Aerospace Firms Push the Envelope.

Boeing Repositions Military Cargo Plane 

With the initial contract for production of C-17 cargo planes set to expire, the Air Force and Boeing Co. are lobbying hard for an extension of the program, including offering incentives to the nation's commercial airlines and cargo handlers to buy the planes for use in military reserve operations.

The future of eventual commercialization of the C-17 hinges on the developments.

Boeing's contract with the Pentagon calls for 120 of the $198 million planes to be delivered by 2003, and the Air Force is pushing Defense Secretary Donald Rumsfeld for an additional 60.

But to boost the program and keep Boeing's 8,500 C-17 workers at its Long Beach facility employed through 2009, the company, with the support of the Air Force, is proposing a plan that would guarantee income to airlines if they purchase the state-of-the-art cargo plane.

That income would come from the airlines flying military missions under the Civil Reserve Air Fleet program.

"In order for Boeing to make the business case for it, we would have to have a firm order (from commercial airlines) for at least 10 (C-17) airplanes," said Larry Whitley, communications director for Boeing's aircraft and missiles sector. "That could be from one service provider (airline), or several."

Traditionally, commercial airlines sign annual contracts to be part of the reserve fleet. The airlines in the program usually are called on to transport military personnel and small cargo on commercial planes. Commercial pilots might be used as a last resort for wartime missions, as was the case when they flew the bulk of the U.S. troops to the Middle East during the Persian Gulf War.

Government contracts assured

But under the new proposals by the Air Force and Boeing, cargo plane owners would be assured a yet-to-be-determined amount of government contracts hauling tanks, military automobiles, helicopters and Navy ship parts. This would ensure profitability until the commercial cargo market alone becomes sufficiently robust to support continuation of the C-17s, which are to be called BC-l7Xs under civilian ownership.

"Clearly, if Boeing sells more C-17s, it's great for Long Beach," said Jon Kutler, president of Quarterdeck Investment Partners Inc., an aerospace research and investment firm. "The Air Force is trying to use creative financing to cover the cost of potential future C-17 orders that they have. The greater the volume, the more profitability (for Boeing) in the back end of the program. Every one you make, you can do it a little cheaper because you learned from your mistakes. This (C-17) project started out very slow and has won a lot of believers, It's turned into a good airplane."

The C-17 has indeed come a long way since design and development problems stalled the program. Boeing signed its first C-17 contract with the Pentagon in 1988, but did not deliver the first plane until 1993.

The stripped-down C-17 sold to commercial carriers would have some of the technology and military hardware removed, dropping the per-plane cost from the current $198 million to the $150 million-to-$ 180 million range.

Airlines to be contacted

Next month, Boeing plans to send out requests for proposals to the 34 commercial airlines and cargo handlers in the Civil Reserve Air Fleet program. Its goal is to generate orders for at least 10 more C-17s, which would potentially generate more than $1.5 billion in new revenues. And that infusion would help ensure that the Air Force will continue to get its cargo-hauling needs met.

"The C-17 has become the workhorse for the strategic airlift fleet," said Lt. Col. Tom LaRock, spokesman for the Air Force's Air Mobility Command, which oversees the Civil Reserve Air Fleet. "It's the only plane we have that can deliver outsized cargo to austere locations."

In the changeover to a commercial plane, Boeing would likely remove the aerial refueling, airdrop and multiple flight control and defense from the aircraft.

What would remain is a plane that has a maximum takeoff weight of 585,000 pounds, and can carry 169,000 pounds of cargo traveling at 450 miles per hour. It can also land on dirt and other undeveloped runways that are as short as 3,000 feet.

None of the existing C-17s are being used in the current reserve fleet. Instead, commercial airlines are using reconfigured passenger planes to transport cargo on government-contracted flights.

The commercialization of the C-17 could further be helped by the growing demand for the transportation of heavy oil refinery, power generation and construction equipment that would not fit on a commercial plane, aerospace experts said.