For a decade, Boeing Defense, Space and Security (BDS) has managed to survive by cutting costs at a slightly faster pace than a relentless decline in revenues.
So, the same division that posted revenues of $32.1 billion in 2007 disclosed sales of $21.1 billion in 2017. Owned or leased facilities assigned to BDS showed a similar decline over the same period, falling from 3.8 million m2 (41.3 million ft2) to 3 million m2 in 2017.
Leanne Caret became president and chief executive of BDS in 2016, a year after the company's loss in the competition to build the Long Range Strike Bomber for the US Air Force. It was Boeing's most painful setback in a defence competition since October 2001, when Lockheed Martin claimed the contract to build the Joint Strike Fighter.
Under Caret's watch, BDS has continued to manage decline, with an internal consolidation announced in November 2016, corporate reorganisation unveiled in June 2017 and a management reshuffling and streamlining executed last March.
END OF AN ERA
In an interview with Caret on the eve of the Farnborough air show, the 30-year Boeing veteran made it clear she believes the era of decline and constant reorganising is over at BDS. With several major production lines stabilised potentially for another decade and several opportunities to win new "franchise" programmes during the next several months, BDS is ready to finally embark on a growth plan.
"We’re in a good place. I don’t anticipate anything [restructuring-wise] significant. My focus right now is stability with the organisation," Caret says.
Stability feels like a luxury at BDS after such a hard decade, but it has been well earned. As Caret arrived at the unit's C-suite, uncertainty gripped the fate of such high-profile programmes as the KC-46A tanker, F/A-18E/F and EA-18G fighter lines, the CH-47 and MH-47 Chinook lines and the partnership with Bell on the V-22 tiltrotor.
Two years later, the KC-46A is scheduled to reach a long-delayed first delivery to the USAF in October. The Trump Administration expanded and accelerated production of the F/A-18E/F for the US Navy, the Block 2 version of the CH-47F is now in final assembly and Bell Boeing just signed the multi-year procurement deal for the V-22.
Meanwhile, Caret's BDS is participating in a rare wave of competitions to win multiple new franchise programmes with the Department of Defense. The US Air Force is set to award the contract by the end of the year for the T-X trainer, for which Boeing has offered a clean-sheet aircraft designed in collaboration with Saab. The US Navy is close to selecting a contractor to build the MQ-25 carrier-based tanker. Phantom Works, a rapid prototyping arm of BDS, is offering a clean-sheet design. Autonomous Systems, a BDS operating unit, meanwhile, is a critical supplier for a competing bid offered by General Atomics Aeronautical Systems.
"We’ve taken a lot of steps to make sure we're ready for when those are awarded," Caret says.
JSTARS IN BALANCE
The US Air Force had also planned to replace the Northrop Grumman E-8C JSTARS with a business-jet-class aircraft. BDS has prepared a bid based on the 737 version of the Boeing Business Jet, but the bid is on hold. The USAF now plans to distribute command and control for air strikes to a network of airborne- and ground-based hubs, rather than relying on a large, unstealthy aircraft to perform the mission. Congress, however, remains divided over the proposal, with the House of Representatives approving legislation to restore JSTARS in next year's budget and the Senate preferring to leave the matter to the USAF's judgment.
The international market also presents several opportunities to fuel BDS's plan to return to a growth business.
The UK reportedly has approved plans to replace the Boeing E-3D Sentry AWACS fleet. Airbus and Saab stand ready to offer a competing proposal, but BDS is keen to preserve the Royal Air Force as an AWACS customer. Boeing plans to offer a version of the 737 Wedgetail Airborne Early Warning and Control aircraft to the RAF, a potentially complimentary piece to the British military's fleet of C-17s, P-8As, CH-47s and AH-64s.
"I feel positive about what I anticipate hearing," Caret says. "There have been lots of conversations."
Further, BDS has built a solid position in India since the US government opened armed exports to Delhi in 2005. The company has sold billions of dollars of aircraft to India with a RAF-like spread of Boeing-made products, including C-17s, P-8Is, AH-64s and CH-47s. But US companies have not yet managed to break into the potentially lucrative Indian market for fixed-wing combat aircraft.
Open tenders by the Indian navy and air force have drawn bids from all six companies with active production lines for fourth-generation fighters, including Boeing, Lockheed, Eurofighter, Dassault, Saab and United Aircraft.
More opportunities to sell fighters overseas could include Finland and perhaps even Canada. Boeing's outreach to Ottawa stands as the only blight on the company's international sales record since Caret assumed her post. The Royal Canadian Air Force had selected the F/A-18E/F for an interim requirement, but cancelled the programme last year in protest at Boeing’s initiation of a trade dispute with the Mirabel-built Bombardier CSeries.
Ultimately, Boeing lost in court against the CSeries, but continues to discuss the F/A-18E/F with the RCAF. The Super Hornet is now in contention for an order to permanently replace the RCAF's fleet of ageing F/A-18A/B fighters, but faces rival bids from the usual competitors, including the Lockheed F-35A.
"Our commitment to Canada never wavered when it came to what our approach was," Caret says.
BDS's path to a growth business still faces many hurdles. The KC-46A's first delivery has been scheduled, but critical deficiencies must still be addressed. The F/A-18E/F ramp-up will face pressures as the US Navy contends with a projected plateau in defence spending over the next few years. The pending opportunities to win new franchise programmes must still be won for BDS to continue as a military aircraft OEM beyond the late 2020s.
But Caret points to her record since she took over BDS two years ago.
"I harken back to 2016 when everybody said the same thing," Caret says. "People have written the script for me so many times, but we reinvent ourselves."