in Wichita, and has grown through several acquisitions. No bombers have been produced in the USA in over a decade, and there are no plans to produce more. The P-8 Poseidon is a weaponized 737, and Boeing’s tanker likewise is a jetliner in a soldier suit. Boeing’s military transport line, the C-17, was acquired with McDonnell Douglas; its plant in Southern California is scheduled to close when the planes now on the schedule, which are for foreign air forces or completely on spec, are complete. Boeing’s helicopters came from acquisitions of Hughes and, much earlier, Piasecki; the AH-64 production line, too, is likely to close (Boeing didn’t retain the smaller Hughes helicopter line).
The production line on the bubble now — its fate will be decided in the next ninety days — is the St. Louis fighter line, also acquired in the McDonnell Douglas purchase. Foreign interest in the planes has been sunk by the jet’s uncompetitively high prices ($50 million plus for a base Super Hornet, $60 m for a Growler). This pricing is the result of decades of cost-plus sales to the US DOD. With Navy orders for Super Hornet and Growler fighter and electronic-warfare aircraft cut again, the production line that produced over 5,000 Phantoms before turning out thousands of F-18s is likely to go silent — for good.
If there are, as currently projected, no F-18 E/F or EA-18G orders in the 2015 budget, the long lead time items for that production won’t be ordered in 2014, and the St Louis plant and, probably, some parts makers, will close by 2016.
Boeing has no follow-on contracts or designs for combat or cargo aircraft, and they’ve lost competition for contract after contract. Company leadership has been preoccupied with the commercial market, where Boeing faces its own challenges, and by such self-inflicted drama as the relocation of corporate HQ to a city far from any customers or plants and a botched attempt at outsourcing that traded vital intellectual property for cheap, but below-spec parts.
The US Air Force is looking to run a trainer competition. The US industrial base for military aircraft has already become so decrepit that all three of the currently announced competitors originate in foreign countries (UK, South Korea, and, we are not making this up, Russia). Boeing no longer has the capability to design such an aircraft in-house, and has been seeking partnership with SAAB of Sweden.
So that’s where we stand: during two periods of defense cuts (the 1990s and the current era), our broad and deep military aircraft industry consolidated into two massive companies, one of which is on the brink of a market exit, and neither of which can design an unarmed jet trainer.