GRAHAM WARWICK / WASHINGTON DC
Deputy defence secretary tells key senators that leasing 100 Boeing aircraft with option to buy is best way forward
The US Department of Defense wants to proceed with the lease of 100 Boeing KC-767A tankers, but in a bid to win Congressional approval has proposed purchasing 26 of the aircraft off lease early to save about $1.2 billion in finance charges. The DoD says a Congress-ional proposal to lease 25 tankers and buy the remaining 75 would cost more in the near term than the 100-aircraft lease.
In letters to senators John Warner and Carl Levin, deputy defence secretary Paul Wolfowitz laid out a series of scenarios, but said leasing the 100 aircraft with an option to buy is the best alternative. Leasing 25 KC-767As and buying the other 75 before construction would save $4.1 billion over the life of the programme, but require an extra $11.1 billion over the first five years. Leasing 25 tankers and buying 75 at the time of delivery would save $3.5 billion over the programme's life, but require $4.6 billion more in the near term. A 25-aircraft lease followed by a 75-aircraft multi-year procurement would save $2.7 billion over a 100-aircraft lease, but would require an extra $10.5 billion in the first five years. The multi-year procurement of all 100 tankers would save $5.5 billion, but cost $13 billion more near-term.
The DoD wants to proceed with the lease deal negotiated by the US Air Force and Boeing, and has the go-ahead from three of four Congressional panels, but needs the approval of Warner's and Levin's Senate Armed Services Committee. The US Air Force argues leasing will allow it to begin replacing ageing Boeing KC-135E tankers earlier, and quicker, and acknowledges it will be more expensive than buying the aircraft, but says it does not have the procurement funds available. Renegotiating the lease would incur a one-year delay and make the deal less attractive to investors providing the financing, the DoD says.
Wolfowitz's letter says the agreed deal to lease 100 KC-767s for $17.2 billion, with a $4.5 billion option to buy, would actually cost $29.8 million including training, maintenance and construction. This compares with $24.3 billion for an outright purchase and $27.1 billion for Congress's proposed 25/75 split. The Congressional plan would require $16 billion over the next five years, he says, compared with $5.5 billion for the USAF's lease-to-purchase deal. Buying 26 tankers off their six-year leases early, between 2008 and 2010, would add $2.4 billion to the near-term cost, but reduce the total programme cost by $1.2 billion.
Source: Flight International