Boeing Craft, Helicopters Gain in Pentagon's $671 Billion Defense Budget

Aircraft and helicopter programs of Boeing Co. receive funding boosts in Pentagon’s $671 billion request for the fiscal year beginning Oct. 1., the first year of what the Defense Department is calling ‘modest’’ growth through 2016.

The second-largest defense contractor’s portfolio, including F/A-18E/F Super Hornets and AH-64D Apache helicopters, benefits across the board in the fiscal 2012 spending plan submitted to Congress today that requests $553 billion for the basic budget and $117.8 billion for the wars in Iraq and Afghanistan, the lowest level of war spending since 2006.

“This budget represents a reasonable, responsible and sustainable level of funding, the minimum level of defense spending that is necessary, given the security challenges we are facing,” Defense Secretary Robert Gates said in a statement today.

Gates since 2009 has warned that growth in defense spending following the attacks of Sept. 11, 2001, would taper off. He has canceled, terminated or truncated programs including Lockheed Martin Corp.’s F-22 jet, Boeing’s C-17 transport planes, and the manned vehicle part of the Army’s Future Combat Systems. This year, among other cuts, he has called for canceling General Dynamics Corp.’s $15 billion Expeditionary Fighting Vehicle being designed for the Marine Corps.

Photographer: Neal/AFP/Getty Images

The budget includes $816 million to upgrade 19 Boeing AH-64 Apache Helicopters. Close

The budget includes $816 million to upgrade 19 Boeing AH-64 Apache Helicopters.

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Photographer: Neal/AFP/Getty Images

The budget includes $816 million to upgrade 19 Boeing AH-64 Apache Helicopters.

Previewing the 2012 Pentagon budget at a Jan. 6 news conference Gates said “we must come to realize that not every defense program is necessary, not every defense dollar is sacred and well-spent and that more of nearly everything is simply not sustainable.”

Fastest Growth

U.S. defense spending has grown the fastest since the last time the federal budget was balanced in 2001, compared with increases in Social Security and Medicare spending.

The three items together constitute the largest U.S. spending programs, according to nonpartisan Center for Strategic and Budgetary Assessments in Washington.

The Pentagon for the fifth consecutive year opposes funding General Electric Co.’s alternative engine for the F-35 jet.

Gates last year said he’d recommend the president veto the fiscal 2011 bill if it contained engine money. Congress authorizes continued funding in the pending 2012 stopgap legislation.

“The Department continues to assess the best way to proceed with this particular issue.”

$13 Billion Reduction

The fiscal 2012 request represents a $13 billion reduction from the $569 billion the Pentagon last year said it would request in fiscal 2012.

The cut is the first installment of $78 billion in deficit reduction cuts over a $2.91 trillion defense plan through 2016, or about a 2.67 percent cuts.

Succeeding requests are being reduced annually by $11 billion each in 2013 and 2014, $18 billion in 2015 and $24 billion in 2016, according to a Pentagon budget summary released today.

The planned fiscal 2013-2016 annual base figures are $571 billion, $586 billion, $598 billion and $611 billion respectively.

Those numbers represent an average annual growth adjusted for inflation of 1 percent when assessed against the fiscal 2011 appropriations, still pending in Congress, of about $526 billion.

Using this benchmark the increase between this year and 2012 is 3.6 percent real growth, according to the Pentagon.

Still, compared with the $548 billion 2011 request the fiscal 2012 proposal represents a decline of 0.7 percent, according to the figures. The average inflation adjusted “increase” through 2016 is 0.2 percent.

Aircraft, Space Dollars

Boeing, based in Chicago, also fares well in the $54 billion of manned and unmanned procurement and research dollars requested -- about 27 percent of the entire procurement and research request of $203.8 billion.

Overall, the aircraft account also includes $10 billion for helicopters and rotorcraft made by Boeing, United Technologies Corp’s Sikorsky Aircraft unit and Textron Inc.

Stratford, Connecticut-based Sikorsky benefits from a $1.6 billion request for 75 additional UH-60 Black Hawk choppers.

Also included is $4.8 billion for unmanned drones made by privately held, San Diego-based General Atomics and Los Angeles- based Northrop Grumman Corp. The Air Force and Army are requesting $2.5 billion for General Atomics Reaper and Grey Eagle drones.

The Air Force is requesting $1.6 billion in procurement and development of RQ-4 Global Hawk surveillance drones. The Air Force also decided to truncate the advanced Block 40 Global Hawk at 11 aircraft from 22, saving $428 million through 2016.

