UPDATE: Calhoun upbeat on cash flow despite fifth consecutive quarterly loss

By Bryan Corliss

Oct. 26, 2022, (c) Leeham News: The Boeing Co. posted a loss from operations of nearly $2.8 billion for the third quarter, citing losses on fixed-price defense development programs that offset an overall 4% growth in revenues.

The consensus of Wall Street analysts earlier this week was that Boeing would announce profits of 13 cents a share and would break a streak of four consecutive losing quarters. Instead, Boeing posted a loss of $5.49 a share.

However, in a conference call with stock analysts later in the morning, Calhoun was upbeat, emphasizing Boeing’s positive operating cash flow of nearly $3.2 billion for the quarter.

“This quarter was a big one for us,” he said. “We hit a marker … to generate positive cash flow.”

Boeing booked losses of roughly $1.95 billion on two defense programs, CFO Brian West said: KC-46 tankers and new Air Force One presidential transports. Both are fixed-price contracts for commercial jet conversions that forced Boeing to eat any cost overruns.

“We aren’t embarrassed by them,” Calhoun said. “They are what they are.”

But in an interview with CNBC’s Phillip LeBeau Wednesday, Calhoun said Boeing will not do fixed-price defense contracts in the future. “That is not our intent.”

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Boeing sees incumbency as advantage in coming air force tanker procurement

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By Scott Hamilton

KC-46A. Source: Boeing.

March 21, 2022, © Leeham News: Lockheed Martin Co. (LMCO) plans to submit a proposal for the US Air Force’s KC-Y aerial refueling tanker procurement. So does Boeing. LMCO joined with Airbus and will offer a tanker based on the existing Airbus A330 MRTT (Multi-Role Tanker Transport). Boeing will offer a follow-on purchase of the incumbent KC-46A, based on the 767-200ER.

These two aircraft faced off in the KC-X competition. Airbus initially teamed with Northrop Grumman and was awarded the contract. Boeing protested the award on procurement procedural grounds and prevailed. Northrop dropped out of the recompete, which Boeing won in 2011.

The two aircraft will be offered again, but this time, one party doesn’t view the aircraft as competitive. LMCO sees the Airbus airplane, which it brands the LMXT, as complementary to rather than competitive to the KC-46A. Lockheed explains why here.

Boeing, on the other hand, isn’t convinced the USAF will even seek a competitive bid—or that LMCO’s belief that the service wants a larger airplane than the KC-46A to fill a “gap” is correct.

Mike Hafer, senior manager of KC-46A Business Development, explains why.

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Pontifications: Advice for Boeing in the coming KC-Y campaign

Part 6: The KC-X competition from Boeing’s perspective

By Scott Hamilton

Feb 21, 2022, © Leeham News: Jim Albaugh, the former president and CEO of Boeing Commercial Airplanes and of Boeing’s defense unit, retired from the company in 2012. He oversaw the first competitive bid at the defense unit for the US Air Force KC-X refueling tanker. That was lost to Northrop Grumman-EADS (Airbus) in 2009.

As CEO of BCA, he oversaw commercial efforts to get Boeing’s cost down on the 767-200ER, which formed the basis for what became the KC-46A tanker. Defense won this round against a solo EADS bid. Boeing’s winning price was about 10% below the EADS bid for its A330-based MRTT.

Years removed from Boeing but nevertheless an interested observer with experience on the losing and winning bids, Albaugh has some observations and advice as Boeing prepared to compete against Lockheed Martin-Airbus for the KC-Y campaign that already has unofficially begun.

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Pontifications: Rerunning the KC-X campaign as Technically Acceptable, Lowest Price process

Part 5 in a Series: the Boeing perspective in the last KC-X campaign

Feb. 14, 2022, © Leeham News: After the Government Accountability Office (GAO) upheld Boeing’s protest over the US Air Force contract award to Northrop Grumman-EADS, the parties regrouped to consider whether or how to compete for the KC-X contract again.

By Scott Hamilton

Boeing was discouraged after the Northrop win. According to press reports at the time, US Rep. Norm Dicks, a Democrat from Bremerton (WA) since retired, encouraged Boeing to make another bid. The US Air Force recast the new procurement to a pass-fail process on the requirements, emphasizing the price. The process was known as Technically Acceptable, Lowest Price, or TALP. Northrop decided to drop out. EADS, despite concluding the odds were long that it could win, went ahead.

