Air Force Says Price of New C-17 Transport Has Soared 27%

The Air Force is facing a price increase of about 27% on future purchases of McDonnell Douglas C-17 cargo jets, a change that raises new questions about the program’s political feasibility.

The Air Force said Wednesday that the unit cost of C-17s--excluding research, development, training and spare parts--has been revised from $255 million to $325 million.

The cost figure, known as the unit flyaway cost, is considered the most conservative figure used by the Defense Department when stating weapons costs.

By a more inclusive figure, the Pentagon in its fiscal 1995 budget released this week will pay $2.99 billion for six aircraft in the coming year, or roughly $498 million for each plane and related spare parts, development and other incidentals.

An Air Force spokeswoman said the cost increase resulted from a recent agreement with McDonnell, under which the Air Force may stop C-17 production after 40 aircraft rather than the originally planned 120 aircraft. She said the program will realize “fewer economies of scale.”

However, the agreement may have a tough time winning approved from Congress. Last month, Rep. John P. Murtha (D-Pa.), chairman of the House defense appropriations subcommittee, called McDonnell inept and said it was too early to say whether Congress would buy the deal.

But analysts are mixed in assessing the C-17’s future. Jack Modzelewski, aerospace analyst for Paine Webber, said the government has already sunk billions into the program and alternatives are even more expensive.

“It is like the mechanic who tears apart your car and then gives you the cost estimate,” Modzelewski remarked. “At that point, what choice do you have?”

Modzelewski predicted that the C-17 will ultimately survive political challenges and that the Air Force will buy more than 40 planes.

If McDonnell can sell 80 planes, its future production costs should drop and open up a lucrative foreign market for the aircraft, he added. “This program has legs,” he said.

But Murtha has predicted that Congress is unlikely to fund aircraft beyond the current commitment for 40, owing to problems on the program and tight Pentagon budgets.