Thursday, December 8, 2016

Understanding Trump’s Air Force One Political Theater - By Thomas Lifson

Using the same skill set he employed during the presidential campaign, President-Elect Trump has crafted another public drama around a storyline of his choosing.  A highly predictable story arc – a series of subplots that unfold as time passes – is in store for the public.

Trump has done this sort of thing before.  And unlike any previous president, he is an incredibly successful impresario/performer in episodic reality television.  A substantial fraction of the electorate follows politics at the level of reality television, and Trump knows how to reach them.

His early-morning tweet of December 6 was an attention-grabbing opening scene:

His tweet and subsequent Trump Tower lobby comments about the Air Force One contract ignited a massive amount of coverage and comment.  But Act One of the story, as seen by the public Trump is targeting, is that he is criticizing waste in government spending and picking on something that is actually a perk of the presidency. 

Trump’s use of the word “cancel” in his tweet was his customary dramatic start to a negotiation, letting the other side know that it has to give something in exchange for what it thought it already possessed.  While the media nattered over its appropriateness and even legality, the public understood that Trump was calling on Boeing to do better.

The day after his tweet, Trump kept the storyline alive by confirming the commonsense interpretation of what he was up to with the use of the word cancel:

"Well I think the planes are too expensive," Trump told NBC host Matt Lauer on the "Today" show. "I spoke to a terrific guy yesterday, the head of Boeing, and I think we're going to work it out, but you know, that's what I'm here for — I'm going to negotiate prices."

Here is why I think Trump is going to be able to save money and in addition accelerate the project’s delivery date.  Boeing first responded to the next CEO of its largest customer and revealed the current economic stakes:

Boeing on Tuesday responded to President-elect Donald Trump's criticism over the cost of a new Air Force One plane, saying the contract is actually for $170 million.

The sunk costs so far do not exceed $170 million, mostly spent on preliminary planning and engineering on a four-billion-dollar (eventually) contract.  The sunk costs so far are much less than the federal government squandered on Solyndra, by comparison.  This is the perfect stage for Trump’s people to come in and put his cost-conscious philosophy to work.  Trump’s views are being brought to bear early in the process.  There is no half-finished hulk in a hangar at Paine Field in Everett, Washington that would need to be abandoned.  Quite the contrary: Under this contract, Boeing and its contractors are mapping out a project that will take eight more years, because a lot of equipment has to be imagined, scoped out, planned, and engineered, and then made to work in concert with a lot of other engineering underway.  It’s a huge task, and inevitably, problems arise.  That is how progress is made: by learning from failures.  But it is slow and expensive.

The airframe itself is the least of the cost.  The extensive capabilities demanded of a flying White House is what is so expensive.  While I am not knowledgable about the specifics of the project, we do know already that a project like Air Force One probably is not being conducted under strict budget discipline.  When you push the state-of-the-art, incremental improvements tend to get very expensive.  Often one can get 90% of the performance for a small fraction of the price of the most exotic, custom-engineered new trailblazing technologies.  And it is understandable that nobody wants to pinch pennies when Air Force One’s capabilities are involved.

Under a regime such as this, contractors, including Boeing, get to develop potentially very valuable new technologies on the taxpayers’ dime.  This, incidentally, is the sort of thing Airbus claims is a subsidy to Boeing. 

That is why two airplanes can cost four billion dollars or more.

My guess is that Trump wants to use the basic approach he used when he saved the foundering Wollman Rink project in Central Park.  Instead of the advanced technology chosen by the city’s officials (Freon circulated in expensive and fragile copper pipe – in the name of energy savings), Trump brought in much cheaper established technologies (circulating brine) that used a little more energy but were reliable.  Trump also got the advice and help of the best people in the business of building ice rinks.  Trump brought in the project in four months and 25% under budget, not the two years the city had planned for its next attempt to finish the rink six years after it had been closed for renovations.

The new Air Force One is incomparably more complex than an ice rink, but Trump’s approach to the cost and completion issues of advanced technologies is likely to draw on the pattern of action he displayed at Wollman. 

I would assume that Trump’s people who review the contract and negotiate with Boeing are going to want to hear the arguments against using more established technologies that are off-the-shelf or cost-effective modifications of existing components and systems.  There may be ways of redefining capabilities that are currently demanded.  For instance, the specifications for this Air Force One reportedly demanded four engines in the name of reliability. 

But the new-generation high-thrust engines are so reliable that old restrictions on twin-engine flight are disappearing.  Twin-engine airliners routinely fly over vast empty oceans many times a day.  The era of four-engine airliners is closing, with the 747-8i and Airbus 380 both languishing as their backlogs shrink.  There would be no economic advantage in substituting a Boeing 77W or 787-10 for the 747 frame, since the four-holers are available and are being discounted in order to move the metal, as they say in the industry.  But there may well be other specifications that safely could be relaxed.

If the Trump administration follows this approach of using more existing systems and weighting cost and speed more heavily than seems to have been the case to date, it could set up a great long-term story: bringing in the new-generation Air Force One not just on time and on budget, but ahead of the old schedule for substantially less money.  If this is the approach taken, expect Trump to highlight every step of the process, perhaps even visiting the Assembly Building to thank the workers building the plane and providing irresistible images.

Air Force One is a potent symbol of the nation and the presidency, right up with the White House.  Donald Trump understands the power of symbols, and he consciously or intuitively grasps that a whiff of heroism attaches to the plane in popular culture.

In his own life, Trump has demonstrated a grasp of the symbolic power of a personal airplane as a branding device.  The Trump Organization flies a fleet of private jets, of which the 757 nicknamed Trump Force One is the flagship.  This documentary from the Discovery Channel is actually instructive for understanding how Trump runs his private airline, demanding a lot and employing people dedicated to getting it right and on time.

This dramatic storyline of Air Force One is exactly what is needed to change the behavior of Pentagon weapons buyers.  They need to weigh costs more heavily into the equation and eschew all the fun of pushing the state-of-the-art.  New procedures and other changes from above are one thing, but getting buy-in from the operating staff is important.  The Air Force One model could become a very valuable tool in changing the culture of weapons procurement.  In addressing military culture, which values leadership by example, Trump’s use of the president’s private craft as the example of how to wring out costs is sheer genius.  If this all plays out as predicted here, The Air Force One Story will be far more than a personal media stunt; it will serve as an effective tool of reform of our military.

Cost savings on Air Force One: maybe a hundred million to a billion dollars?

A stronger military delivering weapons systems on time and under budget: priceless.
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