Does Boeing Have Its Head in the Clouds, or Does the F/A-18 Have a Future?
Boeing builds the No. 2 fighter jet in the world. And if everything goes according to plan... it just might get to keep building it for a while longer.
Boeing's F/A-18 Super Hornet is a beautiful aircraft... but its days may be numbered. Image source: Boeing.
Earlier this year, Flightglobal Insight's 2015 World Air Forces report named Boeing's F/A-18 Super Hornet the world's second most popular fighter, right behind the even more wildly popular F-16 Falcon. It was a bittersweet award for Boeing, however, given that Boeing's management has warned it only has enough orders for new F/A-18s to maintain production through 2016.
Last year, we explained the impact that losing the F/A-18 franchise will have on Boeing, especially combined with a series of high-profile losses on bids to sell F-15 Eagle fighter jets internationally. Simply put, it could drive Boeing out of the defense business...
Don't count Boeing outAs recently reported in National Defense magazine, Boeing is deep in discussions with buyers interested in its F/A-18 Super Hornets and EA-18G Growlers (the electronic warfare variant of the F/A-18). The U.S. Navy has requested that Congress allocate $1.15 billion to purchase 12 F/A-18s for fiscal 2016, and Boeing sees at least the potential to sell the Navy 24 more Hornets and Growlers on top of those, for which the Navy has already requested funds.
Over in Kuwait, the local air force is reportedly considering a $3 billion purchase of as many as 28 F/A-18s. According to Boeing Defense Vice President Daniel Gillian, as paraphrased by National Defense, "such a deal would keep the company's mixed-model Super Hornet and Growler production line in Saint Louis, Missouri, open until 2019."
But will it, really?
The F/A-18 is only half the story. Boeing builds the world's premier electronic warfare fighter, the EA-18G Growler, on the same airframe. Image source: Boeing.
Doing the math: F/A-18 + EA-18G = what?According to Gillian, the 2016 deadline for ending F/A-18 production has been superseded by two events. First, Congress added funding for 15 EA-18G Growlers late last year. And second, Boeing has cut its production rate on these planes from roughly four per monthlast year to three per month today... and potentially to two per month beginning in early 2016.
As Boeing calculates it, between orders now funded by Congress and Boeing's own stitch-in-time move to slow production, there's enough demand for the F/A-18 to keep production lines open "through December 2017," Gillian told National Defense.
Add another 40 plane orders (12 from the Navy and 28 from Kuwait), and at two planes per month, and that gives Boeing a further 20 months' lease on life, keeping the F/A-18 in production through about August 2019.
Gillian notes that after that,Boeing will bid on contracts to supply Denmark's need for about 36 new fighter jets (18 more months of production, if Boeing wins them), and aims to win defense deals in Canada (which needs 65new fighters) and Belgium (which needs roughly 55 fightersto replace its own aging F-16 fleet). If Boeing were to win those two, it could mean as much as five years' more production for the F/A-18.
What it means to investorsWhen you get right down to it, though, here's what Boeing is really looking at: It won funding for 15 new EA-18G Growlers last year, and it may get money for 12 new F/A-18s this year. After that, most of what Boeing is talking about sounds like pie in the sky.
Sure, Kuwait may buy 28 F/A-18s -- or it may not. Ditto the 36-plane "shortfall" that Boeing says the U.S. Navy faces, and Boeing's hopes that the Navy will buy more F/A-18s to fix it.
The Belgian and Canadian contracts? Those countries are much more likely to fall in line with the international consensusand convert their air forces to fifth-generation F-35 stealth fighter jet technology rather than continue to invest in Boeing's old fourth-gen tech.
When you get right down to it, unless a miracle happens, and Boeing somehow wins a large percentage of these "pie in the sky" contracts, the F/A-18's days remain numbered -- and the only way Boeing keeps production lines open even through 2017, rather than 2016, is by continuing to cut production rates.
As growth strategies go, that one leaves a lot to be desired.
Will Boeing's F/A-18 get a green light or a red light? It all depends on whether the orders come in. Image source:U.S. Navy.
The article Does Boeing Have Its Head in the Clouds, or Does the F/A-18 Have a Future? originally appeared on Fool.com.
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