Psst! Hey, Pentagon! Has Boeing
That's a rhetorical question. Fact is, we already know that Boeing does have a deal for the U.S. military. Specifically, the aerospace giant has landed more than $312 million in contracts to lease its ScanEagle unmanned aerial vehicle (UAV) to the Navy and Marine Corps over the past two years. Boeing booked its latest contract, a $250 million deal to provide a new UAV model to the U.S. Special Operations Command (SOCOM), in April.
Yes, that seems to be the deal. Taking a page from Ford's
Why the sudden shift in strategy? Three reasons:
Three reasons to do it ...
Speed: The U.S. government is a notoriously tricky beast to do business with. Once your product has been approved for purchase, you're golden. But getting to that point is considerably more than half the battle. It can take upwards of a year for a branch of the military to get permission to buy a UAV. But rent it? Easy peasy.
Case in point: SOCOM's announced plans to acquire 20 of Boeing's new A160T "Hummingbird" unmanned helicopter. The bulk of the choppers won't arrive until 2012 or later, but three prototypes could be in action in an "undisclosed location" (I'll give you three guesses where) by next year -- and it appears that the way this deal, too, got done, was by SOCOM entering into a lease contract.
Another example. You may have heard that there's a bit of a kerfuffle going on in the waters off Somalia. Rowboat-borne pirates and such? Well, to help tamp down the dilemma, the U.S. Navy contracted with Boeing to lease, not buy, a ScanEagle UAV and fly it off the deck of the USS Bainbridge. Having that capability where it was needed gave U.S. Navy Seals situational awareness that allowed them to score three KIAs against the pirates who hijacked the Maersk Alabama and rescue the ship's captain, Richard Phillips, unharmed. You can mark Capt. Phillips down as one vote in favor of leasing UAVs.
Try before you buy: The U.S. military, along with the Israelis, has become a first-mover in the use of military UAVs. But not everyone else knows how to use the things, or even knows whether it needs them. In this respect, leasing UAVs could well morph into a "try before you buy" program for foreign militaries -- juicing honest-to-goodness sales of UAVs for Boeing. Boeing puts the total value of UAV leasing market at $10 billion within 10 years,
Great idea, run with it: Boeing has a history of pioneering lease deals to the military (albeit not always with the result intended.) According to Bloomberg, as of today, it has the nascent UAV lease market all to itself, as none of Lockheed Martin
And one really big reason not to
But might that fact be instructive? There are significant downsides to the leasing business, after all. Not least, the "good is bad" dilemma -- if these contracts prove unprofitable, that's obviously not good for Boeing. But it could also be bad news if this business proves too profitable. The very sweetheart nature of the company's offer to lease fuel tankers to the Air Force is what first got Boeing in trouble back in 2003. But to this Fool's eye, the biggest risk Boeing takes in forging ahead in the leasing market is ...
Boeing owns the UAVs and employs the pilots who "fly" them. In a very real sense, it's responsible for what these UAVs do in the service of its clients.
Now, it's true that Boeing only leases unarmed UAVs. When the military needs to start a shootin' war, it does still go out and buy the things -- generally, Hellfire missile-armed Predator and Reaper UAVs manufactured by privately held General Atomics. In this sense, Boeing has clearly taken a step to limit liability in the tasks it undertakes for the military.
And while I'm certain that the Boeing has its very sharpest lawyers working to limit liability in other ways, there's always the risk that Boeing will slip up and "pull a Blackwater." Fly a drone into an airliner or crash-land it in a schoolyard. That's legal liability, and bad press, that Boeing surely doesn't need.
Don't do it, Boeing. Don't take that risk.
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