Earlier this week, President-elect Trump announced that he was planning to “cancel” Boeing’s (NYSE: BA) standing contract to supply the next Air Force One fleet — the POTUS’s personal ride for long-range travel.
If Trump does end up going through with this threat, it will mark a major milestone for both the company and the federal government’s executive branch.
Boeing has been the Air Force’s go-to builder for the presidential transport for more than half a century, with the large, imposing airliner and its universally recognized markings an icon of both the nation and its leader.
And that makes Trump’s announcement, made via Twitter, all the more shocking.
His issue with the company: the costs are too high.
Scheduled for delivery in 2024, the pair of Boeing 747-8s, which cost about $350 million each, stock off the factory line, are heavily retrofitted with all sorts of Star Wars-level gadgetry and enhancing propulsion systems to handle the extra mass — accounting for the extreme price premium.
Financially, the blow to the aerospace firm — which is also the nation’s biggest exporter by dollar value and the second-biggest defense contractor in the world — isn’t exactly a death knell.
Read Between the Lines
Symbolically, however, this gesture has plenty of meaning and does raise some questions… the most obvious being, why?
In all likelihood, as the case is with many of Trump’s questionable statements, this tweet was made in jest.
More publicity, which he got; more controversy, which he got; more people either hating or loving him for it, which he also got.
It may also be yet another tacit shot at Obama, whose usage of the fleet included some rather high-profile trips that he and his wife took separately to the same location on the same day.
Detractors of the Obama administration will point out that at $228,000 an hour in fuel costs alone, using both of the 747s where one was perfectly sufficient is a gross misallocation of public resources.
The opposite side will point out that when the president travels anywhere, both planes are usually flown in order to maximize safety and redundancy (not knowing which plane to shoot missiles at instantly cuts the chance of an airborne attack in half).
They’ll also point out that using the presidential jet in a less-than-efficient manner isn’t exactly isolated to the Obamas… Just about every president has had his way with the jumbo jet.
Either way, it seems clear that the announcement wasn’t 100% serious, as the very next day, Trump elaborated on his threat by saying, in an interview with NBC, that he would negotiate the contract personally.
That takes the bite out of his threat, but for a moment, let’s just assume he goes through with his promise and does cancel the order.
What exactly are his alternatives?
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An Air Force One From the Former Hammer and Sickle?
The frontrunner for this job is most likely Airbus, the world’s biggest plane maker, and also the maker of the world’s biggest commercial airliner: the “superjumbo” Airbus A380.
Bigger than the 747, the A380’s airframe is also decades newer (first flew in 2005, versus the 747’s maiden flight in 1969).
The big problem? Airbus is a European company.
Watching the most powerful leader in the world step off an aircraft manufactured by a foreign corporation would certainly send the wrong message.
And that’s the issue that plagues just about every other potential alternative.
Antonov, a Ukrainian jet-builder whose product line includes the An-225, the most massive and heaviest-lifting aircraft ever built, has allegedly stepped forward and offered to construct the next Air Force One.
That offer, however, is even less realistic than the tweet that launched this controversy in the first place.
As the supplier of heavy transports for the Soviet air force during the Cold War, as well as for Russia’s current air force, the chances of an American president stepping off an Antonov seems about as likely as him taking a magic carpet on voyages overseas.
So what are we to make of this latest mini-tirade from the most divisive personality in the world?
You’re Fired (Not Exactly, But People Like to Hear Me Say It)
Besides an opportunity for a bit more self-promotion, some headlines, some raised eyebrows, and a couple hundred million shaking or nodding heads, not a whole lot.
The truth is, plans for this successor go back almost a decade, with the initial call for a new fleet going back to 2009.
The Air Force has already spent close to $100 million just preparing for the arrival of the next generation of presidential transports, making a cancellation a losing proposition from day one.
Moreover, Boeing’s history and intimate understanding of what it takes to create and maintain this unique duo of airplanes aren’t factors that can simply be transferred onto another company… not without a huge price tag and substantial time delays.
Regardless of what Trump tweets, these are things he certainly understands.
Given that the current presidential transports date back to the late 1980s (Nancy Reagan designed the interiors) and mounting costs of maintenance and modernizations are becoming impractical, simply not replacing them is also not an option.
My bet is that come early next decade, we will be seeing two brand new presidential jets entering service, and they will both feature that iconic Boeing 747 hump… The only big question is who will be flying inside them.
Fortune favors the bold,
Alex Koyfman
Check us out on YouTube!His flagship service, Microcap Insider, provides market-beating insights into some of the fastest moving, highest profit-potential companies available for public trading on the U.S. and Canadian exchanges. With more than 5 years of track record to back it up, Microcap Insider is the choice for the growth-minded investor. Alex contributes his thoughts and insights regularly to Energy and Capital. To learn more about Alex, click here.
