Boeing has been awarded a $9.2 billion contract to build the Air Force’s next fleet of combat training aircraft, the Defense Department announced Thursday, locking the Chicago-based aerospace company into the largest U.S. military aircraft procurement in years.
In a statement, Air Force secretary Heather Wilson touted the cost savings achieved through the award, noting that initial estimates had pegged the cost of the program at almost $20 billion. All of three of the major contenders for the award had incorporated international partners into the design, with Swedish, Italian and Korean joint ventures vying for the opportunity.
"This new aircraft will provide the advanced training capabilities we need to increase the lethality and effectiveness of future Air Force pilots,” Wilson wrote. “Through competition we will save at least $10 billion on the T-X program.”
For Boeing’s Arlington-based defense business, the award caps off a stunning winning streak.
While Boeing remains a leader in commercial aircraft, it has been outflanked by rivals recently in the defense market. Lockheed, the manufacturer of the F-35 Joint Strike Fighter, is the world’s largest defense contractor by a wide margin, taking in $50 billion in U.S. contract dollars last year compared with Boeing’s $23 billion. Investors saw Boeing’s loss to Northrop Grumman for the opportunity to build the B-21 bomber in 2015 as a major setback.
But Boeing has notched a string of victories in the past month, winning footholds on major military programs that should pad its coffers for decades. In late August, the company was awarded an $805 million foothold in a program to build the Navy’s MQ-25 a next-generation drone desiged to refuel fighter jets in mid-air. Then, this week, it won a $2.4 billion contract to replace the Air Force’s aging UH-1N helicopters.
Boeing was the only competitor to design a plane from scratch, teaming with the Swedish manufacturer Saab on the project. That approach may have raised the stakes somewhat: if the Air Force had gone with another company’s plane, Boeing would have sunk millions of its own research and development capital into the project to little reward.
With Thursday’s win, the company’s executives can breathe a sigh of relief.
“Today’s announcement is the culmination of years of unwavering focus by the Boeing and Saab team,” Leanne Caret, chief executive of Boeing’s defense unit, said in a statement. Caret took over the company’s defense business in 2016 as part of a broader reorganization designed to streamline the company’s operations, cutting out layers of upper management.
The T-X contract win“is a direct result of our joint investment in developing a system centered on the unique requirements of the U.S. Air Force. We expect T-X to be a franchise program for much of this century," she wrote.
The other major contenders had both pitched modified versions of older planes.
Lockheed Martin and Korea Aerospace Industries had teamed up to offer the T-50A, which has already been used to train pilots in Korea, Indonesia, Thailand, the Philippines and Iraq. And Leonardo DRS, a U.S. subsidiary of an Italian defense manufacturer, offered a modified version of one of its older trainer models called the T-100.
“We were disappointed to learn that the U.S. Air Force did not select our offering,” a Lockheed Martin spokesman said in a statement Thursday. “We believe we presented a very strong solution and await the customer’s debrief to hear more details regarding the decision.”
Analysts were skeptical that the Air Force will actually save $10 billion through the award. Estimates of the program’s total cost have ranged between $16 million and $19 million, meaning Boeing agreed to build the plane for about half of what had originally been expected for the project.
Such a substantial cost-savings is almost unheard of in military procurement, suggesting the program could eventually be subject to cost overruns. Others worried about which capabilities the Air Force dropped by bidding the price so low.
“When a military service says they saved $10 billion you have to wonder what they took off the aircraft,” said Loren Thompson, an analyst with the Boeing-funded Lexington Institute.
The Air Force’s move to replace the aging trainer aircraft is long-awaited. The new planes are to replace the T-38C Talon, which was developed by Northrop Grumman more than half a century ago.
The program was first conceived in policy documents dating back to 2009, but a request for proposals wasn’t issued until 2016. A 2016 study found only 60 percent of the Air Force’s existing T-38 fleet to be “mission-capable,” complicating the service’s efforts to mend a persistent pilot shortage.
Dave Deptula, a retired Air Force general who is dean of the Mitchell Institute for Aerospace studies, called the T-38 a “a great poster child for the geriatric Air Force we now have,” arguing the T-X contract should have been bid out long ago.
“This award is about 30 years overdue,” he said. “It’s amazing that more of those T-38s aren’t falling out of the sky.”
Richard Aboulafia, an analyst with the Aerospace consultancy Teal Group, said the T-X could be the “last training aircraft of its kind,” noting that remotely-piloted drones could replace piloted planes by the time the Air Force orders another model.
“If the T-38 story provides any guidance, the last T-Xs could still be in service in 2090,” Aboulafia wrote in a recent Forbes blog.