Two Foreign Arms Deals for Boeing Cushion Future U.S. Defense Cuts
Boeing (BA) is one of the largest exporters in the U.S. as it provides commercial aircraft for many foreign airlines. It is also one of the biggest defense contractors building satellites, aircraft, as well as doing services and IT work for the military and other government departments.
Because of their many overseas sales Boeing gets a great deal of support from the U.S. Export-Import Bank. The company is currently receiving about $15 billion in loan guarantees from the bank which are used to help finance purchases by these foreign commercial customers. Boeing in fact received 63% of all guarantees from the government entity in 2010.
Despite this business Boeing like all of U.S. defense contractors is facing the potential for major cuts and reductions in overall defense spending by the United States. This means that there may be fewer tankers, transports or other products purchased from them. Boeing did receive the new KC-46A tanker contract last year but this offsets the end of the C-17 production for the Air Force and work on the F-22 and other programs. The Air Force is also looking at moving a great deal of their logistic support back to their own depots and away from commercial providers. This too may affect Boeing’s bottom line.
Recently thought the company got some good news in winning two contracts with other countries for military hardware. India announced that it had decided to buy ten C-17 strategic transports. This is especially helpful as it extends the life of the production line for that aircraft. The U.S. decision to not purchase more had put a date certain when the last transport would roll off of the line.
Taiwan also decided this week to purchase thirty AH-64 Apache attack helicopters. These will be the most current version, the Block III. No value for the contract was given but it will be several hundred million dollars.Continued on the next page