In September 2009, the Air Force began the new procurement process. The same month, Jim Albaugh moved from Boeing’s defense unit, where he had been president and CEO, to Boeing Commercial Airplanes, in the same position. Although no longer involved day-to-day in the KC-X campaign, Albaugh nevertheless was in a good position to recall how Boeing approached this round.

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HOTR: Lockheed Martin to split refueling tanker work between Airbus-Mobile and LMCO Marietta facilities

Jan. 31, 2022, © Leeham News: Assembly and conversion of the proposed LMXT refueling tanker for the US Air Force will be split between Mobile (AL) and Marietta (GA), Lockheed Martin (LMCO) announced today.

Airbus has final assembly plants for the A220 and A320 families in Mobile. LMCO has surplus facilities at its home in Marietta. A new final assembly plant and line will be required at Mobile. LMCO’s C-5 building in Marietta will be the site for the conversion and installation of military equipment.

“We will transition the assembly line for the A330s to the United States and transitioning all conversion lines from Spain to the United States,” said Larry Gallogly, director of the LMXT program. The A330 tooling and production lines moved to the US are for the A330ceo only; A330neo production remains in Toulouse. A330 MRTTs ordered by non-US customers will be assembled and militarized at the current facilities in Toulouse and Spain.

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NIAR, partners offer tanker-converted 777-300ER PTF to US Air Force

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By Scott Hamilton

Jan. 31, 2022, © Leeham News: A third company will offer a tanker to the US Air Force when the KC-Y Request for Proposal is issued this year.

Kansas Modification Center (KMC) and the National Institute for Aviation Research (NIAR) will propose converting used Boeing 777-300ERs to tankers. Jim Gibbs, president and CEO of KMC, already submitted information to the Air Force in response to last year’s Request for Information.

A retired B-1 bomber acquired by NIAR for research. Credit: Wichita State University.

Gibbs, in an interview with LNA, said that the concept is to offer the Air Force a tanker not for front-line combat zones, but along the lines of the conversions used by Omega Air. Omega provides non-combat air refueling service for the US Navy, Air Force, and some NATO countries. It operates after-market conversions of the Boeing 707 and McDonnell Douglas DC-10. IAI Bedek also undertook after-market tanker conversions of the 707 and Boeing 767. The UK’s Royal Air Force converted Vickers VC-10s and Lockheed L-1011s to tankers.

Choosing the 777-300ER

Gibbs said the KMC and NIAR chose the 777-300ER over the 777-200ER or LR as the better platform, in their view.

“The 777, especially the -300, makes an enormous amount of sense right now. It’s a modern aircraft, very low time, the aircraft itself can haul about 200,000 pounds on a structural payload with very minor modifications to it,” Gibbs said. “You can take that aircraft, add some existing capabilities on it, such as the existing boom of KC-135, and simplify the fuel offload process. I think you would have a very capable tanker. If you have a mission radius of 3,000 miles, a 777 can still offload 150,000 pounds of fuel.

“The -300ER has a higher gross weight than anything, with the exception of the -200LR. If you look at the available aircraft for conversion and the available feedstock on it, the LR and the type of aircraft available for that are very minimal compared to the -300ER feedstock. The -300 is a bigger aircraft, it shares the same wing box and a lot of structure with the -200, or most of the structure, besides the plugs. We need to inject 100 tankers into the fleet. There’s not that many -200LRs out there,” Gibbs said.

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Pontifications: “The mother of the last pilot on the 707 tanker hasn’t been born yet”

Part 3 of the Boeing focus for the USAF Aerial Refueling Tanker

Jan. 31, 2022, © Leeham News: Following the 9/11 terrorist attacks in the United States, Boeing offered the US Air Force a lease deal for 100 aerial refueling tankers based on the 767-200.

By Scott Hamilton

The concept of leasing tankers had been floated before. Boeing at one point proposed creating a 747-based tanker and leasing it to the Air Force. The idea went nowhere, but this one gained traction.

The leasing concept formed just before Jim Albaugh arrived at IDS, but he was president as it progressed and through the subsequent competition, called KC-X, against Northrop Grumman-EADS (Airbus) after the lease deal was canceled.

