The Boeing Company
) has received a $2 billion follow-on contract from the U.S.
Department of Defense ("DoD") to help it to maintain its fleet of
246 C-17 cargo planes. Per the contract, the company will provide
logistics support to the U.S. military's C-17 transport planes for
the period fiscal 2013 through fiscal 2017. Apart from looking
after the maintenance of the aircraft, the company will ensure that
spare parts are available for the planes.
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Under the C-17 Globemaster III Integrated Sustainment Program
("GISP"), the company will provide support services, such as
forecasting, purchasing and material management for the C-17
aircraft. This Performance-Based Logistics ("PBL") program helps in
lowering the costs through economies of scale.
Under Performance-Based Logistics contracts, customers receive an
agreed level of system readiness instead of paying for a specified
number of spare parts. This approach has allowed the company to
apply innovative spares forecasting and modeling tools to maximize
aircraft availability while lowering costs.
The Boeing C-17 Globemaster III is a large military transport
aircraft. The multi-service C-17 can carry large equipment,
supplies troops directly to small airfields in harsh terrain
anywhere in the world. It can take off from a 7,600-ft. airfield,
carry a payload of 160,000 pounds, fly 2,400 nautical miles,
re-fuel in flight and land in 3,000 feet or less on a small unpaved
or paved airfield in day or night. It can also perform tactical
airlift, medical evacuation and airdrop missions.
The company has been providing C-17 aircraft that provides vital
military and humanitarian airlift capability. In June this year,
the company delivered sixth C-17 Globemaster III to the UAE Air
Force and Air Defense. Earlier in March, UK Ministry of Defense had
signed an agreement for one C-17 Globemaster III, bringing the
Royal Air Force ("RAF") fleet to eight.
Based in Chicago, Boeing Company is a premier jet aircraft
manufacturer and one of the largest defense contractors in the U.S.
The company's customers include domestic and foreign airlines, the
U.S. DoD, the Department of Homeland Security, the National
Aeronautics and Space Administration ("NASA"), other aerospace
prime contractors, and certain U.S. government and commercial
The Boeing Company is among the best-positioned in its sector due
to its balanced exposure to commercial aircraft and defense
equipment. With the gradual recovery of the global economy, we
believe freight and passenger traffic will improve going forward.
Also, the U.S. defense budget is skewed toward a number of
prominent Boeing programs. Overall, the growth momentum will be
maintained by its order backlog, planned production rate increases
and a globally diversified customer base.
However in the near term, headwinds over the global airline
industry along with expected cutbacks in the U.S. defense budget
loom large over the current valuation of the company.
Like its peer,
Erickson Air-Crane Incorporated
), Boeing presently retains a short-term Zacks #3 Rank (Hold) that
corresponds with our long-term Neutral recommendation on the