Trump Threatens Boeing Air Force One Contract After CEO Criticizes Trade Policies

In what could be a preview of things to come, Donald Trump today threatened The Boeing Company with the cancellation of a $3 billion U.S. Air Force contract to replace the fleet of Air Force One aircraft.

Although aides portrayed the threat as a budget move, it might have been spurred by criticism of Trump’s planned trade policies, which involves high tariffs on imported goods.

While Trump transition officials said the tweets were simply evidence of the kind of cost-cutting movies promised by the President-elect, they were posted online just 22 minutes after the publication of a Chicago Tribune story that quoted Boeing CEO Dennis Muilenburg criticizing Trump’s anti-trade stance.

In the article Muilenburg, whose predecessor at Boeing’s Jim McNerney is an economic adviser to Trump, suggests that the President-elect “back off” from his trade position.

Trump’s Tweet was inaccurate. He claimed the contract costs had ballooned to more than $4 billion for “a brand new 747.” However, Boeing is actually building two new 747-800’s to replace the pair of 747-200’s now in use for presidential travel. The planes are set for delivery in 2024.

It not clear where Trump got the figures the “more than $4 billion” figure. Official U.S. government reports place the total cost significantly lower.

In January, the Pentagon announced that Boeing had won a contract to begin work on replacing the current Air Force One fleet. That initial contract, for preliminary research on the new planes, was priced at $25.8 million, and the Defense Department awarded a second $127.3-million contract in July for Boeing to develop “interior, power and electronic specifications” for the planes.

The Air Force, however, has allocated $2.9 billion for the endeavor through 2021, according to U.S. budget documents, while the estimated total costs, according to a March 2016 Government Accountability Office report, amount to about $3.2 billion.

The aircraft cost a great deal more than a commercial 747 because of numerous special modifications required for presidential use. The aircraft are flying command posts in times of emergency.

Boeing is the only domestic manufacturer capable of building replacement aircraft for the presidential fleet. Shipping the jobs overseas would not be a viable option for Trump, who has criticized U.S. companies for doing the same thing.

The only other company capable of constructing such a jet would be French company Airbus — an unviable option, John Haigh Sr., a former chief steward of Air Force One, told The Atlantic, due to the “highly classified decisions” involved in designing such a plane and the image crisis that could result from building the President’s plane abroad.

Trump’s public threat against Boeing over a contract is highly usual, especially for a president elect who has not yet take office. But, the New York billionaire and Vice President Elect Mike Pence have assume a high profile on economic and trade issues during the transition period.

They intervened to partially reverse a decision by Carrier Corporation to move more than 2,100 jobs from Indiana to Mexico in return for $7 million in subsidies from the state, where Pence is governor.

It is believed that Carrier’s parent company, United Technologies Corporation (UTC), agreed to the deal, at least in part, to avoid endangering the significant amount of business the company conducts with the federal government.  UTC is a major defense contractor, producing missiles and aircraft systems.

The move was applauded by Trump’s supporters for keeping jobs in the United States, while it was condemned by others. Former Alaska Gov. Sarah Palin condemned the package as crony capitalism.

How Trump’s economic and trade policies will affect the space sector remains to be seen. Large aerospace companies such as Boeing, Northrop Grumman and Lockheed Martin are major contractors for the civilian and defense space programs.

Their life could become more difficult if the Trump Administration intervenes in contract awards and the president calls the companies out publicly for business decisions they make. NASA and the U.S. Air Force could find their ability to reward contracts and follow through on programs hampered by administration interventions.

There’s also the issue of freedom of speech. Company executives should be able to express their views on proposed policies without a president elect threatening to cancel contracts. Trump also has threatened to tighten libel laws, moves widely seen as a way of muzzling media criticism of him.