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Boeing-gate
Donald Trump tweeted, Boeing stock fell. From Reuters:
U.S. President-elect Donald Trump said on Tuesday costs for a new Air Force One – one of the most prominent symbols of the U.S. presidency – were out of control, and urged the government to cancel a contract with Boeing Co for the jet.
Trump, who takes office on Jan. 20, griped during his unconventional election campaign about the cost of President Barack Obama’s use of the presidential aircraft to campaign for his rival, Hillary Clinton.
It was not immediately clear what prompted his complaint about Boeing and the presidential plane, but his transition team said that he aimed to send a clear message he intends to save taxpayers’ money.
“Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!” Trump said in a morning Twitter message.
It was not clear what his source of information was for the cost. The budgeted costs for the Air Force One replacement program are $2.87 billion for the fiscal years 2015 through 2021, according to budget documents..
…Boeing shares dipped after Trump’s tweet and were down 0.7 percent in morning trading. Shares of several other major defense contractors were also lower.
“We want Boeing to make a lot of money, but not that much money.” Is Trump’s statement different from Obama’s “I do think at a certain point you’ve made enough money,” and, if so, why?
Published in Culture, Economics, Politics
Trump doesn’t get to fly in the new Air Force One and they’re at such an early stage of development I doubt such a meeting took place.
So we’re paying $4 billion now for a product that won’t be delivered until after 2024 and that’s somehow not outrageous?
No, we’re paying $171 million now for a product that current projections estimate will cost s$2.6 billion by 2024.
For comparisons sake, just the production costs of the existing 747s back in 1990 was $610 million per plane in 2016 dollars. Or $1.22 billion for both – this does not include the developmental costs.
By the way – every single 747-200 airframe in the United States has been retired, except Air Force One. This drives up maintenance costs. Most analysis I’ve read suggests that it’s cheaper in the long run to replace it.
Barack 0bama tweeted … ‘if you like your health plan, you can keep your health plan’.
The entire health system of the United States, 16% of its economy, crashed and burned beyond recognition.
This debate about aircraft lifespans and part numbers and costs of aluminum sheeting is remarkably clueless.
The issue is not Mr Trump cancelling an order. He has no authority to do so. He is a private citizen for a few more weeks. It is not that he has not studied the matter thoroughly. By 15 minutes after his tweet, his acolytes had the necessary data at hand and arguments were being crafted pro and con.
The issue is that he is making a public statement to the effect that his comfort is less important than the Taxpayers’ dollars.
That’s a very, very good statement to be making right now, dontcha think?
Mr Trump is a master at using the media to create an image. This is just another example of his mastery. Ricochetti are arguing about aircraft mainframes while Reagan Dems are lining up behind Mr Trump.
Scott Adams, is that you?
You ignore the E-4 discussed already in this thread. That is the main flaw in the argument. We’d have to scrap the E-4 to gain efficiency.
The difference between a 747-8 and a modernized 747-200 is much smaller than that between a 747-200 and a 707, let alone between a 747-8 and a 707.
The E-4 was scheduled to be retired and then removed by Gates. We could gain additional efficiency by replacing them but it wouldnt negate the efficiency of moving AF1 to a current generation platform.
If that’s the plan then I’m all for it. But keeping the existing air frame with its current capabilities as discussed here makes no sense from a cost benefit analysis over the long term.
Also, Trumps rant displayed none of this kind of thinking. Just unfounded bullying about Boeing being too profitable. If Trump wants to make the case for reducing the imperial presidency and its trappings I’m all for it. That’s not what he did here.
How did Boeing win the contract? Or did they even have to compete with a concept and a bid?
The whole point is the travelling press corps has to fly in luxury.
That being said, the idea of putting them on a LAPES pallet in a C-130 is appealing.
The only other manufacturer of passenger aircraft is AirBus which is a European company. I’d love to see the reaction if the contract were handed to them.
As long as we keep the 747-200/E-4 service infrastructure, that completely negates the efficiency increase.
Remember, even when you ignore the cost of extra 747-8 infrastructure, fuel efficiency is actually less for the 747-8 as an AF1 than the 747-200.
747-8 is more efficient under the seat-miles/gallon measurement for revenue airliners, but not under miles per gallon that is more relevant in AF1 service.
We got a glimpse with the Marine One contract.
Air Force projection show a significant per flight hour operating cost savings. That’s all we really have to go on.
You are trusting a governmental cost prediction. Who are you and what have you done with Jamie Lockett?
I don’t have a better source do you?
You must have read something from Trump different than I did. Where did he say anything about Boeing being too profitable? He said the government was spending too much money.
I prefer common sense. This is the same Air Force that forgot to include the cost of flying fuel to a refueling point when considering fuel costs of, I believe, re-engining the B-52. Thus their cost predictions used the depot cost of fuel, ignoring that the average unit of fuel used would be flown several thousand miles at a cost of several times the depot cost.
Fair enough. I’m more than willing to scrap the development of this aircraft – but I think it requires a cost-benefit analysis more deep than was exhibited here.
Do you have any evidence at all this is the case? Or just your off-the-cuff feeling that he said this based on an off-the-cuff feeling?
No one else bid for it. They all dropped out. They knew that Boeing would lose money rather than let someone else get it. This is what happened in 1980s when the first 747s were purchased. Once there was no competition Boeing took their serious negotiators with all their guys with sharpened pencils off that job and put them to work on competitive bids. Now it’s in the hands of the project managers instead of the brainy deal makers — cost just goes up in those circumstances because no one is trained to work both sides of the equation. Project managers just work on schedule and building their organizations. Nothing wrong with this except it doesn’t have cost sensitivity built in to the upper management people.
I just wish there was a “less than palatial” option for ordering this thing.
Military procurement is more expensive for several reasons. First of all there is no civilian market for M1 tanks, F-22’s, A-10’s or whatever other weapons platform you care to name. Take the F-22 for example, once the Pentagon decided that the F-35 was what they wanted that means starting a new production line with new tools. Next comes the request from the military for modifications, that means more retooling.
Now Lockheed-Martin would have been quite happy to continue producing the F-22 but it was not their decision to close that line. Once it closes it cannot be restarted by simply flipping a switch. Also workers skilled in building the F-22, if no other work is available for them at Lockheed are laid off and they seek work elsewhere, and some of them are lost to Lockheed forever.
Now I voted for Donald Trump, but with all due respect to Mr. Trump he shoots from the lip once in awhile. One wonders if any Boeing execs made the pilgrimage to Trump Tower, or did they get the good news from Twitter.
We’re not talking about military procurement here, we’re talking about a (admittedly highly modified) commercial airliner.
Even more off-topic: As far as modifications to production military planes, read something interesting about airplane production during WWII. The constant modifications to production for heavy bombers was killing throughput on the lines – instead of multiple planes per day, they were getting a few planes per week as they constantly rejiggered.
Finally they decided to leave primary production alone, then fly the completed planes to a separate facility that retrofitted changes into them.
Yes, his actual statement on the matter that they shouldn’t make that much money.
It’s a little bit of a tangent, but I have to take issue with the phrasing of the post. It implies a connection between Trump’s tweet and Boeing’s stock price. A 0.7% drop could just as likely be profit taking after a big gain the day before.
Air Force on is more of a military aircraft than a jet liner.