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C-17 Continues To Provide For Boeing

Considering their problems with the two new commercial programs in development and the fact that the Obama Administration wanted to end buys of the C-17 Globemaster heavy transport the aircraft continues to do well for Boeing (BA). The Washington based and Chicago headquartered aerospace giant had to take a charge last quarter against its earning due to delays in the 787 airliner and 747-800 cargo aircraft. There has also been concern with the Obama Administration's plans to restructure defense spending but that has not affected the C-17 yet.

Not only were several C-17 aircraft ordered with the 2009 defense supplemental against the wishes of the Executive Branch ten more were included in the 2010 defense bill signed by the President on Saturday. This will lead to over $2 billion in revenue for Boeing and keep several thousand employed in Long Beach, CA. The city will be hit hard whenever production does end as Boeing has no future plans for this facility.

As well as continued domestic sales of this aircraft that is very important to "Overseas Contingency Operations" in Iraq and Afghanistan it also enjoys strong sales to foriegn governments. It faces little competition beyond the Ilyushin-76 transport as there is no comparable Airbus product. EADS (EADS.P) and its partners are working on developing and selling the A400M transport but this is two years behind schedule and really is in competition with the C-130J Hercules made by Lockheed Martin (LMT). The A400M like the 787 recently saw its first flight but is still several months away from entering service with any customer.

Britain and the U.A.E. have recently announced buys of the aircraft. Britain has decided to buy at least one more bringing its fleet to seven. The U.A.E. joins Quatar as a Gulf State acquiring the heavy lift transport. These orders for five total aircraft on top of the recent buys for the U.S. Air Force mean at least twenty more of the aircraft will enter service over the next few years. There is also no sign of Congress stopping orders as while the Air Force says it has reached its objective for the aircraft there is certainly use for more of them.

Another revenue stream for Boeing is providing support for the aircraft. In fact the increased logistical cost of the new orders is one of the arguments against Congress adding more aircraft. Many times there is money for production added but not for the operations and maintenance. Boeing was awarded a contract this week for support of the fielded aircraft. This is worth over $200 million and provides work and money for Boeing and its subcontractors.

This program will continue to offset the losses of F-22 and eventually F-18 production for the U.S. military. Boeing has been offering the F-18 overseas to countries like Brazil and India to prepare for a day when the F-35 Joint Strike Fighter begins entering service where it will replace the F-18 in use by the Navy and Marine Corps. It again demonstrates the ability of the large defense contractors to counter risk by executing a large portfolio.

The C-17 remains a key part of the U.S. military's ability to execute operations overseas. It provides important capability to fly in troops, equipment and support for use in areas all over the world. The U.S. will continue to need this capability and Boeing is profiting from this need.

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