Five billion dollar paydays are rare even for a US defense contractor, so Boeing is probably feeling pretty good today.
The US Navy yesterday gave $5.3 billion to Boeing to build 124 F/A-18E/Fs and EA-18Gs over the next five years. That’s not quite as good as Lockheed Martin’s agreement last week on LRIP-4 for F-35, which, the company says, will pay more than $5 billion to build 32 aircraft over only one year. Of course, the Super Hornet fleet has a decade of production maturity and lacks very low observable (VLO) stealth, so the cost differential is not unexpected.
But it should be noted the pricing trend looks good for the Super Hornet after a year of uncertainty. The Department of Defense played hardball with Boeing for several months on the third multi-year contract, complaining that Boeing’s initial price offered only 7% savings compared to a single-year purchase. The DOD requires at least 10% savings to approve a multi-year, which trades away the department’s budgetary flexibility for marginal cost savings.
I researched Boeing’s press releases to find out how much the Super Hornet’s price has changed over the last decade. Even as the company introduced the Block II Super Hornet/Growler with active electronically scanned array (AESA) radar, the price has steadily declined. Keep in mind these figures don’t include ‘actuals’ — Congressional plus-ups make true cost comparisons impossible. But the trend is clear.
- MYP 1 (June 2000) — orders 222 aircraft for $8.9 billion, or $40.09 million per copy. Adjusted for inflation based on consumer price index: $49.45 million (2009 dollars)
- MYP 2 (December 2003) — orders 210 aircraft for $8.6 billion, or $40.95 million per copy. Adjusted for inflation based on consumer price index: $47.65 million (2009 $), a 7.6% decrease
- MYP 3 (September 2010) — orders 124 aircraft for $5.3 billion, or $42.72 million per copy, a 10.4% decline compared to MYP-2 and 13.6% decline compared to MYP-1
* Boeing MYP contracts exclude government furnished equipment, which includes engines