Local plant stands to gain if Air Force leases Boeing jets

Deal for 100 aerial tankers could benefit workers at Middle River Aircraft

February 13, 2003|By Robert Little | Robert Little,SUN STAFF

The Air Force is expected to complete within several days a plan to lease 100 air-refueling tankers from Boeing Co., a $21 billion deal that would give the battered plane maker a critical infusion over the next decade as it struggles to overcome declines in the commercial aircraft market.

And on Eastern Boulevard, where employees of Middle River Aircraft Systems are struggling with their own workload drought, the decision could reverberate throughout the factory.

If Middle River is asked to build the planes' thrust reversers - a strong possibility, given its history - then the local plant's main production line will also get a multiyear boost, just when its future seems dire.

"The commercial business is really in a trough right now," said A. Norton DePinho Jr., vice president for business development at Middle River Aircraft Systems. "This would offer a good balance to that and extend the life of an important production line for us."

The plan still has several hurdles to clear. Sources close to the negotiations said they expect the Pentagon to complete plans in the coming days for a 10-year, $17 billion lease of Boeing tankers, which would be built using the company's 767 wide-body jet airframe.

The deal would allow the Air Force to buy all 100 of the planes for $4 billion when the lease expires, according to sources. The first aircraft would be delivered in 2006.

But Congress, which has been skeptical of the leasing arrangement, would have 30 days to review the proposal, and even then the role of Middle River Aircraft Systems would be uncertain. Boeing and the Air Force still must select one of two engine manufacturers, only one of which is likely to use the locally made thrust reversers.

The potential consequences are vast for Boeing, and for probable subcontractors like Middle River, a subsidiary of General Electric Co., which makes one of the engines.

Without the tanker deal, Boeing's 767 production line could soon slow to a rate of roughly one aircraft a month - "bare sustenance level," according to Paul H. Nisbet, an aerospace analyst for JSA Research Inc. The company already has suffered a drop in annual revenue of more than $4 billion, because of drains to its commercial airliner business.

Middle River Aircraft Systems, which employs about 750 people at its local plant, has watched its thrust reverser production line slow as well, from an output of 150 units last year to just 115 expected this year. Those reversers, used as braking devices for the GE jet engines that power Boeing's 767 and other large aircraft, are the plant's main product line.

Air Force income

Spokesmen for Boeing, Middle River Aircraft Systems and other companies involved in the deal would not speculate on the Air Force's plans, but they made clear that many aerospace manufacturers are eager for some steady Air Force income.

"We're hopeful that it will be completed soon," said Deborah Bosick, a Boeing spokeswoman. "We've said all along that the American taxpayer will win because of the leasing deal, and the war-fighter will win because they'll get access to advanced capabilities much sooner than they could otherwise."

The Air Force wants to upgrade the tankers that it uses to refuel fighter and transport planes in the air. Many of its KC-135 Stratotanker refueling planes, built from Boeing's old 707 design, were manufactured more than 40 years ago and have grown increasingly unreliable and expensive to maintain.

The proposed KC-767 tanker would offer improved range and capacity and could, unlike the KC-135, be used to refuel Air Force and Navy planes on the same mission, without having to land and change nozzles.

The leasing arrangement - a novelty at the Pentagon - means the government would not pay anything for the planes until they are delivered, but some members of Congress have objected that the total cost will be higher than an outright purchase would be.

Pentagon and Boeing officials have worked for months to craft a deal that might be acceptable, apparently backing down from earlier proposals that congressional and White House analysts said were overpriced.

"It is a major investment required by the Department of Defense," said Defense Undersecretary Edward C. "Pete" Aldridge Jr. at a Pentagon briefing Friday. "Anything new, people have some questions about whether or not it's doable. But we are working it now."

"No decision has been made as of yet, but we're trying to work those out and come to a decision soon," he said. "We'll try to wrap up some direction, hopefully next week, on this whole idea."

Pacts with Italy, Japan

Boeing signed a contract last year with the Italian Air Force for four KC-767 tankers and has an agreement with Japan for four more. Both countries have chosen to power the aircraft with General Electric engines. The Air Force and Boeing are not expected to announce their engine selection for several months.

A GE spokesman said yesterday that if the Air Force selects the company's popular CF-6 engine, then Middle River will build the 200 thrust reversers for the fleet of twin-engine craft. The local unit also would be expected to provide spare parts and support services for Air Force bases around the world.

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