The A-10 Thunderbolt II Warthog is "the only airplane in the Air Force specifically designed for close air support."
"The A-10 is the best CAS platform mankind has ever designed."
It's "an unstoppable commercial Learjet with a full-automatic cannon in its nose and an iron bathtub surrounding the cockpit."
-- Mother Jones
And now the Air Force wants to replace it.
Retire and replace? Or replace, then retire?
Last month, the Air Force shocked A-10 supporters when it rolled out a plan to retire the A-10 fighter-bomber ahead of schedule, in hopes of accelerating deployment of new F-35 stealth fighters from Lockheed Martin (LMT 2.25%) instead. An outcry from the A-10 community, however, has apparently forced Air Force Lt. Gen. Mike Holmes to revive talk from last year about designing a new airplane to replace the A-10 Warthog.
As reported by CNN earlier this week, Gen. Holmes recently floated several possibilities for replacing the A-10. These range from the development of an entirely new close-air support (CAS) platform to picking one of several existing CAS platforms to replace the A-10 to proceeding with Boeing's (BA -3.76%) current project to simply upgrade the wings on the A-10 fleet, extending the A-10's service life for decades to come.
Let's take those options one at a time, and see what implications they hold for investors:
Build a better A-10?
For contractors like Boeing and Lockheed Martin (and for Northrop Grumman (NOC 3.14%), the company that currently controls all A-10 assets from the defunct Fairchild Republic), this is the pot-o'-gold option.
New airplane contracts routinely involve billions or even tens of billions of dollars of development spending, followed by more billions to buy the planes once developed. In the current constrained spending environment, getting Congress to ante up for an entirely new CAS airplane seems unlikely -- but it's obviously the route that would make defense contractors happiest.
What's behind Door No. 2, 3, or 4?
The second-most lucrative option for the military-industrial complex would be to pick a more modern aircraft, already in existence, to replace the aging A-10. After all, the A-10 Warthog has been flying since Jimmy Carter was in the White House. Meanwhile, several viable light-attack aircraft have come to light, with claims of being able to replace it.
These include Embraer's (ERJ -5.82%) A-29 Super Tucano light-attack aircraft, already in service in Afghanistan...
...the AT-6C Wolverine turboprop, built jointly by Textron (TXT -1.28%) and Lockheed Martin...
...and the jet-powered, twin-engine Scorpion jet, also built by Textron:
Shiny and new, or tried and true?
These are all fine light-attack aircraft, no doubt. And yet, when compared to the specifications of an A-10 Warthog, they all seem somewhat lightweight, as well.
Boasting twin engines above the wings (to better protect them from ground fire), redundant hydraulic systems (to better withstand battle damage), a titanium shell surrounding the pilot, and of course, the massive 20-foot-long, 4,000 GAU-8 Avenger rotary cannon in its nose, the A-10 Warthog is a flying tank. With the capacity to carry as much as eight tons of munitions, it's a much heavier bomber than any of the alternatives named above.
It's also a pretty cheap plane to own and operate. In fact, according to Rep. Martha McSally -- herself a former A-10 pilot -- the A-10 is "the cheapest plane to operate. It's the cheapest plane to fly." (A fact we confirmed through our own FOIA request to the Air Force earlier this year.)
That raises an interesting question for Congress, for taxpayers, and for investors, as well: If the A-10 is already "the best CAS platform," and it's the cheapest CAS platform, too, then what's the rationale for replacing it at all?
After all, Air Force Secretary Deborah Lee James recently told Congress that if she "had more money," she would like to keep the A-10, too. Conversely, Air Force Chief of Staff Gen. Welsh has testified that the only way he sees to get "the savings we needed to balance the books" is to eliminate the A-10 fleet wholesale.
Replacing the A-10 with anything else -- a new plane, or an alternative, existing plane -- would by definition create an entirely new fleet of CAS aircraft to operate and maintain. And because it's hard to imagine a new plane being cheaper than "the cheapest" plane we've already got, there really doesn't seem to be a whole lot of logic to replacing the A-10 Warthog.
Long story short, regardless of what Gen. Holmes says, I don't see much chance of the A-10 getting replaced. Seems to me the only realistic options are A-10 -- or bust.