Sky Talk

F-35: The high cost of concurrency

Some lessons are never learned in the Military-Industrial Complex. One of them is you should design and thoroughly test some things before you start building them. Such as F-35s.

Even as Lockheed Martin execs are complaining about a new Pentagon policy that wants to push some of the cost overruns on the F-35 Joint Strike Fighter onto the company, costs incurred for fixing already built or nearly built airplanes to resolve problems now being uncovered in testing, the company -- and the Department of Defense are paying the bills in other ways.

Bloomberg reports, what Lockheed officials didn't say yesterday, that the Pentagon has had to reduce its next order of F-35s from 34 planes to 30 so that it can find the money to pay for making changes to the 61 planes already in production to cover problems that been discovered along the way in testing.

It seems that Congress, beginning to face up to the nation's astounding deficit problem, is no longer willing to just write more checks for the F-35 program.

Over the last decade and more, longtime observers of the Pentagon's weapon's buying practices both outside the government and inside (read any GAO report on the F-35) warned against producing airplanes before the test program was at least well down the runway. Here's a commentary from a 2009 article in Jane's by Winslow wheeler and Pierre Sprey. 

Instead of embracing “fly before you buy”, they are rushing headlong into their plan to produce up to 513 aircraft with only two per cent of flight testing now complete. In that handful of test hours, the programme has already discovered significant problems in the avionics and engine that now must be fixed.

 Even more astounding, the programme plans to verify only 17 per cent of the aircraft’s characteristics with flight-testing, according to the Government Accountability Office and Pentagon insiders. The rest will be verified by computer simulations, testbeds, and desk studies. Desk studies?  

Here's the full article.  Download Wheeler-Sprey on F 35 and Gates as in Janes

Contractors like Lockheed want concurrency because they tend to make higher profit margins on production than they do on research and development. The military likes it because once people are employed building weapons they now Congress rarely kills a troubled program.

- Bob Cox

 

Airlines generate $1.5 billion in bag fees and change fees in Q2, BTS says

Airlines generated more than $1.5 billion in baggage fees and reservation change fees in the second quarter, a government report said on Thursday.

In its quarterly airline financials report, the Bureau of Transportation Statistics said that domestic carriers received $887 million in bag fees during the quarter, down slightly from the same period last year. Over $612 million was generated from reservation change fess, the BTS said.

Fort Worth-based carrier, American Airlines, ranked second behind Delta Air Lines in collecting the most bag charges, reporting $152 million in bag fees. Dallas-based carrier, Southwest Airlines, which does not charge for the first two checked bags but does charge for oversized and the third bag, ranked 14th, collecting $8.4 million in bag charges.

It is unclear how much revenue airlines generate from other ancillary fees such as pillow and blanket charges, food for purchase and priority boarding access. However, the Transportation Department issued a proposed rule in July that would require airlines to report revenues in 16 additional categories for fees and charges. The department is currently reviewing public comments made on that proposed rule.

As an industry, the BTS said that domestic carriers reported operating revenues of $38.6 billion for the quarter and operating expenses of $36.6 billion.

Here are the top ten airlines that collected bag fees in the second quarter. The figures are in thousands of dollars.

Rank	Airline	2Q 2010	2Q 2011	Percent Change
1	Delta	$255,950	$226,291	-11.6
2	American	$152,059	$156,114	2.7
3	US Airways	$135,601	$134,752	-0.6
4	Continental	$91,031	$91,332	0.3
5	United	$84,824	$71,111	-16.2
6	AirTran	$39,204	$46,138	17.7
7	Alaska	$25,394	$40,270	58.6
8	Spirit	$16,811	$34,441	104.9
9	Frontier	$15,470	$18,015	16.5
10	JetBlue	$14,012	$15,941	13.8

-Andrea Ahles

United Continental and US Airways both report Q3 profits

United Continental Holdings and US Airways both reported third quarter profits on Thursday morning although higher fuel costs pushed profits lower than they were last year.

Chicago-based United Continental said net income was $653 million, down 23 percent, from the third quarter of 2010 while revenues rose 8.7 percent to $10.1 billion. The airline said it spent $1 billion more on fuel in the quarter, excluding the impact of fuel hedges.

“Our merger integration is going well as we approach two significant milestones: our single operating certificate, which we expect to achieve by the end of this year, and our single passenger service system, which we expect to implement by the end of the first quarter of next year,” said United chief executive officer Jeff Smisek.

