Is this the Art of the Deal coming into play, or a stand against gouging by defense contractors? Despite insisting on the latest in luxury as a private citizen, Donald Trump seems to be saying no to a new fleet of presidential aircraft. He tweeted earlier today that the contract for replacing Air Force One should be canceled due to spiraling costs:
Over the past few months, the Pentagon approved contracts that allowed Boeing to prepare to convert two of its 747-8s into replacements for the current pair of aging 747s that serve as Air Force One. The three contracts come to $169 million, a down payment on an expenditure that the Pentagon estimates will have a cost of $1.65 billion [see update below]. The Air Force announced that plan almost two years ago, and the Air Force promised to “use proven technologies and commercially certified equipment” to keep costs under control.
A search of news does not produce any links about costs doubling on the project. It’s certainly possible that it might be happening; the request for bid went out to Boeing in September, so perhaps the proposal came back with a surprisingly high bottom line. If so, it’s being kept so quiet that even industry outlets have missed it. Boeing already has a limited market for the 747-8 as it is, thanks to competition from Airbus and a preference for two-engine aircraft for most routes. In January, Boeing announced a cutback in production of the 747-8 due to lower demand. Does it make much sense that Boeing would make their product look even less commercially useful by blowing up a high-profile contract? For some perspective on that question, check out the hit that Boeing took after Trump’s tweet, losing 1% in premarket trade.
Besides, canceling the order doesn’t make much sense in practical or political terms. The current pair of 747s fulfilling this mission are almost 30 years old and are nearing the end of their planned lifespan as AF1s. Replacements have to be found soon, and Boeing already has the process underway. The only other four-engine airframe option would be the Airbus 380, which would mean dumping a product made in the USA to, um … outsource it overseas. That’s not exactly Making America Great Again, is it?
Either this is a stream-of-consciousness tweet that means nothing, or Trump wants to lean on Boeing publicly to wring a better deal out of them. As a defense contractor, they depend on government contracts for survival, and they had to have noticed what happened last week with United Technologies and its Carrier subsidiary. Nice contracts ya got there, pal …
Update: Given the nearly unremarkable nature of this contract before now, it’s been difficult to get solid details on it. Other reporting on this, which went up after this article was published, indicate that the cost is $1.65 billion each, not as a pair, as originally argued — although the original reportng from earlier this year implied that was the total planned expenditure. I edited the original post to leave that issue for later clarification. If the figure is per plane, then the planned expenditure would have been $3.3 billion, so a cost overrun to $4 billion would be not quite as surprising. There still haven’t been any reports indicating that, however.
Trump did reinforce his tweet in a brief media avail this morning:
“It’s going to be over $4 billion for Air Force One program and I think it’s ridiculous. 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,” the president-elect said.
Sounds like a renegotiation to me. Plus, it’s a lot more legitimate in this case, given that Trump is in the position of customer rather than an outsider.
Update: After doing some research on the price, it seems more likely that the $1.65 billion projected cost was for both airplanes, not just the one. The list price in 2014 for the 747-8 was $358 million, but a customized VIP version sold for over $500 million in this undated article from Azure. If costs really have gone up to $4 billion, then it’s highly questionable as to why.
If anyone would like to help me do some more research, though, be sure to get ahold of that VIP version and fly it out to me. I’ll fly it around for a few months and let everyone know whether it’s worth the price. And also, peel me a grape, will you?
Update: Well, my my my, as Joe Kenda likes to say:
US Air Force official: Price of new Air Force One project expected to be more than $4B by time aircraft delivered – @ckubeNBC
— NBC Nightly News with Lester Holt (@NBCNightlyNews) December 6, 2016
Yikes. Now, replacing the existing pair is a necessity, but this seems like a yuuuuuuuge bill for two $358 million planes, no matter how many modifications take place. If I were Trump, I’d want an explanation, too.
Update: More from NBC. Note that the costs of the planes themselves are about $800 million. It’s everything else that costs a fortune:
Miller did not answer directly how Trump knew the price of the new Air Force One, but according to the latest figures, Trump is likely correct about the $4 billion price tag. Research and development is already at $2.7 billion for first two years, a number that is already budgeted and approved, and the Government Accountability Office warned last year that the cost would be approximately $3.2 billion. By the time the aircraft is delivered, the total cost will likely be over $4 billion, because the government still has to buy the two aircraft once they are built.
Air Force One is so much more expensive than commercial planes because of the communications package and air defense measures. Boeing was the only choice for the build because it’s an American company and they have the only four-engine aircraft, a necessity due to the weight.
Keeping the old Air Force One is an option, but not an ideal one. The plane has a lifespan of about 30 years, and the current ones are in their late 20s. As the planes age, safety becomes a concern while maintenance and other costs increase.