Boeing makes its business case for new Canadian fighter jet

Vincent J. Curtis

27 Oct 20

Block III Super Hornet best all round for economics and transition..

At a media webinar held on October 27th, Boeing laid out its business case for Canada selecting the Block III Super Hornet as the replacement fighter jet for the CF-18 Hornet.  In a nutshell, the Super Hornet meets all the RCAF operational requirements, offers a very high degree of backward compatibility with the current installed fleet, and Boeing plans on spending one hundred percent of the contract value in Canada, either through direct supply purchases or through offsetting purchase placement in Canada for Boeing’s other projects.

ITB, Industrial and Technology Benefits policy, is the Canadian government’s means of leveraging procurement, and the Boeing conference hit that policy point hard.  The policy requires companies awarded defense procurement contracts to undertake business activity in Canada equal to the value of the contract they have won.

Ottawa-based Doyletech Corporation outlined the ITB angle of Boeing’s proposal.  It estimates the forty year life cycle of the fighter program, including acquisition and maintenance, will cost C$61 Billion and create about 250,000 person-years of work in highly paid jobs.  All regions of Canada will benefit.

In particular, five of Canada’s largest aerospace companies will be subcontracted for work: CAE (Montreal), L3Harris Technologies (Mirabel), Peraton Canada (Calgary); Raytheon Canada (Calgary), and GE Canada Aviation (Mississauga).  Briefly, CAE will provide simulators and training; L3Harris depot and base maintenance; Peraton avionics repair and overhaul; Raytheon warehousing and supply chain services at Cold Lake and Bagotville and possibly avionics radar support; and GE engine maintenance and overhaul for the F414 engines.  These companies already have strong relationships with Boeing in Canada, and a Block III Super Hornet purchase would continue and extend those relationships.

Doyletech reports that in 2019, Boeing’s direct expenditures in Canada was C$2.3 Billion, an increase of 15 % since 2015.  Canada is one of Boeing’s top three supply locations outside the U.S. and virtually all of Boeing’s production in Canada is exported.  Boeing participates in Industry-University linkages and research networks across Canada.

Besides the direct and indirect work and economic activity of a Super Hornet acquisition, Doyletech estimates that municipal governments will reap $994 Million and provincial governments, $6.8 Billion, presumably in tax and services revenue over forty years.  The Federal government will recoup $8.5 Billion in revenue.

Doyletech’s assessment mentioned Boeing’s century long presence in Canada.  Because of Boeing’s already large investments in Canada, in every region, Boeing is a major player in every aerospace industrial cluster in Canada. Boeing buys a lot locally; and through its many contracts, including the C-17 Globemaster, CH-147F Chinook helicopters, Harpoon missiles, UAVs, and weapons system, Boeing has a track record of meeting its ITB commitments. 

EdC questioned Boeing on a number of fronts.  The Block III Super Hornet would be assembled in St. Louis.  This makes sense as the production line is already “hot” and the run of 88 aircraft is relatively short.  Offsetting work would be placed in Canada.

The “fly-away” or per unit cost was said to be tough to answer, and was not answered.  However, Doyletech did estimate that maintenance comprises 70 % of the contract.  A little math places the initial purchase cost at $18.33 Billion, or $208 Million per plane.

A major sales point for choosing the Super Hornet is the efficient and affordable transition from the “classic” Hornet.  There is no change in support structures required.  In addition, the Super Hornet is one of the least expensive fighters to fly, with verified U.S. flying costs of US$18.5k per hour.

When asked about offering the F-15X, Boeing was not surprised at the question, having received it repeatedly.  The short answer is the cost-benefit to Canada favors the Block III Super Hornet.  While Boeing would be happy to supply an F-15, if asked, the Super Hornet would work better on austere airfields.  Being designed for carrier operations, the landing gear is the more robust, and the aircraft has an arrester hook which can minimize landing distance with the right equipment.  There might be a need to modify support structures if the F-15 were selected.

Boeing did not respond to EdC’s question concerning the state of their relationship with the Trudeau government.  Canada was looking to acquire 18 Super Hornets to fill a capability gap as Canada transitioned from Hornets to the new fighter.  Boeing got into a trade dispute with Liberal favorite Bombardier over the latter’s commercial jet business, and the Trudeau government cancelled the order, labelling Boeing as economically harmful to Canada.  This was how purchasing used Australian F/A 18 Hornets originated, out of the reopening of the capability gap.  Bombardier has since exited the commercial aircraft business, eliminating that point of contention.  Given Boeing’s current investments in Canada and its solid ITB record, which it emphasized in the webinar, the Trudeau government ought to have softened its position.  But, no response.

Boeing could shed no light on the acquisition timeline, saying only that 2025 is when delivery is expected and that they would be able to meet that date without trouble.

The business case for a Block III Super Hornet looks impressive.  Questions that remain open are whether RCAF brass has its heart set on stealth or not; given the high costs of stealth, will the government spend the bucks on whiz-bang technology at the behest of the brass; and is the Prime Minister still personally venomous towards Boeing?

Lockheed-Martin, which would supply the F-35, also has wide and deep investments in Canada, and Canada in the F-35 program.  Lockheed-Martin also has a track record of meeting ITB.  What is its business case for the F-35?

A wild-card is the Saab Gripen F proposal.  How would Saab meet Canada’s ITB requirements?

Boeing delivered its business case.

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