Boeing Refurbishes 500th Super Hornet Fighter Jet, Makes Plans for Looming Dubai Air Show

By William Patalon III
Managing Editor
Money Morning

The Boeing Co. (BA) announced that it's delivered its 500th modified F/A-18 Super Hornet jet fighter-bomber to the U.S. Navy from the company's Aerospace Support Center at Cecil Commerce Center, located near Jacksonville, Fla.

Boeing also detailed its plans for the upcoming Dubai Air Show, which opens Sunday and runs through to Thursday. It has emerged as one of the world's key commercial air shows. And Dubai has emerged as a market investors must keep watching as the Middle Eastern nation continues to expand its sphere of economic and financial influence.

The "Super" New Hornet

The Cecil airfield - a former U.S. Naval air station - functions as a "drive-in/fly-out" facility that allows the modified fighter jets to be made available for deployment as soon the upgrade and modification work is finished.

To modernize and overhaul the jet fighters, Boeing and prime contractor Northrop Grumman Corp. (NOC) have been installing upgraded avionics and making key technological and structural enhancements to F/A-18s since the center opened in September 1999.

With more than 900 F/A-18s in U.S. Navy and Marine Corps squadrons, there's still plenty of modification work to be done. The modifications bring the older planes up to par with the more-recently built "marks," or versions, of the Super Hornet. Inspectors look for cracks, corrosion and fatigue to determine if the life of the aircraft can be safely extended. The oldest and most heavily used Hornets are in the midst of an extensive inspection process aimed at boosting each aircraft's lifespan from 6,000 to 10,000 flight hours.

Newer Hornets at Cecil Field receive upgraded display systems, miniaturized global-positioning system (GPS) receivers, helmet-mounted cueing systems and more advanced radios. The modifications give the Hornet improved communication and information systems and allow the F/A-18 strike fighter to carry the latest weapons, including the newest missiles and "smart bombs."

In January, Boeing's Cecil Field facility will begin modifying F/A-18 C- and D-model aircraft for the U.S. Navy Blue Angels flight demonstration team, which has flown the A- and B-model Hornets since 1986.

"Cecil Field is vital to the health and performance of the U.S. Hornet fleet," said Mike Rudolf, Cecil Field F/A-18 programs manager. "We've proven for almost eight years that we can successfully perform modifications and repairs and return aircraft to the customer very quickly. That's important for the [fighter pilot] in the field who depends on us to deliver improved capability. The bottom line is: We get the jets out on time."

The cost of new defense programs are soaring into the stratosphere. Aircraft programs are among the most expensive of all. As these costs rocket, retrofitting and modernizing existing aircraft has become a key strategy embraced by all branches of the U.S. military so that each service can stretch its budget allotments by keeping weapons systems in service for many additional years - if not for additional decades.

Indeed, consider the case of the U.S. Air Force Boeing B-52 Stratofortress, a high-winged strategic jet bomber that was brought into service in the middle 1950s. The B-52, also known as "The BUFF" - for Big Ugly Fat Fellow - has been retrofitted and modernized a number of times, which is the main reason it's still a frontline aircraft - even though it's much older than most of the men who fly them.

The company's Cecil air station facility has reduced its work force in recent years as Navy programs on other aircraft have wound down, but Boeing is pursuing other work for the center. One possible source of work: The V-22 Osprey, the so-called "tilt-rotor" aircraft that the U.S. Marine Corps flies.

"We're going to continue to grow Cecil Field," Don Davis, Boeing's senior manager for naval integrated logistics support systems, said in a statement.

Demonstrations at Dubai

At the Dubai Air Show, Boeing intends to highlight a range of the products and services that have been contributing to the parent company's record sales. The show will spotlight a wide range of offerings across Boeing's commercial and defense divisions. The show opens Sunday and runs through to Thursday.

"Boeing is proud of a partnership with the Middle East that stretches back more than a half century, and we are committed to meeting the needs of our customers throughout this fast-growing region and to further developing and expanding our long-term partnerships," said Tom Downey, a Boeing senior vice president.

Boeing has long considered the Dubai Air Show to be one of the world's premier aerospace exhibitions, which is why the firm said the exhibition will be well-staffed with people, products and services.

