Boeing Frontiers
February 2003
Volume 01, Issue 09
Top Stories Inside Quick Takes Site Tools
Industry Wrap

Pentagon plans Special Ops revamp

Pentagon plans Special Ops revampU.S. Defense Secretary Donald H. Rumsfeld recently announced a plan to give Special Operations forces greater authority and a substantially larger budget to pursue al Qaeda and other terrorist networks around the world, reported the Washington Post.

The move reflects an effort by the Bush administration to shift the Pentagon's traditional emphasis on combating large forces. The idea is to improve the reach and reaction times of the Pentagon's elite commando units by empowering them to take charge of operations, expanding their numbers and bolstering their equipment, the Post said.


Report questions A380 financing as insufficient

Slowing orders for the jetliners of today threaten to sour Airbus's plans for its giant airplane of tomorrow. The Wall Street Journal reported that as Airbus throttles up development of the double-decker A380, the European plane maker aims to fund about half of the superjumbo's $12 billion development bill from its own cash flow. But as struggling airlines buy fewer of the planes that Airbus already makes, dwindling revenue is forcing managers to scramble for cash to finance the planned 555-seat plane.

So far, Airbus executives say they have enough cash. But if market conditions worsen significantly over the next two years, they may force Airbus to borrow to fund the A380. The cost of interest could hurt the plane's business case, which Airbus managers presented to their two shareholders, European Aeronautic Defense & Space Co. and BAE SYSTEM, when they approved the program in December 2000, the Journal reported.


GAO report: Air cargo security still lax

Despite improvements in airline-passenger and airline-baggage security made after the Sept. 11, 2001, terrorist attacks on the U.S., the same upgrades haven't happened for cargo transported in the hulls of most passenger aircraft, according to a recent General Accounting Office report cited in The Wall Street Journal. Despite a new emphasis on aviation security, "few changes have been made to air cargo security," the GAO report said.

Most of the estimated $12 billion of air cargo shipped annually isn't screened for explosives, the GAO said. It noted that about 22 percent of total air cargo is carried in the hulls of passenger aircraft. In fact, the report said, about half of the hulls of most passenger planes are filled with cargo. Companies such as FedEx Corp. and United Parcel Service Inc. ship the remainder of air cargo.



U.S. to accelerate work on high-Mach aircraft

The U.S. Defense Department plans to increase progressively the speed of manned and unmanned vehicles to around Mach 12 over the next 10 years.

The plan calls for cross-leveraging military and NASA hypersonic, space access and technology programs under the National Aerospace Initiative, according to Flight International.

The NAI technology framework identifies three critical areas to explore at speeds up to Mach 12, encompassing high-speed expendable and reusable strike systems, reusable launch vehicles and space launch payloads, the report said.

The interconnected technology provides for a steady increase on the Mach 3 sustained speed of the 1960s-vintage jet-powered Lockheed SR-71 and North American XB-70 bomber.

Investors betting on China airlines

Investors are chasing shares of China's two state-backed airlines, China Southern Airlines and China Eastern Airlines, even though few brokerage houses recommend buying the shares, the South China Morning Post recently reported.

"The share prices have gone straight up; there hasn't been a down day since the year began," said John Casey, regional airline analyst at DBS Vickers Securities. But "there are a lot of reasons to be cautious. On a long-term view, the big China story is indisputable. But on a short-term view, how we get there is always fraught with risk."

Chinese airlines suffer from too much capacity, pretty fierce competition on both domestic and international routes, steep jet fuel prices, and deep discounting on domestic ticket prices, analysts said.

Indeed, China Southern's and China Eastern's recent share price gains were due to increased interest in China and a recovery from recent lows rather than a change in their operating climate, analysts said. Because of soaring fuel costs, "from about July to October, Chinese airlines had a pretty hideous period. The recent rally is a recovery off that," Casey said.

"The year 2003 could be a pretty good year for Chinese airlines, but the jet fuel issue remains a clear and present danger," Casy told the Post.

Philip Wickham, airlines analyst at ING Financial Markets, said he was wary of recommending airline stocks as the world braced for a possible war in Iraq.


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