Presidential Helicopter

Funding is included to continue development of a new presidential helicopter to replace the canceled VH-71.

The budget asks $2.66 billion for 28 Boeing F/A-18E/F jets, $1.1 billion for 12 EA-18G electronic warfare versions, $1.4 billion to buy or upgrade 47 CH-47 Chinook transport helicopters, and $816 million to upgrade 19 Boeing Co. AH-64 Apache Helicopters.

Boeing also splits the revenue with Textron Inc. on the V-22 tilt-rotor Osprey. The Pentagon is requesting $2.97 billion for 36 additional aircraft.

The company also benefits from $1.16 billion requested for continued development and sustainment of the U.S. ground-based missile defense system in Alaska and California. The Pentagon is requesting $10.6 billion overall on missile defense.

Space Venture

In space, Boeing is partner on the Denver, Colorado-based United Launch Alliance joint venture with Lockheed Martin that boosts military satellites into space. The Pentagon is requesting $1.7 billion in launch services in fiscal 2012 and almost $8 billion between 2013 and 2016.

The aircraft account also includes $9.7 billion in procurement and development dollars for 32 Lockheed Martin’s F-35 jets, 13 fewer than planned last year before Gates in January announced additional delays.

It includes $1.2 billion for purchase of 12 additional Lockheed Martin C-130J transports and $598 million for eight more C-27J Army transports produced by New York City-based L-3 Communications Holdings, Inc.

The aircraft account also includes $199 million for early research into a new long-range bomber, the first installment of a $3.7 billion Air Force Long-Range Strike Family.

Vessel Dollars

The budget includes $24.6 billion to buy 11 ships, including two Virginia-class submarines, four Littoral Combat Ships and one DDG-51 destroyer.

Northrop Grumman and General Dynamics will get $4.9 billion to jointly build the additional nuclear-powered attack submarine at their shipyards in Newport News, Virginia and Groton, Connecticut.

Northrop Grumman, the nation’s only builder of aircraft carriers, will get $908 million in advance funding for the Gerald Ford-class carrier, and $408 million for a carrier refueling and overhaul.

The budget provides about $2.1 billion for the DDG-51 destroyer, built by Northrop Grumman in Pascagoula, Mississippi and General Dynamics in Bath, Maine.

Two teams-- led by Lockheed Martin and Austal USA--would get $2.2 billion to build four additional Littoral Combat Ships -- a surface combatant designed to operate close to shore.

Amphibious Ships

Northrop also would get $1.8 billion to build the last of 11 LPD-17 amphibious transport dock ship and $2 billion in additional funding for a LHA amphibious assault ship ordered this year.

General Dynamics would get $425.9 million for a Mobile Landing Platform, built in San Diego, used to by other ships to transfer vehicles, personnel and equipment.

Mobile, Alabama-based Austal USA also would get $416 million to build two Joint High Speed Vessels -- shallow-draft ships designed for rapid transport. One ship would be used by the Navy and the other by the Army.

The budget proposes $16.1 billion for ground programs, including $7.86 billion for support equipment, $5.22 billion for combat vehicles, $2.28 billion for tactical wheeled vehicles and $723 million for weapons.

General Dynamics would get $834 million for 100 Stryker vehicles and $191 million for 21 upgraded M1A2 Abrams tanks. The Stryker is an armored wheeled vehicle and the Abrams is the Army’s main battle tank.

Heavy Vehicles

Oshkosh Corp. would receive $680 million for 1,598 Family of Heavy Tactical Vehicles, or FHTVs, trailers and tracking systems, and $448 million for 2,422 Family of Medium Tactical Vehicles, or FMTVs.

The FHTV includes the Palletized Load System, or PLS, a 16.5-ton truck that moves containers, and the Heavy Expanded Mobility Tactical Truck, or HEMTT, a 10-ton truck that refuels helicopters, tows missiles and recovers vehicles. The FMTV includes 2.5-ton and 5-ton trucks that are used to resupply units with equipment and personnel.

The budget would increase spending on the Joint Light Tactical Vehicle, or JLTV, to $243.9 million. The Army and Marine Corps are developing the JLTV to replace the Humvee.

Three industry teams have won contracts to develop JLTV prototypes, including BAE Systems Plc, General Tactical Vehicles, a joint venture of General Dynamics and Humvee-maker AM General Llc, and Lockheed Martin Corp.

To contact the reporters on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net; Brendan McGarry in Washington at bmcgarry2@bloomberg.net; David Lerman in Washington at dlerman1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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