The General is out, and the A-10 Warthog may be back in.
That's the upshot this month, in the wake of last week's news that U.S. Air Force Major General James Post has lost his job. At an Weapons and Tactics Review Board meeting at Nellis Air Force Base in Nevada in January, Gen. Post (in)famously threatened: "If anyone accuses me of saying this, I will deny it [but] anyone who is passing information to Congress about A-10 capabilities is committing treason."
In so saying, the vice commander of Air Combat Command aimed to mute internal criticism of Air Force plans to retire the A-10 Warthog in favor of replacing the aircraft with newer, shinier warplanes such as Lockheed Martin's (NYSE: LMT) F-35 stealth fighter jet. Instead, he sparked a Congressional investigation of whether he had violated Art. 10, Sec. 1043 of the U.S. Code, which guarantees service members the right to speak openly to Congress.
Last week, this investigation culminated in an Air Force Inspector General's finding that Post had indeed violated "the U.S. Code and DoD Directives, whether that was his intention or not." As a result, ACC head Gen. Hawk Carlisle issued Post a letter of reprimand and removed him from his position at ACC.
In furtherance of a healthy debate
The Air Force's decision received immediate applause from Congress, where Sen. Kelly Ayotte, for one, had decried interference with airmen "exercising their lawful right to communicate with Congress." After all, says Ayotte, "if the facts are on the Air Force's side regarding its efforts to prematurely divest the A-10, what does the Air Force fear?"
Which raises the question: What are those facts?
Fact: The A-10 Warthog has been called "the best CAS platform mankind has ever designed," "the hands-down best 'tank buster' aircraft in the American military," and "an unstoppable commercial Learjet with a full-automatic cannon in its nose and an iron bathtub surrounding the cockpit."
Fact: The A-10 Warthog is bought and paid for, and costs only $17,716 per combat hour to fly, according to Air Force data. In contrast, each Lockheed Martin F-16 costs $34 million to buy new, while Lockheed's F-35 costs stealth fighter costs well in excess of $100 million per unit -- and is headed for a total program cost estimated at $1.5 trillion.
Fact: At less than $18,000 per combat hour, that makes the A-10 21% cheaper to fly than the F-16 (which carries half the ammunition load for a smaller cannon). The A-10 costs about half what it costs to fly an F-35, and carries six-and-a-half times more ammo.
Fact: The F-35 -- the plane the Air Force ultimately intends to replace not just the A-10, but essentially all of its fighter jets -- carries a smaller gun, with less ammunition ... and cannot even shoot it. Air Force sources suggest the F-35's cannon won't be ready for operational missions before 2019.
What it means to investors
But there's still one more fact to consider: Because the A-10 Warthog is "bought and paid for," and no longer in production, it lacks a strong corporate backer to lobby for its retention in Congress. Sure, Northrop Grumman (NYSE: NOC) makes some millions a year keeping the A-10 Warthog fleet maintained and operable. Boeing (NYSE: BA) makes a few millions more upgrading wings on the A-10 fleet.
But these paltry millions don't compare to the billions of dollars a company like Boeing might win from convincing the Air Force to buy F-15 Strike Eagles, for example, to replace the A-10 Warthog's mission. Still less do they compare to the hundreds of billions (ultimately reaching into the trillions) in revenue that Lockheed Martin stands to gain from a wholesale replacement of all combat aircraft in the Air Force's arsenal with F-35 stealth fighters.
Now, as investors, we're trained to "follow the money." Ultimately, this money will flow to companies, lobbyists, and ultimately Congressmen who advocate killing the A-10 and replacing it with newer, shinier, and more expensive aircraft. Why? Because the sooner the A-10 Warthog is retired, the sooner Lockheed Martin can get monies diverted for A-10 maintenance diverted to purchases of new F-35s -- helping it to scale up production of that aircraft, and improve that aircraft's weak profit margins. Similarly, less money tied up in the A-10 means more funds available to buy EA-18G Growlers and F-15 fighters from Northrop and Boeing.
Long story short, while opposition to the A-10 Warthog cost one general one job last week, even in his defeat, General Post hasn't been forced to retire.
But the A-10 Warthog ultimately will be.
(Tune back in to The Motley Fool tomorrow, for some ideas about what might replace the A-10 Warthog. Hint: It won't be an F-35).
Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.