Air Force Expects Rise in McDonnell C-17 Orders : Military: Problems in Long Beach-built transports have been solved, official says. Move could stabilize industry.

In a dramatic recovery, McDonnell Douglas Corp. has solved the major problems on its long-troubled C-17 military transport program, and it is almost certain to win a significant increase in orders for the Long Beach-built jet later this year, the Air Force’s top acquisition officer said Wednesday.

Lt. Gen. George Muellner said that the C-17’s performance “has been really impressive,” demonstrating that the plane can meet requirements to transport heavy military cargo across oceans with a reliability of better than 99%.

The Pentagon, based on the most recent performance data, will increase its order for 40 aircraft to as many as 120 aircraft, Muellner said, although the exact number depends on the outcome of two Pentagon studies that have yet to be completed.

If McDonnell does land a major new order from the Pentagon, it would represent one of the few times that a major military program has been able to recover from severe problems. Only two years ago, the C-17 program was so riddled with technical troubles and cost overruns that the Pentagon put the program on probation and threatened to kill it.

A new order would also help stabilize Southern California’s battered aerospace industry and preserve McDonnell as a viable aircraft maker in the state. The C-17 program supports 8,700 direct jobs in Long Beach at McDonnell, as well as hundreds of aircraft component manufacturers across California.

The final decision will be made by the Pentagon’s Defense Acquisition Board when it meets in late October. At stake is which plane--the C-17, Boeing’s 747 or some other transport--will replace the Air Force’s aging fleet of C-141s.

“McDonnell Douglas has clearly done a good job of correcting a lot of quality problems,” Muellner told reporters. “Clearly, the C-17 performance and McDonnell Douglas performance says that [orders] beyond 40 aircraft are very, very real.”

The comments are the strongest indication yet from a senior Pentagon official on the potential for more C-17 orders, although other top Air Force and Army officials have been privately lobbying for more C-17s.

“We’re always enthused when our customer praises our airplane and talks about buying more of them,” said George Field, McDonnell’s No. 2 executive on the C-17 program. “And if you look at our progress in the last year, it’s definitely warranted.

“We know we’re going to sell a lot of these [C-17s], and this is just the beginning,” Field said.

But McDonnell still faces obstacles. Company officials have said privately that McDonnell is $1 billion in the red on the C-17, and that it must build at least 100 aircraft to make money on the program. Overall, the program has cost U.S. taxpayers and McDonnell about $21 billion.

The Pentagon’s decision on ordering more C-17s is also critical to McDonnell’s plan to sell the cargo jet internationally and to commercial customers, such as air cargo firms. As the Pentagon increases its orders, the cost per plane will drop sharply because the firm’s fixed costs can be spread over more aircraft.

Indeed, McDonnell has been trying to boost its chances of getting more Pentagon sales by asserting that it can drive the C-17’s price to $190 million or less--provided it gets enough orders. The most recent C-17s have cost an average of $300 million each, far too high for foreign customers.

At one time the Air Force talked about buying 210 C-17s; then it pared the program to 120 aircraft. But in the early 1990s, McDonnell ran into serious cost and technical problems in developing the C-17, a four-engine jet whose high-pitched tail stands five stories high.

The problems prompted Congress to order the Pentagon to consider buying Boeing 747 jetliners or some other existing cargo jet as a substitute for the C-17. Defense Department officials also warned St. Louis-based McDonnell in late 1993 that they would end the entire C-17 program at 40 aircraft unless the company cut costs, improved delivery schedules and raised quality.

The threat worked. The last nine transports were delivered to the Air Force ahead of schedule, and McDonnell has slashed the time it takes to assemble the plane by half--to about 550 days--and expects to keep trimming that timetable to one year. The time needed to put finishing repairs on an assembled C-17 has plunged 80%, to 110,000 hours.

In late July, the Air Force put 12 C-17s through a rigorous, 30-day evaluation to simulate hundreds of missions the planes would be expected to handle. The plane posted “outstanding results,” Air Force Secretary Sheila Widnall wrote last month in a letter to Sen. Strom Thurmond (R-S.C.), chairman of the Senate Armed Services Committee.

Some Air Force officials are now saying privately that they do not want the Boeing 747 or any other commercial jet as an alternative, arguing that the C-17 is best suited to the special transportation needs of the military. However, the Defense Acquisition Board may still order some 747s next month because the Boeing plane costs about $140 million.

The C-17 was designed to carry large items, such as Army tanks and helicopters, and to land on short runways if needed. The C-17 can also maneuver on narrow Tarmacs and airdrop cargo out its rear ramp.

Earlier this year, Army officials bluntly said they did not want any alternative aircraft, saying the C-17 was “optimum” for Army needs. So far, 17 C-17s have been delivered to the Air Force, and the first operating squadron of C-17s is based at Charleston Air Force Base in South Carolina.

Those planes have flown several supply missions to far-flung locales such as Kuwait, but have yet to be used near combat zones, such as in Bosnia.

Vartabedian reported from Washington and Peltz from Los Angeles.