US Airways reported a $76 million third quarter profit, down 68 percent from the third quarter last year. Revenues rose 8.1 percent to $3.4 billion, up from $3.1 billion in the same quarter in 2010.

"Looking forward, we see continued strong demand in the fourth quarter," said US Airways chief executive Doug Parker. "Thanks to continued capacity discipline, aggressive cost control and focus on outstanding operating reliability, we believe US Airways is well positioned for 2012."

-Andrea Ahles

F-35 flight testing on pace for 2011, Lockheed says

Flight testing of the three variants of the F-35 Joint Strike Fighter continues to go well, according to Lockheed Martin officials.

The company on Wednesday released new figures on the progress of flight testing so far this year. As of Sept. 30, the flight test program was more than 8 percent ahead of schedule for both test points and test flights.

As of Oct. 25, F-35s had flown 849 times this year and completed 6,254 test points. F-35A models, those destined for the Air Force and most foreign buyers, have completed 388 flights and 2,890 test points.

The F-35B short-takeoff-vertical landing variants completed 287 test flights and 2,043 test points, including 265 vertical landings and 72 vertical landings in 19 days earlier this month aboard the USS Wasp amphibious ship.

F-35C carrier variants have flown 129 times and completed 1,321 test points through Oct. 25. The C-model has been launched by a catapult 59 times in Navy ground testing.

Lockheed Chief Executive Robert Stevens, in remarks to financial analysts, said the test results showed the F-35 program was making good progress. Testing of the F-35C, Stevens said, had showed the need to redesign the arresting hook system used for carrier landings.

- Bob Cox

 

The high cost of flying a fighter that doesn't need much runway

Aviation Week's ever cheeky reporter and F-35 critic-skeptic Bill Sweetman has an interesting post on the Ares blog taking a crack at how much it has and will cost to develop the F-35B, the short-takeoff, vertical-landing version so fervently sought by the Marines.

Sweetman's estimate, based on publicly available documents and records, is:

Total Pentagon investment for 340 F-35Bs, according to the program of record: about $92 billion, or $270 million per unit. 

 Now, does anyone want to start talking about the frugal Marine Corps, always doing more with less?

It's an interesting and provocative read with some equally interesting public comments.

-Bob Cox

 

Boeing profit exceeds Wall Street expectations

Boeing reported a $1.1 billion third-quarter profit Wednesday that beat expectations because of strong growth in its defense business, according to the Associated Press.

Boeing's revenue is split between defense and commercial airplanes.Weapons demand in the Middle East and South Asia is helping to offset expected reductions in U.S. defense spending in the U.S.

Profits from Boeing's passenger jet business grew, although more slowly. It also cut its forecast for deliveries of its two newest jets, including the much-anticipated 787.

Boeing's overall net income rose 31 percent. Profit of $1.46 per share beat analyst expectations, while revenue rose 4 percent to $17.73 billion.

The company said it would spread development costs for the 787 over 1,100 aircraft, meaning it will take much longer to record a profit on the new plane than in the past.

- Bob Cox

 

F-22s problems still not solved

In case you missed it, the Air Force grounded its F-22s again last week after pilots again reported problems resembling oxygen starvation.

Now the Air Force has decided its ok to allow some of its F-22s to resume operations, but not others. The F-22 is jointly built by  Lockheed Martin and Boeing, with Lockheed responsible for most of the aircraft's flight controls, systems and sensors, basically just about everything in or controlled from the cockpit.

- Bob Cox

Coming out party for new Eurocopter

As we reported in today's Star-Telegram, American Eurocopter showed off the newest addition to its commercial helicopter product line to potential customers Tuesday at its facilities in Grand Prairie. 

The EC-145T2 is distinctively different than the existing EC145 model because of its Fenestron enclosed tail, but what may be most significant are the performance goals the company says the aircraft will meet. 

The aircraft will carry more fuel and cargo/passenger payload and be capable of operating and higher altitudes and in hotter temperatures, according to Eurocopter.

Here is a copy of a spec sheet comparing the EC-145T2 to the existing version.  Download Eurocopter EC145T-20001

- Bob Cox

TWU statement on fleet services agreement

Here is the official statement from the Transport Workers Union.

TWU Fleet Service and Ground Service Workers at American Airlines Reach Tentative Agreement

Proposed four-year pact delivers nine percent base pay raises, six percent lump sum bonus, five additional holidays

Local union presidents vote to send agreement to rank-and file members

DALLAS – The TWU Fleet Service and Ground Service Bargaining Committee at American Airlines, representing more than 11,000 workers at dozens of locations across the United States, has reached a tentative agreement for a new four-year labor contract.

