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BOEING WINS $9.7BN C-17 CONTRACT

15 Aug 02. Boeing Co. (NYSE:BA – News) won a $9.7bn contract to build 60 C-17’s Globemaster for the U.S. Air Force, the Pentagon announced on Thursday.

The contract calls for Boeing deliver the Globemaster planes by 2008.
Boeing has been eager to land the contract as shrinking orders from the ailing airline industry have hurt its commercial airline business. The company has cut production in half since Sept. 11 and issued layoff notices to about 30,000 workers, most of them in Washington state.

Chairman Phil Condit touted the possibility of an order for more C-17s during the company’s annual shareholder meeting in April. Congress also has approved plans to allow the Defense Department to lease 100 Boeing 767s as military refueling tankers and four 737s to carry administration officials and lawmakers. Boeing already has a contract to deliver 120 C-17s to the Air Force by the end of 2004. Eighty-nine of those planes have been delivered. The new contract preserves 7,000 jobs in Long Beach, Calif., where the planes are assembled, local Boeing officials said. Without the new orders, work on the
remaining planes would have been finished by 2004 at the rate of 15 planes per year. The contract also extends operations at Boeing plants in St. Louis, Macon, Ga., and Mesa, Ariz.

“We are absolutely ecstatic,” said Bill Shultz, president of United Aerospace Workers Local 148. “This is very good news for the Air Force, for Long Beach and the UAW work force, and it’s a good plane. It has exceeded all its expectations.”

The four-engine C-17, introduced in 1995, is one of the largest cargo planes in the Air Force fleet and has been used extensively to support the war in Afghanistan. With midair refueling, the planes can fly virtually anywhere in the world from bases in the U.S. and land on relatively short and primitive runways.

The planes are currently based at Charleston Air Force Base in South Carolina and McChord Air Force Base in Washington state.

Comment: This is good news for Boeing and confirms the strength of the C-17 after its shaky career start in the early 90’s. It is now regarded as the best aircraft in its class. The RAF, the only other user so far is ecstatic with the aircraft and has utilised the system way ahead of its planned leasing programme thus increasing the lease costs. Tornado aircraft are being ferried to the Falklands rather than flying and Afghanistan provided a vital learning curve. It is likely that the RAF will buy rather than order the next tranche.

As mentioned in our lead story the combination of the budget problems in Europe and this increased buy may make a European C-17 buy a cheaper alternative to A400M, which would benefit BAE SYSTEMS which has extensive work on the aircraft and could well become the lead for any European buy. The C-17 already has the BAE HUD and Terprom system.

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