As the philosopher Yogi Berra once said, “It ain’t over ’til it’s over.” Yogi wasn’t talking about the contract between the U.S. Air Force and Boeing Co. (NYSE: BA) to supply a fleet of two 747-8s that will replace the current fleet widely known as Air Force One, but he could have been.
Practically the first tweet-target that President-elect Trump fired at was Boeing’s $4.4 billion contract for the planes. The list price of a 747-8 in 2016 was $378.5 million, or $757 million for two. If the Air Force paid even half that amount for the planes it would be a surprise. The rest of the cost goes to customizing the planes to meet the demands of a presidential plane.
As it turned out, the Air Force agreed last August to buy two planes that Boeing had built for a now-bankrupt Russian airline. At Boeing’s request, the sales price was not disclosed.
Once the planes were purchased, the contract talks proceeded to fitting out the planes. The president claimed in September that he had shaved $1 billion off the cost of the program, but the budget he proposed earlier this month continues to list the cost at $4 billion.
According to a report at Defense One, the Air Force and Boeing have been negotiating details of the contract. The main sticking point may be Boeing’s unwillingness to sign a fixed-price contract like the one the company agreed to for the new KC-46A tanker. So far the company has had to swallow some $2 billion in cost overruns and Boeing would like to avoid that on this contract.
Defense One also noted that the president and Boeing CEO Dennis Muilenburg “were able to break the gridlock that had stymied lower-level negotiations” and that a finalized deal is expected to be announced soon.
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