Boeing rolls out big guns for battle over contracts

December 12, 2001

By James Dao and Laura M. Holson, New York Times, Orlando Sentinel Staff Writer


New focus: Military and space

WASHINGTON -- Staggered by the loss of the largest military contract in history and the collapse of the commercial airline market, Boeing has sharply intensified its efforts in Congress and the Pentagon to win an array of other big-ticket military contracts.

Mobilizing an armada of well-connected lobbyists, sympathetic lawmakers and friendly Air Force generals, the company has argued that by financing its contracts Congress would reduce the need for thousands of layoffs and help keep Boeing, the nation's second-largest military contractor, healthy in a time of war.

"You've got the nation's leading exporter, and one of its leading military contractors, who has been hit hard," said Rep. Norm Dicks, D-Wash., who has been leading the charge for Boeing. "We can really help them."

The push underscores a broader trend for Boeing, company officials and analysts say. With the sharp downturn in commercial aircraft business, which last year generated two-thirds of the company's $51.3 billion in sales, Boeing is looking more than ever to its military and space divisions to bolster sagging revenue.

Last week, the company took a major step toward winning the first of its lobbying battles when the Senate approved a sharply contested plan calling for Boeing to lease to the Air Force 100 new 767 wide-body jets for use as refueling tankers and reconnaissance planes. At an estimated cost of more than $20 billion over 10 years, the plan has been attacked by critics, led by Sen. John McCain, R-Ariz., as a costly corporate bailout.

But supporters say that it would not only significantly offset Boeing's loss of orders from ailing commercial airlines but also help the Pentagon by accelerating the replacement of aging mid-air refueling tankers and reconnaissance aircraft that have been worn down by heavy use in the war in Afghanistan.

"Near term, it's a very nice financial salve to an immediate wound," said Howard Rubel, a military industry analyst at Goldman Sachs.

The 767 plan is just one of several major Pentagon programs that Boeing is prodding Congress to sustain, expand or accelerate. The company is the lead contractor on more than a dozen major contracts accounting for well over $10 billion in the 2002 Pentagon budget.

Those include the F/A-18 fighter jet for the Navy, the V-22 Osprey tilt-rotor aircraft for the Marine Corps, the AH-64 Apache Longbow helicopter for the Army and the airborne laser for the Pentagon's Ballistic Missile Defense Organization.

After the terrorist attacks, air travel plummeted and airlines canceled dozens of jet orders, prompting Boeing to announce plans to lay off 30,000 workers, mostly in the commercial airplane division.

Just when it seemed things couldn't get worse, in October the Pentagon awarded a $200 million contract for the Joint Strike Fighter to Boeing's rival, Lockheed Martin. The jet is expected to become the mainstay fighter for the Navy, Air Force and Marine Corps over the coming two decades, raising doubts about Boeing's future in the tactical fighter business.



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