Boeing Lands $9.7-Billion C-17 Contract

Boeing Co. on Thursday was awarded a much-anticipated order to build 60 additional C-17 transports under a $9.7-billion Pentagon contract that will extend the life of California’s last remaining military aircraft manufacturing facility.

In what analysts called a shot in the arm for Southern California’s aerospace industry, Boeing executives said the contract--considered one of the largest in recent years--would help it continue operating the C-17 production line in Long Beach until 2008 and keep 7,000 workers employed.

Boeing has built 89 of the 120 aircraft ordered under the original contract. It was facing the prospect in two years of having to shutter its Long Beach Airport plant.

“It’s a great day,” Howard E. Chambers, general manager for Boeing’s airlift and tanker programs, said as he announced the contract to about 1,000 employees who gathered in a massive hanger where several C-17s were being assembled. “This is going to keep you employed through 2008, so rest tonight and start on 60 more tomorrow.”

The new C-17 contract is the latest chapter in the history of the sprawling Long Beach aerospace complex that at one point employed more than 40,000 workers in the 1980s. The former Douglas Aircraft facility produced several types of commercial jets, including the DC-10, MD-80 and MD-90. Now the only remaining commercial airliner produced there is the 717, a program employing more than 3,000 workers.

The contract was welcome news for what has otherwise been a dismal year for Chicago-based Boeing, whose commercial aircraft making business has been hammered by the slump in air travel after the Sept. 11 terrorist attacks.

Although the company has been diversifying and pushing more military work, Boeing still derives about 60% of its revenue from its core commercial jet making business, which is expected to see jet deliveries drop by nearly half.

Boeing shares rose Thursday after getting pummeled all week amid dire reports of growing airline woes and prospects for lower jet orders. In trading on the New York Stock Exchange, Boeing shares climbed $1.14 to $37.49.

The contract also represented a welcome relief for Long Beach officials, who have seen the local aerospace industry virtually collapse in the last decade and were facing the possibility of losing the city’s largest employer. Much of aerospace manufacturing has left the state, leaving the C-17 as the last military aircraft manufactured in California.

“We’ve come a long way since its struggles and when its future was uncertain,” Long Beach Mayor Beverly O’Neill said. “We’ve been waiting a long time for this.”

The Air Force first proposed acquiring the additional aircraft last fall as military operations in Afghanistan showcased the C-17’s capabilities, including dropping humanitarian supplies and transporting U.S. troops and equipment to the front lines.

Air Force officials have lauded the aircraft’s ability to land on short, unimproved runways while having the capacity to transport some of the heaviest equipment in the U.S. arsenal.

Moreover, Pentagon planners raised concerns that the U.S. was running short of transport planes and proposed the additional purchases in the latest defense budget. Congress recently approved the budget, which included the funding for the C-17 purchases, freeing Pentagon officials to strike a deal after Boeing offered to slash the price of the aircraft by 25% to about $160 million each.

Boeing said that during the last year it has been reducing costs and has asked its subcontractors to do the same in hopes of securing new orders. More than 700 major subcontractors, employing 30,000 workers, supply parts for the C-17. Boeing also has about 3,000 employees in St. Louis; Macon, Ga.; and Mesa, Ariz., working on the C-17 program.

Hoping to sustain operations even longer, perhaps into the next decade, Boeing executives said they have proposed building 42 more C-17s for the Air Force, bringing the total to 222, or about what the Pentagon had originally planned to acquire when it began the program a decade ago. The Air Force plans to submit that request in its 2004 budget.