Trump on Boeing’s Air Force One contract: ‘Cancel order!’

By Andrea Shalal and Amy Tennery | WASHINGTON/NEW YORK

U.S. President-elect Donald Trump urged the government on Tuesday to cancel an order with Boeing Co for a revamped Air Force One – one of the most prominent symbols of the U.S. presidency – saying costs were out of control.

It was the latest example of Trump using his podium, often via brief Twitter messages, to rattle companies and foreign countries as he seeks to shake up business as usual in Washington. Trump, who takes office on Jan. 20, took aim at what he called cost overruns even though the plane is only in development stages.

“Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!” Trump said on Twitter. It was not immediately clear what prompted the timing of his complaint.

Trump, who has vowed to use his skills as a businessman to make good deals that benefit American taxpayers, then made a surprise appearance in the lobby of Trump Tower in New York, where he amplified his comments.

“The plane is totally out of control. I think it’s ridiculous. I think Boeing is doing a little bit of a number. We want Boeing to make a lot of money but not that much money,” he told reporters.

Boeing, which has built planes for U.S. presidents since 1943, has not yet begun building the two replacements for the current Air Force One planes, which are scheduled to be in service by 2024.

Boeing has not yet been awarded the money to build the proposed replacements.

“We are currently under contract for $170 million to help determine the capabilities of these complex military aircraft that serve the unique requirements of the President of the United States,” the company said in a statement.

NOT A ‘VANILLA’ JUMBO JET

The U.S. Air Force, which operates the presidential planes, first announced in January 2015 that Boeing’s 747-8 would be used to replace the two current presidential planes.

The planes can fly direct from Washington to Hong Kong, 1,000 miles (1,600 km) farther than the current Air Force One. They are designed to be an airborne White House able to fly in worst-case security scenarios, such as nuclear war.

President Barack Obama, who was flying on the aging Air Force One to Tampa, Florida, on Tuesday, has called the plane one of the best perks of the presidency.

His spokesman Josh Earnest told reporters on board that the contracting arrangements for replacements are “rather complicated” and said the recommendations for upgrades had been made by national security experts.

“The planning work that we have done on behalf of future presidents is something that the next administration will have to decide whether or not to carry forward,” Earnest said.

The budgeted costs for the replacement program are $2.87 billion for the fiscal years 2015 through 2021, just on research and development, testing and evaluation, according to budget documents seen by Reuters.

The current Air Force plan envisions extensive modifications to a Boeing 747-8 plane, adding military avionics and advanced communications to a self-defense system.

“Of course it’s not like buying a vanilla Boeing jumbo jet,” said defense consultant Loren Thompson, who has close ties to Boeing and other companies.

A March 2016 report from the Government Accountability Office, the investigative arm of Congress, estimated the cost of the overall program at $3.21 billion, including the purchase of two aircraft.

But the GAO estimated the costs for research and development would be would be lower, at just under $2 billion. If the GAO report used the same Air Force estimate for research and development, then its estimate would be around $4 billion.

Boeing shares dipped after Trump’s tweet but were flat by mid-afternoon. Shares of several other major defense contractors were also lower.

LATEST BROADSIDE

Trump’s broadside against Boeing comes as Washington’s business lobbyists are bracing for a wild ride.

A New York real estate developer, Trump took aim at big corporations during his campaign, saying that they often harm ordinary Americans by sending jobs abroad.

Since winning the Nov. 8 election he has taken credit for pushing United Technologies Corp and Ford Motor Co to backtrack on outsourcing plans.

Both Ford and United Technologies said they support Trump’s efforts to cut corporate tax rates and overhaul regulations, which could save the companies billions in the long run.

Behind the scenes, business lobbyists are emphasize the importance of trade to the U.S. economy to Trump’s advisers.

Trump’s attack on Boeing was the main topic of discussion at the annual luncheon of the Aerospace Industries Association, where the group’s CEO Dave Melcher urged the new administration to promote trade and bolster the high-paying manufacturing jobs that the $143 billion a year sector offers.

Industry executives say they are seeing willingness from the Trump team to take another look at export controls that limit exports of U.S. weapons. But in the short term, his tweets and comments on Boeing put defense contractors on notice.

“The chilling effect on industry is huge, if you are a contractor,” said Franklin Turner, a partner specializing in government contracts at law firm McCarter & English.

Boeing relies on the U.S. military and other arms of the federal government for a significant share of its defense, space and security business which is worth $30 billion a year.

The company clashed during the past year with Republicans in Congress over the Export-Import Bank, a federal program Boeing uses to finance sales to certain overseas customers. Boeing executives have also been outspoken supporters of the Trans-Pacific Partnership trade deal with Asia, which Trump opposed.

Chief Executive Dennis Muilenberg last week called for Democrats and Republicans to work together to make sure the United States continues to play a leading role in shaping the global economy through trade agreements.

Trump, who sold his shares in Boeing and other companies in June according to a spokesman, named former long-time Boeing CEO Jim McNerney to a high-profile business advisory council last week. McNerney could not be immediately reached for comment on Tuesday.

Trump is known for his love of his own Boeing 757 jet. In a 2015 Rolling Stone profile early in his campaign, he said his plane was “bigger than Air Force One, which is a step down from this in every way.”

“Did you know it was featured on the Discovery Channel as the world’s most luxurious jetliner?” he said.

(Additional reporting by Timothy Gardner, Emily Stephenson, Mike Stone, Susan Heavey, Andrea Shalal and Doina Chiacu in Washington; Ayesha Rascoe aboard Air Force One; Steve Holland, Alana Wise, Jeffrey Dastin, and Lewis Krauskopf in New York; Writing by Roberta Rampton; Editing by Frances Kerry and Alistair Bell)