Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
- A350-1000 or 777-9? Part 2 April 11, 2024
- Pontifications: Boeing “transparency”–not so much. April 9, 2024
- Airbus charges and write-offs since 1999: more than €33bn April 8, 2024
Boeing and Washington State; and: Congressional meddling may threaten KC-46A
The Washington State Legislature may consider implementing a mechanism to track the benefits of the Boeing 777X tax incentives granted last year, according to the on-line news service Crosscut. Boeing opposes the measure, according to the report.
Figure 1. Boeing has been distributing its view of the tax breaks received for the 777X, which are an extension of those received for the 787. Click image to enlarge image.
The accountability is a key drive from Boeing’s unions, IAM 751 and SPEEA, the touch-labor and engineers’ unions. Shortly after Washington granted $8.7bn in tax breaks to win the 777X assembly and wing production for Boeing, the company began moving thousands of engineering and technical jobs out of state. None appeared to be directly to the 777X, however, although some X work was awarded to Boeing’s St. Louis operation.
The unions complained that the tax breaks didn’t have job guarantees tied to them, in contrast to tax breaks granted by South Carolina for the 787 assembly work.
Figure 2. Source: Boeing. Click image to enlarge.
The union effort seems to be gaining some traction with the potential legislation to require metrics proving their worth. Boeing is countering with a campaign of mythbusting. We received a two-sided card from Boeing (Figures 1 and 2) outlining its view of Myths vs Facts.
We’ve pointed out on several occasions that the tax breaks provided by Washington, as an extension of those granted for the 787, were ruled by the World Trade Organization to be illegal. This remains under appeal by the US Trade Representative. Should the finding be upheld on appeal, the 787 tax breaks (and presumably the 777X’s) will have to be replaced by something of similar economic value, according to the 787’s terms and conditions with the state.
Separately, Congressional meddling once again seems on the precipice of screwing up a procurement program. Defense News reports that Congress may delay retirements of the KC-135 and KC-10. This could have an adverse affect on the KC-46A tanker program, Defense News writes. The KC-46A will be built by Boeing’s Washington facility in Everett. Our view of Congressional meddling continues to reach new lows.
“Our view of Congressional meddling continues to reach new lows.”
Lets not forget congress blocked EADS / Grumann in 2008 and changed the rules of the competition so Boeing could win this tanker contract.
Then there was the 8.7 Billion tax subsidy.
Now giving Boeing a free cart to move out work while not paying tax, probably is a step to far. But you never know, it’s Boeing, the countries #1 exporter, 80 yrs USAF large aircraft/ missiles supplier and source of national pride.
Keesje,
No matter how many times you continue to say this (BWAHH!! Congress changed the rules so Boeing can win!!) it won’t make it true.
You might as well just stand, click your heels together, and say “There’s no place like home” in the hope that you’ll be whisked away to the place where your statement is true.
And I say that as I pretty much bet and expected that EADS/Airbus would win the contract over the 767. Once I read the GAO report (and looked at a whole lot of other stuff regarding the competition while deployed), I could see that the USAF was up to shady practices in the original competition.
Do you for who GAO works? Do you think EADS would have a second chance if they fixed the first round, had to fire their CEO, CFO and pay a 600 Mill fine?
keesje: you continue to be wrong. EADS was given credit for higher capability than they were allowed under the terms.
i.e. rightly or wrongly in the bid, excess fuel beyond the spec got no credit.
Said credit was then given on both fuel and lift capacity
Boeing of course protested, under those terms a 777 tanker would have beat a A330 tanker and of course that is ridiculous (short of a KC10 replacement and this was a KC135 (which is much much smaller than an A330 if you care to look it up)
And I do note that the US was not invited to bid on the French tanker contract, so me thinks Europe speaks with a forked tongue.
Maybe Airbus should have bid an A300!
“And I do note that the US was not invited to bid on the French tanker contract, so me thinks Europe speaks with a forked tongue.”
Well, in order to comply with the Buy American Act (BAA), Airbus had to offer a tanker having at least a 51 percent in total US value content. Could you please tell us how much French content there would be in French KC-46 tanker?
Would you go to a car dealer and ask for a car despite the fact you know is not there because it is not in production yet? You want 9 seats this dealer can just offer a car with 6 seats. Range and fuel tank are also somehow short of what you want.
The point for KC-X was the offer by Northop Grumman was cheaper. What followed was a lame excuse: http://www.gao.gov/press/press-boeing2008jun18_3.html
e.g.: “The agency also did not take into account the fact that Boeing offered to satisfy more non-mandatory technical ‘requirements’ than Northrop Grumman, even though the solicitation expressly requested offerors to satisfy as many of these technical “requirements” as possible.”
So, more toilette paper weights more in than a higher fuel capacity…
– “3. The protest record did not demonstrate the reasonableness of the Air Force’s determination that Northrop Grumman’s proposed aerial refueling tanker could refuel all current Air Force fixed-wing tanker-compatible receiver aircraft in accordance with current Air Force procedures, as required by the solicitation.”
The A330 was able to do it because Airbus was not excluded from the second try.
“result in Boeing displacing Northrop Grumman as the offeror with the lowest most probable life cycle cost;”
and
“The Air Force improperly increased Boeing’s estimated non-recurring engineering costs in calculating that firm’s most probable life cycle costs to account for risk associated with Boeing’s failure to satisfactorily explain the basis for how it priced this cost element, […]”
The developmental risk is related to delays and any delay would keep the KC-135 longer on active duty. The KC-767 for Italy was 5 years late. Just add 5 years of KC-135 maintenance on top of Boeing’s offer and you are closer to reality.
For sure a KC-777 would have offered more but not for the same money. The A330MRTT offered more for about the same price as KC-46.
