4 Reasons The $3.9 Billion New Air Force One Program Cost Boeing $7 Billion & Counting

Boeing airplanes have transported United States presidents for several decades. The latest iteration of the presidential aircraft is a pair of modified Boeing 747-200 (VC25A). In 2018, the Air Force continued the legacy with two modified Boeing 747-8 orders to replace the current aging airplanes.

The manufacturer realized that it was incurring much higher costs on the program. This article explores why the Air Force One program costs much more than initially anticipated.

1

A fixed-price contract

The Trump Administration struck a fixed-price deal with Boeing in 2018.

• Original deal: $3.9 billion for two jets
• Further expenditures reported by Boeing in early 2023: $482 million
• Total program losses reported in 2023: $2.4 billion

In 2018, the Trump Administration struck what seemed to be an ideal negotiation outcome: to acquire a new pair of presidential planes from Boeing for a fixed price of $3.9 billion. While the deal supposedly saved a chunk for American taxpayers, Boeing regrets accepting the offer. According to a CNN report from 2018,

“President Trump has reached an informal deal with Boeing on a fixed price contract for the new Air Force One Program…Thanks to the President’s negotiations, the contract will save the taxpayers more than $1.4 billion.”

Photo: Air Force

In 2022, Dave Calhoun, the current CEO of Boeing, stated

“Air Force One, I’m just going to call a very unique moment, a very unique negotiation. A very unique set of risks that Boeing probably shouldn’t have taken…But we are where we are.”

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Boeing has only poured more money into the program and incurred losses worth billions, bringing the program cost significantly greater than the fixed-priced contract with the government.

2

Capability expectations

The aircraft is expected to have greater capabilities than existing presidential planes.

The latest presidential planes (VC25A) were built over 30 years ago. While the existing Boeing 747-200 modified planes have advanced technologies and capabilities, the Air Force expects a significantly improved version with the VC25Bs. In addition to the greater range of proposed VC25Bs, the aircraft must also be capable of defending against newer, more advanced enemy threats.

Photo: Senior Airman Andrew Bertain | 86th Airlift Wing/Public Affairs | US Air Force

Although specific details of the Air Force capabilities are kept secret by the US government, Boeing has listed some of the essential elements of the presidential aircraft.

• Conference/dining room
• Quarters for the president and the first lady
• An office area for senior staff members
• Another office that converts into a medical facility when necessary
• Work and rest areas for the presidential staff, media representatives, and Air Force crews
• Two galleys that can provide 100 meals in one sitting
• Multi-frequency radios for air-to-air, air-to-ground and satellite communications
• State-of-the-art navigation
• Electronic and communications equipment
• Interior configuration and furnishings
• Self-contained baggage loader
• Front and aft air-stairs

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3

Research and development cost

This is due to the ever-changing technological requirements.

With greater capability expectations come higher costs, particularly research and development costs. Boeing realizes that R&D costs are very unpredictable, especially in the ever-changing technological environment. While most contractors avoid taking the fixed-price deal, Boeing agreed to a lot more than it could actually deliver within the said budget.

Photo: Dallas Fort Worth International Airport

According to the Director of the Center for Defense Concepts and Technology at the Hudson Institute think tank, as reported by Defense News,

“There’s definitely been a new openness on the part of DoD contracting officers to accept cost-plus [contracts] on the R&D side,” Companies now say they “want R&D to be a cost-plus endeavor, where we’re getting covered in terms of our overruns. Because the government always asks for something pretty ambitious, therefore, it makes sense that the government helps to pay for or cover the risk associated with those ambitious goals.”

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Moreover, worldwide supply chain delays and labor shortages are costing Boeing billions on the VC25B program. Numerous delays result in increased overhead costs, not to mention the high cost of goods.

4

High cost of goods

The post-pandemic inflation has hurt the company’s bottom line.

The major after-effect of the pandemic was the high cost of goods. In the last few years, worldwide inflation has affected almost all industries. Since Boeing accepted the fixed price offer in 2018, the $3.9 billion value has translated into today’s $4.87 billion, a whopping nearly 25% increase. The inflation-related variance has raised the cost of goods, transportation, and labor.

Photo: Nina B | Shutterstock

The Defense News reports,

“There was a lot of risk in that [Air Force One project] because it’s not easy to convert a plane that already exists to perform a different function. The government squeezed them pretty hard to give them a fixed price, and [Boeing] had to lowball it, and now they’re having to take those losses.”

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What are your thoughts on the increasing cost of the Air Force One program at Boeing? Share your views in the comments section.