The proposed pact includes a 6 percent signing bonus, an immediate 3 percent structural base pay increase and three additional 2 percent structural increases, which will take effect 12 months, 24 months and 36 months following ratification, respectively.

“Considering the economic times in which we live, I believe it is imperative that our members have their voices heard in the direction they would have us move. If this agreement is ratified, it will provide significant pay increases to fleet service and ground service workers,” said Donny Tyndall, president of TWU Local 502, representing union members in Los Angeles, Las Vegas, Phoenix, San Diego, Santa Ana, and Tucson. “The local presidents who were at the bargaining table agreed that we should send this tentative agreement to our rank-and-file members for their decision.”

“We’ve negotiated long and hard with this company, and we’ve insisted that AMR executives recognize the sacrifices and contributions made by TWU members,” said Garry Drummond, director of TWU’s Air Transport Division. “Now, it’s up to our members to make a decision.”

Under terms of the tentative agreement, a typical fleet service clerk will earn over $23 by the end of the four-year contract, while a crew chief will earn more than $25 an hour.

TWU fleet service and ground service workers load and unload baggage, de-ice aircraft, direct planes on the ground, and provide additional “under the wing” fleet and ground service work at American Airlines gates in airports throughout the United States.

Additional provisions of the tentative agreement include:

• Holidays increased: The proposed contract doubles the number of paid holidays, from five to ten, and increases holiday pay to double time from time and a half.

• Sick leave:  Sick days increased to eight, from five under the previous agreement.

• Health care premiums frozen for active employees:  AMR’s Value health plan will replace the $150 deductible standard plan and will become the contractual plan.  Employee contributions to premiums for the contractual plans will be frozen at 2012 rates for 2013, 2014, and 2015. Workers in the $150 Standard plan will have options to enroll in other plans during enrollment for 2013 benefits.

• Retiree health care: Benefits are unchanged for current retirees.  Current employees who retire within three months following ratification will continue to participate in the existing pre-funding retiree health plan.  Employees who retire after that date will have their pre-funded retiree health care contribution returned, and will pay the Value health plan premium (employee only rate) per person per month for retiree healthcare coverage.

• Retirement:   Pension benefits are unchanged for current retirees, and current active employees will continue to participate in AMR’s defined benefit plan. Employees hired following ratification will be participate in a company-matched defined contribution plan, no less favorable than the plans offered to management, with a maximum employer matching contribution of 5.5 percent.

• Job security: Under terms of the tentative agreement, TWU members will no longer perform daytime cabin and fueling work or work as bus drivers.  More than 1,200 employees now in these classifications, however, will have their jobs protected and will be transferred to other assignments within their city. In addition, the system protection date has been adjusted to 6/26/2000, providing job security to more than 1,000 Title III fleet service clerks hired on or before that date.

TWU fleet service and ground service workers will have the opportunity to review the agreement and vote at their respective work locations. 

-Andrea Ahles

DoD wants Lockheed to share in more of F-35 costs

Reuters broke an interesting story about how the Department of Defense wants prime contractor Lockheed Martin to pay for some of the costs involved in fixing new problems that show up during testing.

The Reuters story is attributed to unnamed sources, but the Wall Street Journal (subscription required) now has a version that includes confirmation of sorts from Lockheed CEO Robert Stevens.

This is from Reuters:

Shay Assad, the Pentagon's director of defense pricing, told Reuters in a recent interview that he was braced for resistance from industry to some reforms. "We're going to be breaking some glass here," he said.

Assad and a team of more than two dozen pricing experts are finishing a review of what the fifth batch of F-35 production jets should cost this month, which will pave the way for Lockheed and the Pentagon to begin formal contract talks.

But defense officials have already told Lockheed that they expect it to share in the costs of "concurrency" or changes that must be made to the new warplane, which has already entered production as developmental testing continues.

DoD official and Lockheed long ago embraced concurrency, production of planes long before testing is close to complete, despite warnings from the Government Accountability Office and others that would only lead to very costly changes.

Even as they've struggled to get both testing and production up to speed Lockheed officials have lobbied the Pentagon to increase orders, rather than cut back, even though testing won't be completed until around 2016. More production means higher revenues and profits for Lockheed and its suppliers.

-Bob Cox