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America’s $55 billion bomber battle heats up

June 12, 2015, 8:57 PM UTC
Courtesy of Northrop Grumman/YouTube

It could happen in August, or maybe in late July. Depending on who you ask, it could even happen before the end of this month. No one—at least no one who’s talking publicly—seems to know exactly when the U.S. Air Force will award a $55 billion development and procurement contract for the branch’s next-generation long-range bomber.

All we know is that sometime soon, Air Force brass will select one of two competing, top-secret bomber plans for its Long-Range Strike Bomber (LRS-B) program. The winning design will become America’s new stealth combat jet.

It’s a decision that could end up costing taxpayers far more than the $550 million per aircraft the Air Force is currently quoting for its 80 to 100 bombers it plans to launch starting in the mid-2020s. Beyond that, some analysts think the decision could trigger a shake-up in the military aircraft industry, forcing one of America’s three combat jet makers out of the space entirely. “It’s the single biggest defense program that’s going to be offered for awhile,” says Capital Alpha Partners Managing Director Byron Callan, which makes it vitally important to aircraft makers vying for the business.

Even with so much at stake—for taxpayers, shareholders, the defense industry, and U.S. defense strategy—the LRS-B program has received relatively little attention outside of policy blogs and defense industry trade press. Although most expect that to change in the coming weeks as the Air Force gets set to announce whether Northrop Grumman (NOC) or a collaboration between aerospace giants Boeing (BA) and Lockheed Martin (LMT) will seize what could be the Pentagon’s last major combat jet buy for a decade.

The Air Force’s case for why it wants new stealthy, long-range heavy bombers is straightforward: Its current bomber fleet ranges are old, air defenses have come a long way since the development of America’s current fleet of B-2 stealth bombers, and maintaining long-range aerial strike capability is key to both America’s nuclear deterrent strategy and its superpower status.

However, dig into the political and competitive environments in which such an aircraft might be developed, and things become a bit more complex. The LRS-B will replace a number of aging Air Force bombers, including 76 Boeing B-52s (averaging 52 years old), 63 Boeing B-1 Lancers (averaging 27 years old), and 20 1990s-vintage B-2 Spirit stealth bombers from Northrop Grumman that make up America’s current force. Unlike previous aircraft, the LRS -B will be expected to perform roles previously carried out by a range of bombers built and serviced by multiple companies.

From a strategic and logistical standpoint, the consolidation of different platforms into one aircraft makes sense. From an industry perspective, it concentrates Pentagon funds that previously were spread across multiple contractors. But, it has also set the scene for a tense lobbying war on Capitol Hill and at the Pentagon, while sparking concerns that the Air Force’s decision could vastly reduce America’s military-industrial base.

Richard Aboulafia, vice president for analysis at aerospace and defense consultancy Teal Group, believes that either Northrop Grumman or Boeing will have to make some tough decisions regarding the future of its combat aircraft design shop, depending on who wins the LRS-B business (with its current $400 billion F-35 program secure, Lockheed Martin is somewhat insulated from an LRS-B loss). With no major aircraft procurement program on the horizon, one of the three major defense aircraft primes could be forced to pare back its combat jet design business or even fold it altogether.

“It’s not automatic, it might take a year or it might take two,” Aboulafia says. But, with no major new aircraft business forthcoming, “something has to give.” Exactly what might give remains to be seen. If the Boeing/Lockheed team loses, Boeing could try to land the LRS-B by acquiring the much smaller Northrop Grumman company, Aboulafia says. If Northrop Grumman loses, it may have to exit the combat jet business entirely, at which point it might come under investor pressure to sell off other units as well.

Capital Alpha’s Callan doesn’t believe a loss of LRS-B will necessarily trigger a seismic upheaval in the combat aircraft industry, though he acknowledges the above scenarios are possibilities. “But there are still a lot of moves on the chess board,” he says. “This is obviously the biggest program out there, but it’s not the end of the line for new aircraft development programs.”

While details of their competing designs remain classified, Boeing and Lockheed are hoping to impress officials by emphasizing the size of their combined industrial base and past experience managing major aircraft manufacturing programs, including ongoing programs like the F-35 and Boeing’s KC-46 aerial tanker.

Meanwhile, Northrop Grumman points out that both the F-35 and KC-46 programs have been plagued by cost and schedule overruns and will only serve as a distraction from the new bomber. Unlike its competitors, the LRS-B would be Northrop’s only major aircraft program and its primary focus. Company reps also haven’t let anyone forget it previously built the B-2, the Air Force’s only strategic stealth bomber to date.

For its part, Air Force acquisition personnel say they will make their decision based on the merits of each individual design only, regardless of considerations of present or future industrial base. Whatever that decision is, the Air Force will then have to defend it’s choice as well as the program itself as sequestration budget caps put the LRS-B squarely in competition with several other Pentagon programs vying for limited defense dollars over the next decade.

“I do think there’s some concern on the part of the Air Force as to whether people really understand the budget rationale for it,” Callan says. “I don’t know if Congress gets it, and I’m not sure the public gets it either.”

Indeed, it’s difficult to run an effective PR campaign for a program that costs $550 million per aircraft and that taxpayers aren’t allowed to see. But absent something highly unexpected, Aboulafia says, the LRS-B program will survive the political process and produce both a bomber and generate as much as $100 billion for either Northrop Grumman or Lockheed/Boeing.

“Without political opposition the budget stays on track, and I don’t see a lot of push back for this budget,” he says. “Absent an unexpected budget downturn, this happens.”