NCPA - National Center for Policy Analysis

Leasing Tanker Fleet

April 22, 2003

The Boeing Company has made an unusual proposal to lease, rather than sell, to the Air Force 100 Boeing 767s refitted to serve as airborne refueling tankers. The company and defense officials say it is a cost-effective way to replace aging air refueling tankers.

Analyses from other government agencies disagree:

  • The General Accounting Office estimated that the lease would cost $26 billion to $30 billion and concluded that it would be cost more than a direct purchase.
  • Modernizing existing tankers would cost the government only about $3.2 billion, says the GAO.
  • Moreover, the leased tankers would have to be returned after six years.
  • The Office of Management and Budget calculated that leasing and reconverting the 767s to commercial use would ultimately cost $26 billion -- compared with $18 billion if the airplanes were bought outright -- due to higher borrowing costs under the lease.

However, at the end of the six year lease, the Air Force says it could buy the aircraft at a prenegotiated price, so there would be no expensive reconversion.

  • Air Force calculations show that it would be cheaper to lease the tankers than buy them -- by up to $800 million.
  • Furthermore, leasing would allow the Air Force to get more replacement planes more quickly than if it had to buy them one by one.
  • And the Air Force says that some of the aging KC-135 tankers can't be overhauled.

Boeing expects that global 767 tanker military sales to other countries might total $100 billion, and Japan, Italy and Britain have already expressed interest.

Source: Leslie Wayne, "Creative Deal or Highflying Pork?" New York Times, April 20, 2003.

 

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