Not Content To Stop With Air Force One, Trump Is Now Going After The F-35
If Trump’s tweet and subsequent commentary about Air Force One’s bloated price tag didn’t scare all defense and government contractors, his tweet about the F-35 should frighten them beyond belief.
As I have previously detailed, at an estimated $1.5 trillion dollars, the F-35 is perhaps the biggest defense program in the US DoD’s budget, and unsurprisingly, it is far behind schedule and way over budget. But the worst part about the F-35 is that it just can’t do the job it was designed for. Essentially a stealthy bomb chucker with a little bit of maneuverability, air-to-air capability, and a lot of high-priced avionics, it doesn’t even beat the jet its supposed to replace (the F-16) in within-visual-range engagements, and is almost totally reliant on its stealth to avoid them.
All of this begs the question – why didn’t the DoD instead choose to extend the F-22 line, and build a stealth fighter/bomber with more range and payload, scrapping the maneuverability requirement which held the plane’s performance back?
This morning, President-elect Trump turned his tweeting attention from Air Force One to the F-35 program, as seen below:
The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.
— Donald J. Trump (@realDonaldTrump) December 12, 2016
However, this is hardly the first time Trump has mentioned the F-35’s bloated cost and underperformance. Over a year ago, Trump threatened to cancel the F-35 when his campaign was just beginning, Back in February, Trump detailed his objections to the F-35 on the campaign trail, and Trump continued his threats to cancel or amend the F-35 program throughout his campaign. Clearly, his objections have not disappeared now that he has won.
As ZeroHedge explained, Lockheed’s shares dumped 3% immediately after the tweet, and are currently down even further, approximately 5% on the day, at ~246. If the mere suggestion of the F-35 program being amended by a Trump administration can move the share price that much, you can see how massively important (and profitable) the program is to the defense giant.
To those like Richard Abdoulafia who would say that Trump is just “talking out his ass”, or that he is clueless to the specifics of aviation, you should take a closer look into Trump’s past. Trump has a history not only of purchasing and maintaining expensive jumbo jets and helicopters for his own personal fleet, he’s also owned an airline, so its not as though he is clueless on the topic. As military aviation expert Tyler Rogoway explains, Trump prefers to purchase and operate used versions of large aircraft on the cheap, and pay the higher maintenance costs associated with said aircraft. Above all else, Trump is concerned not only with the size and optics of his fleet, but with getting the most bang for his buck.
…Trump does actually know about owning and operating large aircraft. At one time he owned an airline. That didn’t end well. Since then he’s continued to own a small fleet of personal aerial chariots. For decades the centerpiece of that fleet has been “Trump Force One”—second-hand Boeing airliners converted into lavish flying mansions.
Why Donald buys these older airframes is pretty clear, he sees value in size over efficiency, whether that be a fleet size or the physical size of the aircraft. In terms of wealth: it takes far more up-front capital to purchase new aircraft than it does to buy old ones, and you can get a lot bigger jet for the money if you are willing to buy one that is well broken in. And that dynamic is supersized when it comes to old fuel-guzzling airliners turned VIP aircraft as few people want to be burdened with the cost of operating such a machine.
Regardless of his motivations, a very clear truth emerges—Donald does know about operating and owning large aircraft, especially aging ones.
As I previously stated, Trump has put all government contractors on notice, and the Air Force One tweet was a shot across the bow designed to send a message to defense contractors…
Hopefully, Trump’s conduct will keep government contractors’ heads on swivels, and wary of the repercussions of overbilling on government contracts for as long as he is president. Still, our government spends close to $4 trillionannually, and Trump cannot be everywhere at once. Don’t be surprised when reports of more over-budget, behind schedule government programs appear during his presidency.
…which was a sentiment also shared by Rogoway’s subsequent analysis.
This new Air Force One deal is nothing compared to the failed Littoral Combat Ship, or the too-big-to-fail F-35 Joint Strike Fighter—among many others. But they’re all on notice now, because the conclusion we’re coming to is the same conclusion all the head honchos of the big defense contractors were making yesterday morning as they sipped their coffee and glanced at the news.
Though right now Trump’s rhetoric only amounts to tweets and speeches, in a little over a month, Trump will be president, and in the position to truly make a difference. And, if government and defense contractors don’t feel threatened by Trump’s threats, the market’s reaction to Trump’s actions will force them to listen.
Keep a close eye on the share prices of defense contractors; they will be the ultimate indicator as to how much Trump is able and/or willing to follow through on his plans to curtail excessive spending on ineffective defense projects.