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Boeing gets $3.9 billion Navy aircraft contract

By Dominic Gates
Seattle Times aerospace reporter

GREG GILBERT / THE SEATTLE TIMES Carolyn Corvi, who heads the Renton plant, said the Navy's commitment "extends the life of the [737] ... a couple of decades." Program manager Jack Zerr is in rear.

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The contract is for the Navy's next generation of anti-submarine aircraft, known as Multi-Mission Maritime Aircraft (MMA).

The contract, worth nearly $4 billion initially, but potentially 10 times that amount over 25 years, will have a big impact on the commercial side of the business, too. It means an order for as many as 300 of Boeing's 737 jets that are assembled in Renton.

The contract almost guarantees that Boeing will continue making airplanes in Renton for the next two decades, 10 years beyond what had been expected.

The commercial and military sides of the company came together to compete with Lockheed Martin to design and build the planes.

About 100 employees working on the program gathered yesterday in a company cafeteria in Kent to see the announcement live over a video link, a spokesman said. They cheered when Assistant Navy Secretary John Young announced that Boeing had won.

The winning MMA proposal is a militarized version of the 737 commercial airliner. The standard airframe will be modified and hardened to carry 12,500 pounds of missiles, torpedoes, depth bombs and sonic buoys and a fuselage full of sophisticated sensor and computer data systems.

Jim Albaugh, CEO of the Integrated Defense Systems division of Boeing, admitted that company officials weren't sure whether Boeing's damaged reputation would hurt its chances of winning the MMA contract.

Boeing lost some lucrative rocket contracts after the Pentagon found that company employees had stolen documents from rival Lockheed in the late 1990s. And last year, the company's chief financial officer, Mike Sears, was fired after he offered a job to an Air Force procurement officer working on the 767 tanker plan.

But the shadow of those scandals seemed to disappear after yesterday's announcement.

Albaugh touted the MMA win as a sign that the defense and commercial sides of the company, merged in 1997 when Boeing absorbed McDonnell Douglas, have come together successfully.

"Without the power of bringing all these heritage companies together, we wouldn't have had this win," Albaugh said.

Carolyn Corvi, head of the Renton plant, said that partnering with the defense side of the business was a great experience.

"One of the reasons we brought these companies together was to minimize the effects of commercial airplane cycles in our business," Corvi told a news conference in Kent.

Boeing won the contract with a radical plan to integrate this military program with its commercial operation in a way that's never been done before.

Instead of producing a commercial jet and flying it to the military modification center in Wichita for conversion, the militarized versions of the planes will be produced on the initial production lines in Wichita and Renton.

The 737 fuselage will be built in Wichita and sent by train to Renton, where it will be joined to the wings, and systems installed and assembly completed.

When production gets going, 12 to 18 militarized 737s a year will come off the Renton line between regular commercial versions of the jet. An internal study showed that building the military version of the airplane on the initial production line would save money and cut a year off the development program.

The time and cost savings and the reliability of the 737 sold the Navy on Boeing's jet.

The initial development phase of the contract, which will produce seven planes, is worth $3.9 billion. An order for 109 production aircraft will follow, and international orders are expected to bump that number up to 300 jets.

Corvi said the U.S. Navy commitment alone "takes the contract up to 2025."

"That extends the life of the [737] clearly out a couple of decades from now," she said.

Until yesterday, Corvi had routinely said Boeing would stay in Renton for the foreseeable future, which she had indicated was about seven years out. Last month, a report in a trade magazine had suggested Boeing might wind down 737 production in 2013.

"We always said 'the foreseeable future,' because you never knew exactly when it was," Corvi said. "Now we are getting closer to defining it."

The Navy orders have an estimated value of $15 billion over a 10-year production run. With spares, support and international orders, that could soar to more than $40 billion over 25 years, said Young.

At the Kent news conference, MMA program manager Jack Zerr said his team was "looking forward to a little hooting and hollering tonight," and described the MMA program as "pulling together the best of Boeing and the best of the industry."

Boeing will partner on the program with Northrop Grumman, Raytheon and Smiths Aerospace. CFM International, a joint venture between General Electric and Snecma of France, produces the 737 engines.

Most of the 1,200 new local jobs will be in a new MMA building in Renton, close to the 737 assembly plant, where the staff will work on the structural engineering design of the airframe.

Jobs also will be added in Kent, where Boeing will set up labs to integrate and test the sensor and data systems for the aircraft, Zerr said. These will be largely software and computer hardware jobs.

A smaller unit will work at Boeing Field, where military avionics and weapons systems will be added to the planes.

The MMA program also means about 400 more jobs will be added in St. Louis and in Patuxent River, Md., for a total of 1,600 jobs companywide.

The Navy picked Boeing's jet over an updated version of the Lockheed P-3 turboprops that currently fly the missions. The aircraft sweep the oceans for threats to the Navy's fleet and fly intelligence, reconnaissance and surveillance missions around the world.

Boeing's MMA planes will fly low over the ocean, crisscrossing for hours and using electronic and sonic sensors to search for signals. They will have nine-member crews.

During the Cold War, P-3s tracked Soviet nuclear subs. Today, the Navy needs to protect its surface ships, including huge aircraft carriers, from the threat posed by older, low-tech diesel-electric submarines, which make no noise when the engines are switched off and are thus harder to detect than nuclear subs. More than 40 nations have older subs.

Boeing said it believes the MMA aircraft also could play a role in homeland defense.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Copyright © 2004 The Seattle Times Company

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