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Boeing Tanker Lease Remains "Complicated"
Yahoo finance | 5/9/2003 | Reuters, Jim Wolf

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.'


TOPICS: Business/Economy; Crime/Corruption; Front Page News; Government
KEYWORDS: 767tt; boeing; boondoggle; kc767; lindadaschle; tankerlease
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Well Linda Dashole, not so fast with that pen to endorse your check.
1 posted on 05/09/2003 1:10:18 PM PDT by aShepard
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To: aShepard
A buddy of mine just landed a job with Boeing for this project. He's an engineer in St. Louis...
2 posted on 05/09/2003 1:13:32 PM PDT by demsux
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To: aShepard
Don't get me wrong, LindaTom is/are evil people.
3 posted on 05/09/2003 1:14:41 PM PDT by demsux
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To: aShepard
It's "complicated" because the complexity hides the rip-off.
4 posted on 05/09/2003 1:17:12 PM PDT by Shermy
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To: aShepard
Could someone explain the Linda Dashle connection?
5 posted on 05/09/2003 1:17:15 PM PDT by MediaMole
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To: aShepard
There's an awful lot of DC-10's sitting in storage out in the desert.

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?

6 posted on 05/09/2003 1:24:26 PM PDT by Fixit (http://comedian.blogspot.com)
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To: MediaMole
Linla Dashole??

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???

7 posted on 05/09/2003 1:28:23 PM PDT by aShepard
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To: aShepard

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.


8 posted on 05/09/2003 1:32:09 PM PDT by Nick Danger (The liberals are slaughtering themselves at the gates of the newsroom)
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To: Fixit
Operating costs on a 767 should be a lot lower than a DC10 for equivalent pounds/mile payload
9 posted on 05/09/2003 1:33:33 PM PDT by Wisconsin
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To: Nick Danger
""government can already go onto the market and borrow at lower rates than anyone else. ".....

An excellent point!, But then, it would be harder to pay off the skim to the politician, because the transaction would be too "visual".
10 posted on 05/09/2003 1:35:05 PM PDT by aShepard
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To: aShepard
Too late. I think I heard that Tom n' Linda just bought new digs in DC for $1.9M. Maybe on Limbaugh earlier in the week.
11 posted on 05/09/2003 1:40:18 PM PDT by Calvin Locke
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To: Wisconsin
I know that the DC-10's (and KC-10's) are fuel hogs, but when they could be purchased outright (off the used market) for at a very small fraction of the price that Boeing was awarded to simply lease us the 767's, when would the break even point be for the operating costs outweigh the difference in initial outlay (including time value of the money).

I don't know the answer to that one, I simply wonder if anyone who can answer it has bothered to do the analysis?

12 posted on 05/09/2003 1:49:33 PM PDT by Fixit (http://comedian.blogspot.com)
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To: aShepard
Knowledgeable sources said recent negotiations had cut this cost by an unspecified sum from the $17 billion tentatively agreed
I'm not sure that is right, as this article says that the lease price is $17B for 6 years, with a $4B buyout price at the end. These planes are around $130M each, or $13B for all one hundred.
13 posted on 05/09/2003 1:54:32 PM PDT by lelio
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To: Fixit
There's an awful lot of DC-10's sitting in storage out in the desert.

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.

14 posted on 05/09/2003 1:59:03 PM PDT by Paleo Conservative
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To: aShepard
Thanks, she wasn't mentioned in the article. I didn't know about her connections.
15 posted on 05/09/2003 3:25:35 PM PDT by MediaMole
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To: Paleo Conservative
"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."

And your source for this. And DC-10s are in production? How many have you seen flying lately? Are they good platforms for boom refueling - your sources please. Are you an expert on Air Refueling? I am. Your questions please.

the dozer
16 posted on 05/09/2003 5:37:20 PM PDT by dozer7
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To: dozer7
And your source for this. And DC-10s are in production? How many have you seen flying lately? Are they good platforms for boom refueling - your sources please. Are you an expert on Air Refueling? I am. Your questions please.

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.

17 posted on 05/09/2003 6:06:51 PM PDT by Paleo Conservative
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To: Paleo Conservative
bying = buying.

I'm having difficulty reading from my monitor today.
18 posted on 05/09/2003 6:38:47 PM PDT by Paleo Conservative
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To: Paleo Conservative
There is even a precedent for making refuelers out of civilian DC-10's, producing a variant called the KDC-10.

http://www.globalsecurity.org/military/systems/aircraft/kdc-10.htm

An engineer is someone who can, for a dollar, do what any fool could do for two.

19 posted on 05/09/2003 7:23:28 PM PDT by Fixit (http://comedian.blogspot.com)
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To: Fixit
Also, there are other converted civilian airliners in use as tankers. The British operate coverted Vickers VC-10 and Lockheed L-1011 airliners as tankers.
20 posted on 05/09/2003 7:30:51 PM PDT by Paleo Conservative
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