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Boeing Lease Price Pared 6%

But 'there still needs to be work,' a government spokesman says of talks on the Air Force deal.

May 12, 2003|From Bloomberg News

WASHINGTON — Boeing Co. has made progress in negotiations to lease as many as 100 of its 767 transport aircraft to the Air Force for use in aerial refueling by cutting its price 6%, defense officials said Sunday.

The cost of the lease has been negotiated down by about $9 million per aircraft to about $141 million each, according to defense officials. The deal was originally proposed to cost as much as $17 billion through 2017, including maintenance.

The cost reductions indicate that Boeing may be overcoming the biggest obstacle in a long-delayed lease that Air Force officials have said might be necessary for the nation's No. 2 defense contractor to keep its 767 production line running.

"I believe there has been progress," said Trent Duffy, a spokesman for the White House Office of Management and Budget. "The price is headed in the right direction, but there still needs to be work."

The Air Force says it must accelerate the retirement of its aging fleet of KC-135 tankers, a quarter of which are grounded at any given time for maintenance. The Air Force needs to retire as many as 500 KC-135s during the decade.

Congress in 2001 allowed the Air Force and Boeing to enter negotiations on the 767 tankers.

Some lawmakers, including Republican Sen. John McCain of Arizona, have criticized the lease proposal as a bailout for Boeing, and Duffy's agency has in the past suggested that buying the planes might be less expensive for the government than leasing them.

Air Force, Boeing and Pentagon officials next week will present the latest version of the tanker proposal to Undersecretary of Defense Edward "Pete" Aldridge, officials said. Aldridge has announced his retirement effective May 23.

Boeing shares rose 96 cents to $29.10 Friday in New York Stock Exchange trading.

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