Boeing has announced it will shutter its production line for C-17 transports in 2015, but a plan to swap aircraft and sell refurbished planes overseas could keep the assembly line humming. (Staff Sgt. Jacob Bailey / Air Force)
Unless Boeing can sell a few more C-17 transports to international customers or strike a novel deal with the Air Force to swap old planes for new ones, the company will end production of the giant cargo plane in 2015 after a more than 20-year run.
Trading old C-17s for new ones — akin to what the service does with its Lockheed Martin C-130Js — could extend the line several years, sources and analysts said. Rather than retiring the aircraft, like the Air Force does with its older C-130s, the service could return its early C-17s to Boeing, which would refurbish them for sale on the international market.
It is unclear in the current fiscal environment as global defense spending shrinks if a trade-out concept is even tenable. Over the past two decades, Boeing has successfully extended C-17 production six years, but this time the Pentagon is facing another $52 billion cut to its upcoming budget.
The oldest Air Force C-17s, many of which reside in the Air National Guard and Air Force Reserve, were built in the early 1990s and have logged thousands of flight hours.
Boeing on Sept. 18 said it would close the C-17 final assembly plant in Long Beach, Calif., in 2015, after completing 22 aircraft for international customers.
The company will begin reducing its workforce in 2014. In all, 3,000 people at facilities in California, Arizona, Missouri and Georgia work on the C-17. When the supply chain is factored in, about 20,000 people support the C-17 program.
Of the 22 aircraft still to be built, 13 are not on “firm order,” said Nan Bouchard, Boeing’s C-17 program manager.
“We expect those  to go to a mix of new and existing customers,” she said.
Six nations in addition to the U.S. Air Force fly the C-17: Canada, Australia, the U.K., Qatar, India and United Arab Emirates. A consortium of 12 countries — 10 NATO members and two partner nations — also jointly operate three aircraft.
But international orders have come mostly in small quantities.
“There’s a lot of interest out there, but timing of the orders just didn’t line up for us,” Bouchard said. “We’ve been protecting the production line with long-lead funding.”
The C-17 is the only wide-body military transport in production in the U.S. Lockheed builds the smaller C-130J in Marietta, Ga., and is also upgrading the mammoth C-5 Galaxy transport.
“We’re kind of in uncharted territory here, because there had never been an export market for a plane of this class before the C-17,” said Richard Aboulafia, an analyst with the Virginia-based Teal Group consultancy. “It’s a clever idea, but unlikely to be successful. They’ve managed to pull off a miracle by stretching production with international orders this far. But what can they do when the only customers they do have aren’t coming through in time, like Saudi Arabia? Remember, the other 13 planes are being built on spec.”
The company said it would produce an additional 13 planes that have not yet been sold before shuttering the production line. Aboulafia said he believes those planes could end up with India, South Korea and Saudi Arabia. India has already purchased a previous order of C-17s; the latter two countries have been named for some time as potential buyers.
It is always possible that the existing user pool could see this as last call and tack on extra orders before the line closes. Countries such as the UAE, Kuwait and potentially Qatar could make that move, Aboulafia said. Another potential participant could be Japan, whose domestic C-2 program has developed slowly.
Whether this opens up market opportunities for the Airbus A400M, seen as the C-17s largest competitor, is unclear.
“The problem with the A400M is we just don’t know what the price is going to be,” Aboulafia said. “There will be some kind of export market, but it’s not clear if it’s the same as the C-17s. This isn’t a question of price point, but politics and whether you can afford the capability at all. Consider that there haven’t been any new A400M sales outside the consortium that developed the plane, other than Malaysia.
“What Boeing needs now is time. Time to see if the Saudis come through. Time to see what happens to Japan’s indigenous cargo plane program, the C-2. Time for the U.S. to realize it’s throwing away a valuable industrial capability it will miss in five years.”
If the Air Force swapped out its older aircraft, it could likely acquire the new ones at a deep discount from the airlifter’s $225 million sticker price, sources said.
The new aircraft would also include more modern features not installed on the older C-17s. The older aircraft must go through a separate overhaul process to receive these upgrades. Boeing holds an Air Force support contract and upgrades the aircraft in San Antonio. That contract runs through 2017 and has options through 2021.
The aircraft is expected to continue flying in the U.S. and abroad for “many decades to come,” Bouchard said.
Boeing believes its modernization and sustainment programs will help the company retain the intellectual know-how to compete for future military transport projects in the 2020s, Bouchard said. She said the company is not planning a lobbying effort to keep the production line open.
If the Air Force traded in its older aircraft, it raises the prospect of international sales. Boeing could sell the aircraft on the international market at a lower price and more directly compete with the Airbus Military A400M.
A C-17 is powered by four Pratt & Whitney jet engines, while the A400M is powered by four Europrop turboprop engines.
While the Air Force is said to find the deal attractive, federal budget cuts will likely prevent the service — which has a host of higher acquisition priorities, namely the Boeing KC-46A tanker, the Lockheed F-35 joint strike fighter and a new long-range bomber — from signing on to the plan. That means Congress would need to legislate the move, which seems unlikely in the current budget climate.
Several members of California’s House delegation signaled that, in the sequestration era, Congress is unlikely to reverse the Air Force’s decision.
House Armed Services Committee Chairman Howard “Buck” McKeon, R-Calif., said he has not studied the issue in any depth.
But he did sarcastically utter a telling quip when asked about the Air Force plan to end C-17 manufacturing: “You mean keep all production lines open forever?”
And California Democratic Rep. John Garamendi — also a member of the Armed Services Committee — said he supports the service’s plans.
“The Air Force has completed its purchases of C-17,” he said during an interview.
Asked if he believes the U.S. has enough Globemasters, Garamendi replied, “Yes. Unless you’ve found another several billions dollars lying around some place.”
Boeing in 2006 began taking measures to close the C-17 production line in 2009, but Congress added dozens of Air Force aircraft. Numerous international orders were also placed.
John T. Bennett and Aaron Mehta contributed to this report.