On the defense side, the company said it will showcase the capabilities of such fighter planes as the F-15E Strike Eagle and F/A-18 Super Hornet. Static displays will include the regional debut of Boeing's 737 Airborne Early Warning and Control aircraft, in addition to the E-3 AWACS, the B-1B Lancer jet bomber, the C-17 Globemaster III military transport aircraft and a UAE Land Forces AH-64A Apache attack helicopter. On the commercial side, Boeing customer Royal Jet will display a Boeing business jet.

Boeing's schedule begins on Saturday, with a press conference featuring its airliner division. On that same day, Boeing's Integrated Defense Systems unit, with its Saudi Arabian partner Alsalam Aircraft Company, will co-sponsor the Middle East Air Chiefs conference.

On Tuesday, Boeing Capital Corp. will host a financiers and investors conference, recognizing Dubai's role as an emerging center for global finance.

Issues With Emirates Airlines

Boeing executives may well use this time to try and overcome an emerging problem with the Dubai-based Emirates Airlines, a sought-after customer. Emirates says the U.S. airliner maker may fail to land a 100-plane contract worth $20 billion because of the airline's belief that the biggest version of the much-hyped Boeing 787 Dreamliner lacks sufficient "thrust," or power, from its General Electric Co. (GE) engines.

According to a report by the Seattle Post-Intelligencer and Bloomberg News, Boeing's 787-10, a 310-seat version of the under-development Dreamliner, doesn't yet meet Emirates' needs, airline President Tim Clark said. The Dubai-based airline would operate the plane to destinations including Los Angeles.

"It needs more thrust," Clark told Bloomberg during an interview in Cannes, France. "It's not a view shared by Boeing, but my instinct tells me it needs more."

Meanwhile, Boeing nemesis Airbus SAS got an order from International Lease Finance Corp. for 20 A350 widebody jets, fewer than analysts expected and smaller than the company's contract for Boeing's 787. Even so, the deal is worth $4 billion at list prices, sources told Bloomberg.

Deals with the Los Angeles-based International Lease Finance are closely watched as the leasing firm is viewed as a bellwether customer in assessing the popularity and potential success of new models of aircraft. The firm placed an order for 12 A350s in 2005 before Airbus voided the deal by modifying the airplanes. ILF agreed to buy 52 787s in June, following an initial order for 22 in 2005.

Emirates is weighing the 787-10 against the Airbus A350-900 and may order as many as 100 planes, a deal with a potential value of $20 billion at list prices, Clark said. Concern about GE's GEnx engine might mean that the carrier won't reach a decision by the time of the air show, where it had originally intended to make an announcement, he said.

Rick Kennedy, a spokesman for the Fairfield, Conn.-based GE, told Bloomberg that the company was "gratified Emirates is interested in the Genx. [But] at this juncture, it's premature, because the 787-10 hasn't been formally offered to airlines."

Boeing has more than 700 orders for the Dreamliner, valued at about $120 billion. On Oct. 10, the first delivery was pushed back by six months after supplier problems and parts shortages made it clear the original schedule was unrealistic.

All Nippon Airways Co. will get the first plane in November or December 2008.

While the delayed 787 still will be delivered five years before the Airbus A350 - a controversial program that's undergone five revisions - Emirates' Clark said the Airbus airliner has benefited in terms of design, aerodynamics, materials and propulsion.

"The A350 is now an airplane we're prepared to study seriously," Clark said told Bloomberg. "They listened, and from what we see of the A350, now it's an essentially good airplane, and it matches the 787 offering from Boeing."

Rolls-Royce Group PLC (RYCEY) offers engines for both the A350 and the 787, and has a more powerful entrant whose thrust output may better satisfy the Emirates Airlines' requirements, Clark said. Still, the CEO said he would prefer to have a choice. However, GE and Airbus have yet to reach an engine-supplier agreement.

Boeing's Buyback and Dividend Payout

Boeing last week announced plans to buy back as much as $7 billion of its common stock, the latest leg of a share-repurchase program under which the aerospace company has bought back $8 billion worth of its shares since the program was resumed in 2004.

The aerospace-and-defense-contracting company also declared a regular quarterly dividend of 35 cents a share, payable Dec. 7 to shareholders of record as of Friday (Nov. 9).

Boeing is the No. 1 U.S. exporter, and is a stock that several of Money Morning's contributors and advisory panelists have identified as one of the globally focused U.S.-based companies investors might want to research further [In fact, to see a copy of our special investing research report, "Investments for a Weak Dollar World," one of several of our research reports that list Boeing among the U.S.-based companies that will really benefit from the falling greenback, please click here. The report is free of charge].

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About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press.

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