“Would you go to a car dealer and ask for a car despite the fact you know is not there because it is not in production yet?”
Ahem…..
http://jalopnik.com/order-a-tesla-model-x-today-and-you-wont-see-it-until-w-1663250893
So, yeah, a lot of people would.
I think some companies, like airlines do that as well. Just a wild guess..
Sudsidies: Maybe Boeing will get zip on the second round.
Yes the are ruled illegal, but until its put a stop to it will go on.
As I recall, there were numerous cases of not just launch aid, but equivalent French , German and British subsidies for the local factories in each country.
As I recall the US was built without that, but that was before the corporation queued up to the welfare trough though welfare is bad for us poor smucks at the bottom. What is good for the golden geese is not good for the swallows. (or so the view is)
Congress is right on. The Air Force brass is trying to get rid of some unloved aircraft like A-10 and KC-10 to buy more combat useless aircraft: F-35.
“But with the compromise National Defense Authorization Act (NDAA) released last week, Senate and House negotiators put in language prohibiting any fiscal 2015 funds being used to ‘transfer, divest or prepare to divest any KC-10 aircraft’ until 60 days after the defense secretary submits a series of cost-benefit analyses.”
BTW. How many F-35 would US Air Force need to “replace” one operational A-10 on duty according to loiter time?
Why is USAF so keen to get rid of KC10 instead of 135s?
The remaining 59 KC-10 are far more in use than the Kc-135 fleet because the KC-10 can really move also cargo and troops. During Iraq war one third of the complete KC-10 fleet was occupied and reserved for transport missions only.
KC-10 has far more range unrefueled than C-17. So why refuel the C-17 then the KC-10 can do the job unrefueled?
I guess the point is maintenance costs per aircraft are far higher for used KC-10 than for unused Kc-135. The US Air Force is just looking at these costs but not what Air Force gets in return: less use and maintenance of C-17 and less aerial refueling. That could be the reason why Congress did ask for a “cost-benefit analyses”.
the AF doesn’t want to get rid of KC-10s, but with sequestration the theory was that in order to get the kind of budget reductions they needed, they got better capability tradeoffs by eliminating whole fleets than cutting portions of fleets.
therefore there was more money to be “saved” by eliminating the entire fleet of KC-10s than by eliminating a greater number of -135s and supporting 2 fleets (remember, the -135/-137/707 is the basis of almost all large special mission aircraft so you can’t easily get rid of the -135 infrastructure)
there public argument regarding the A-10 is similar, but more suspect as the AF (institutionally) has never wanted the A-10, despite it being the best tool for just about all AF jobs that are not Air Superiority, Strategic Bombing or penetrating heavily defended airspace.
for those tasks we need a reasonable # of F-22 and stealthy light and heavy bombers backed up by large numbers of non-stealthy F-15E/A-10 types.
unfortunately, the Viper (F-16) mafia has run the AF for the last 25 years and their only goal is to buy another ferrari (fragile, relatively useless, but pretty) when what they need is a couple pickup trucks (A-10 and F-15E replacements)
The KC-10 is a small fleet with a large fuel burn so it has high costs maint wise and fuel use wise.
My understanding is its use is to fill up the C5, C17 and B-52. However it is way too much for the rest of the tanker missions.
On the other hand, while it might take more KC-135s to do some missions, they can do all of them and the active ones have been re-engine with the very reliable and economical CFM engine. the fleet is in far better shape than USAF allows as they have low hours and a significant program to deal with and head off corrosion. I think they only average 700 hours a year use on individual airframes and I suspect they rotate them around to maintain the low overall hours.
Is it the right decision? That I don’t know, the USAF is a twisted organization that seems to be driven more by ego (the A330MRT being a bigger brighter shiny toy that they violated the terms on)
A-10 is deemed not useful in todays world, but we keep winding up fighting low tech insurrections not the full on fighter to fighter war the USAF hierarchy lives and breaths for.
Of course they contend a fast jet is as good as a slow jet which is a spurious nonsensical argument and they then arm their new fighters with bombs so they can be useful. Even the F-22 is being setup to drop bombs (though why you would risk that all to rare and valuable beyond price aircraft in ground attack or bombing is beyond my compreshension)
Are we doing the whole tanker saga again?
Boeing won on shortsighted requirements. Just a replacement of what we have please, no improvement desired.
The 767 is older and because of that inferior airframe. Boeing should have proposed the 787, but didn’t dare.
How the hell does something that is worth 7.8 billion to Boeing, that is paid by the state, not costs the state any money? Deferred income is still the same as cost, it’s money you don’t get to spend.
according to http://dor.wa.gov/Content/FindTaxesAndRates/BAndOTax/BandOrates.aspx
all aerospace related categories pay .002904% taxes. 6 categories pay less but more notably the following:
General wholesaling (as opposed to commercial aerospace wholesaling) and child-care pay .00484% (1.6x more), Hospitals (for- or non-profit) and scientific R&D pay 0.015% (5x what a commercial for profit company pays),
(only radioctive waste disposal and winning more than 50k/year in casino’s costs you more)
Sure Boeing pays it’s fair share…
(just like Airbus BTW)
Looks like these values are “rates” and not percent values.
i.e. value * rate = tax
But is it a rate on revue or a rate on profits?
profit is not the proper basis to tax companies. “Profit” (particularly taxable profit) is too easy to manipulate in such a was as to never have any and avoid taxes entirely. For all the griping republicans do about how awful taxes are on businesses in America compared to other countries, the tax laws are structured so that any business with a competent accountant and tax attorney can entirely avoid paying taxes, and with a little bit of bribery (lobbying and campaign contributions) actually get the government to pay them to not pay taxes.
Are individual humans taxed on profit? no we are taxed on Revenue.
Businesses should be taxed on revenue also.
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