“You go back in history, and it started out with the need for the Air force to replace the 707s which were their tanker fleet for a long time, and they were getting old,” recalls Albaugh, the CEO of Boeing’s Integrated Defense Systems unit at the time. IDS is now called Boeing Defense, Space and Security (BDS).

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Lockheed Martin sees LMXT as complementary to KC-46A, not competitive

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By Scott Hamilton

Jan. 30, 2022, © Leeham News: Lockheed Martin’s LMXT US Air Force refueling tanker will be a complementary offer to the service in the forthcoming KC-Y competition.

Larry Gallogly

In an exclusive interview with LNA earlier this month, Lockheed Martin (LMCO)’s LMXT Campaign Director, Larry Gallogly, said the Air Force wants an airplane that is bigger, has more range, and more fuel offload than the incumbent Boeing KC-46A. This fits the LMXT, based on the Airbus A330-200 Multi-Role Tanker Transport (MRTT) now in production.

Airbus partnered with LMCO in 2018 to prepare for the KC-Y competition. Airbus has 61 orders for the MRTT from around the world. Boeing is building 179 tankers for the Air Force from the original KC-X competition. It has a handful of orders from other countries.

The KC-Y contact will be for up to 160 tankers. The competition will pit Boeing and Airbus against each other for the third time. Airbus first teamed with Northrop Grumman in the first round of the KC-X campaign. Northrop won the contract, but the award was protested successfully by Boeing. Northrop dropped out of the recompete, with Airbus going alone. This time, Lockheed Martin will be the lead, and Airbus the subcontractor.

The two fights were bitterly waged in the public and political domains. LMCO hopes to avoid a repeat.

No plans to relitigate

“We have, from the start of this, with both ourselves and Airbus, have had no intention of re-litigating the [KC-X] competition,” Gallogly said. “Our goal has always been to provide what we consider to be a complementary capability. There are going to be 179 KC-46s out there, but there are significant capability gaps that the US Air Force has that this LMXT can fill. We are not trying to provide the same capability in a different wrapper. Our goal is to provide a very different capability and, again, fill those gaps.”

Gallogly said that after talking to the Air Force and Pentagon repeatedly, from the Air Mobility Command to transportation command to the individual theater commanders, to the people in the Pentagon, “what we heard consistently was that the gap exists for fuel offload at strategic ranges. You know as everybody who focuses on the Pacific Theater, you’re faced with the tyranny of distance there, and we needed to provide as much fuel offload as we possibly could.”

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Lockheed near announcing location for LMXT tanker final assembly line in US

By Scott Hamilton

Jan. 24, 2022, © Leeham News: Lockheed Martin (LMCO) is expected to announce as early as this month where it will assemble its LMXT aerial refueling tanker should it win the US Air Force’s KC-Y contract. Lockheed’s 2021 earnings call is tomorrow, Jan. 25, but it’s unclear if an announcement will be made on the call.

The top contenders appear to be the Airbus final assembly complex in Mobile (AL), or Lockheed’s own facilities in Marietta (GA). Others may be in the mix.

In an interview with LNA Thursday, Larry Gallogly, the director of the LMXT campaign, said an announcement will be made “toward the end of this month.”

LMCO will compete for the US Air Force’s KC-Y Bridge Tanker contract. The Request for Proposals is expected to be issued this year. Boeing will offer its KC-46A tanker. The KC-46A fulfills the KC-X contract won by Boeing in 2011.

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Pontifications: A retrospective of the KC-X refueling tanker competition from Boeing’s perspective

Part 2 of the Boeing focus for the USAF Aerial Refueling Tanker

Jan. 24, 2022, © Leeham News: Jim Albaugh was president of Boeing Integrated Defense System (IDS), now known as Boeing Defense, Space and Security (BDS) during the competition for the US Air Force’s KC-X program.

By Scott Hamilton

After 9/11 (2001), Boeing was reeling as US airlines canceled or deferred orders in the aftermath of the terror attacks in New York City and Washington (DC). Terrorists hijacked four airplanes (all Boeing, as it turned out) operated by American and United airlines. Then, US carriers dominated the world market as customers for Boeing and Airbus. Boeing was disproportionately affected, as it was the USA’s two biggest airlines that were victims of the terror attacks.

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