Boeing sells 747s left behind by the Russians as Air Force One jets – but for how much? Don’t ask

Air Force One
An Air Force One 747 jet flies over the Statue of Liberty. (DOD Photo)

The U.S. Air Force says it’s getting a good deal on two Boeing 747s that were built for a now-bankrupt Russian airline and will now be converted into presidential Air Force One jets.

However, it’s not saying exactly how good the deal is, at Boeing’s insistence.

It’s no surprise that the Air Force is buying the 747s, which were ordered by Russia’s Transaero Airlines in 2013. By the time the two planes were available for delivery, in 2015, Transaero had declared bankruptcy. The jets went unsold, and they’re now being stored at a desert facility in Victorville, Calif.

This week, word emerged that the Air Force was thinking about purchasing the jets from Boeing at a steep discount. That would help address the cost concerns raised by President Donald Trump after November’s election – concerns he considered so serious that he talked about canceling any deal.

Trump fumed over reports that it’d cost $4 billion to replace the two current Air Force One 747s, which are nearing the end of their projected 30-year lifetime. In response, Boeing CEO Dennis Muilenburg promised the president he’d keep the price tag below $4 billion.

Today the Air Force confirmed it would buy the ex-Transaero planes.

“This award is a significant step toward ensuring an overall affordable program,” Darlene Costello, the principal deputy assistant secretary of the Air Force for acquisition, said in a statement. “As we move forward, we will continue to seek and implement cost savings opportunities.”

The Air Force said the purchase price would not be released because of the way the sale was negotiated. It explained that price and related details were “commercial-competition sensitive.”

Air Force Secretary Heather Wilson put the price issue in plainer terms during an interview with Bloomberg News. “Boeing has said they do not want us to release that because they sell these things commercially,” she explained. Nondisclosure was “part of the condition for the sale,” she said.

Instead, the Air Force will eventually disclose the total price of the overall program, including conversion of the airframes, once that’s agreed upon.

“We got a really good deal,” Wilson said.

Boeing said it was pleased with the deal as well.

“We’re glad to have reached an agreement to sell to the U.S. Air Force two new 747-8 commercial airplanes at a substantial discount from the company’s existing inventory to serve as the future Air Force One fleet,” Boeing spokeswoman Caroline Hutcheson told GeekWire in an email. “The Air Force has taken advantage of a unique opportunity to get a great airplane at a great price for the American taxpayer.”

The Air Force says it’s already asked Boeing to provide proposals for modification of the planes. That’s expected to include equipment for in-flight refueling, radiation hardening, a super-secure communication system and other features that other 747s don’t need.

The list price for a 747-8 like the ones sold to the Air Force is about $379 million. In the commercial jet market, the actual price paid is typically about half the list price, based on a rule-of-thumb formula from Avitas, an airline valuation firm.

In this case, Boeing’s discount could be even steeper – due to the fact that the 747 market is so slow, as well as Muilenburg’s pledge to Trump. In any case, the purchase price of the planes is virtually certain to account for just a fraction of the project’s total cost.

The Air Force’s schedule calls for modifications to begin in 2019, and for the aircraft to provide presidential airlift support starting in 2024.

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