Production Extended for Indian C-17s

The Indian cabinet’s decision to proceed with a U.S. foreign military sale purchase of 10 C-17s should stretch the California-based Boeing production line until 2014.

The exact timeline will be dictated by the delivery schedule included in the yet-to-be-signed letter of agreement between the Indian government and the U.S. The 10 aircraft are expected to be delivered in two batches — five aircraft one year and five more the next.

Jean Chamberlin, vice president of mobility systems for Boeing, says the deal will likely keep the line open until 2014, although the company is looking for additional international orders to stretch production.

Boeing is in the process of reducing output to 10 aircraft a month from a rate of 13 while keeping the airlifter’s price constant. The move is aimed at stretching out the production line to buy time to capture additional orders. The rate reduction should be achieved in the third quarter.

A further decrease is not possible, however, Chamberlin says, noting that a rate study looked at having output drop to six or eight aircraft a year, but that would have triggered a noticeable cost increase to the airlifter.

The C-17s will be India’s biggest defense deal with the U.S. after New Delhi shut out Boeing and Lockheed Martin from an $11 billion fighter jet project for the Indian Air Force (IAF) in late April.

India is likely to opt for an additional six C-17s after the contract is signed for the first lot of 10 aircraft as the IAF is keen on increasing its heavy-lift capability, says a senior Indian defense ministry official.

Boeing, which also is in contention for IAF’s requirement for 22 attack helicopters and another 15 heavy-lift helicopters, expressed satisfaction with the India government’s decision.

The U.S. administration has been promoting the sale of C-17s to India since the visit of President Barack Obama to New Delhi last November.

The final contract is expected to be signed within a couple of months after India issues the letter of acceptance to the U.S. government. The contract entails an offset clause under which Boeing will reinvest nearly $1 billion back in the Indian defense, internal security, aviation and related training sectors.

The C-17 is capable of carrying a payload of 164,900 lb. and can take off from a 7,000-ft. airstrip. The four-engine aircraft can transport tanks and combat-ready troops over 2,400 nm. “Once this over $4 billion sale is finalized, the economic impact will be felt by 30,000 American workers and 650 American suppliers located in 44 states,” U.S. Ambassador to India Timothy Roemer had said in anticipation of the deal’s approval.

According to the Indian air force, the C-17 would significantly augment India’s military airlift and humanitarian/disaster relief capability over large distances.

Currently, the IAF has about a dozen Russian Il-76 “Gajraj” aircraft, with its medium-lift fleet comprising 104 Russian An-32s.

In a bid to modernize its military, India is likely to buy arms worth $120 billion between 2012 and 2017 as it seeks to overhaul its defense capabilities, according to a 2010 estimate by the Confederation of Indian Industry and Deloitte Touche Tohmatsu India.

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