Posted on 05/09/2003 1:10:17 PM PDT by aShepard
Reuters:
Boeing Tanker Lease Remains 'Complicated'
Friday May 9, 2:03 pm ET
By Jim Wolf
WASHINGTON (Reuters) - Boeing Co.'s (NYSE:BA - News) multi-billion proposal to lease 100 jets to the U.S. Air Force as refueling tankers remains a 'complicated issue,' the Defense Department said Friday. ADVERTISEMENT
The department, which must endorse any deal before it goes to the White House budget office and ultimately to Congress, cannot rush its work because of the issue's complexities, said Cheryl Irwin, a Pentagon spokeswoman.
'This is a complicated issue and one that deserves the closest attention to make certain that we make the best use of taxpayer money, while at the same time meeting the Air Force's critical needs,' she said.
The proposed lease of 100 767s would give the service new planes more quickly than waiting to have the funds to buy them outright, the standard way of procuring such big-ticket items.
Boeing has offered to sell the 767s at the end of a six- year lease for $4 billion in addition to the lease cost. Knowledgeable sources said recent negotiations had cut this cost by an unspecified sum from the $17 billion tentatively agreed to by the Air Force and Boeing.
Critics, including Senate Armed Service committee member John McCain, an Arizona Republican, have denounced the proposed deal as a handout to Boeing.
An alternative proposal involves putting new engines in the aging KC-135 tanker fleet, delivered between 1957 and 1965.
A stumbling point appears to be a risk premium factored into the deal by Chicago-based Boeing.
The federally funded Institute for Defense Analyzes, which has studied the matter for the Pentagon, reportedly has concluded that each aircraft should cost $20 million to $30 million less than negotiated by the Air Force.
IDA held that Boeing's risk in building the aircraft was minimal and should not be included in the price, Defense News, a trade publication, reported Thursday. IDA also has produced evidence that Boeing gave a 'huge discount' to a major domestic commercial carrier to buy its 767-ER model, Defense News said.
Boeing and IDA did not return repeated requests for comment. An Air Force spokeswoman, Gloria Cales, said the service was 'still working with the Defense Department. And we're waiting for its approval' of the deal.
A week ago, the Pentagon's chief weapons buyer, Edward Aldridge, told Reuters the Defense Department was trying to 'resolve the cost differences' at issue. Aldridge is retiring May 23. Some congressional backers of the deal consider his impending departure an important deadline for moving a decision to Defense Secretary Donald Rumsfeld quickly.
Congress authorized the tanker-lease after the Sept. 11, 2001, hijacked-airliner assault on the United States, which hurt Boeing's commercial airliner sales.
Bob Gower, Boeing's vice president for 767 tanker programs, told a May 1 news briefing Boeing had not seen the Institute for Defense Analyzes' numbers.
'Like you, we hear that there's significant difference between the number that the U.S. Air Force has negotiated with us and what IDA has done,' he said. 'Quite frankly that perplexes us a little bit' in light of the tentative agreement with the Air Force and in light of Boeing's deals to sell 767 tankers to Italy and Japan.
'I would question the methodologies that they're using.'
Wouldn't it be a lot cheaper to buy them up & convert them to KC-10's or KDC-10's than it is going to be to lease (then give back, according to the original terms of the lease) a bunch of 767 T-T's?
Fact- American Airlines -Linda Daschle's client, American Airlines has lobbied for years to water down safety and security that might have aided in foiling the World Trade Center Attacks. With the support of Tommy and Linda Daschle, American Airlines received a $583 million taxpayer bailout after the 9/11 attack.
Fact- FAA- CBS -60 Minutes - Tom Daschle charged with inappropriately intervening to reduce safety inspections of an air charter company owned by a "friend of the family" after one of the planes crashed and killed four in 1994. While Linda Daschle was at the FAA she acted to exempt their friends airline from intensified safety inspections.
Fact- Boeing- Another client of Linda Daschle is lobbying for a deal to lease 100 Boeing Aircraft to the U.S. Military at a cost of $37 Billion. If the planes were bought outright the cost would be $25 Billion ...or $12 Billion Less. Tom Daschle is responsible for scheduling a vote on the bill. Will it be mentioned on CNN or in The New York Times? Don't hold your breath!
Fact- L-3 International- According to the 2000 Transportation Budget, the FAA was forced to buy baggage scanners from another client of Linda Daschle's- L-3 International, despite the fact that the Department of Transportation found the equipment to be substandard, some even leaking radiation. The Inspector General told Congress that the FAA's requirement to buy the scanners is one reason airports will not be able to meet the new mandate to screen all luggage for bombs or guns... for many years. He added that Americans have been put further into serious risk.
Fact- Northwest Airlines- More than $100,000 was donated to Tom Daschle's campaign in the last election by the Air Transportation Industry. Northwest Airlines was the second largest contributor to Tommy's campaign in 1998. Northwest is a client of Linda's.
???Is that enough???
The government is always doing this, and it pisses me off. The government can already go onto the market and borrow at lower rates than anyone else. Why would they ever lease anything, unless the imputed interest rate was no higher than it is on T-bills? And I don't know how it could be, because Boeing can't borrow at that rate. |
I don't know the answer to that one, I simply wonder if anyone who can answer it has bothered to do the analysis?
Wouldn't it be a lot cheaper to buy them up & convert them to KC-10's or KDC-10's than it is going to be to lease (then give back, according to the original terms of the lease) a bunch of 767 T-T's?
Especially when you consider tankers sit on the ground much more than commercial aircraft. The Air Force will be buying the last 767s off the line while at the rate of use they have, they should last at least 50-60 years. The Air Force will have the same problem they have with the KC-135. Lots of the companies that make spare parts will be out of business. It will be more expensive over time to maintain them because the industrial base that built them has become obsolete. Good used DC-10s and MD-11s with quite a number of flying hours left can be bought for a lot less, and there is not the risk of outliving the industrial base that maintains the commercial fleet.
Perhaps you should pull your head out of your rear. I was responding to a previous post. Have you ever heard of the KC-10? It is a tanker built on the DC-10 airframe. The Air Force bough 60 of them in the early 1980s. Perhaps you should visit Boeing's website or the Air Force's website. "Fixit" pointed out that there were lots of DC-10s grounded (as a result of September 11). He was suggesting the Air Force could convert them to tankers with similar characteristics to the previous KC-10s much cheaper than buying brand new 767s. Boeing still supports the DC-10 and MD-11 even though they are out of production. In fact they even Repace the old 3-man cockpits of DC-10s and replace them with a 2-man digital cockpit used in the MD-11 and redesignate it as the MD-10. Fedex and other freight airlines fly quite a few of these former passenger airliners that have been upgraded.
My point is that the Air Force could spend a lot less bying used DC-10s and converting them to KC-10s than bying brand new 767s. At the rate the Air Force flys its tankers, they would still be around for quite a while. You should consider that the KC-135 which was built in the 50s and 60s is expected to be around till 2040; thats over 80 years. According to one study I read (use a search engine to find it) only a few KC-135s will have reached the maximum numbers of hours on on their airframes.
http://www.globalsecurity.org/military/systems/aircraft/kdc-10.htm
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