By Scott Hamilton
March 24, 2025, © Leeham News:
Boeing’s Transformative F-47 Fighter Award: A Financial Game-Changer
Boeing’s recent victory in securing a contract for the U.S. Air Force’s F-47 sixth-generation fighter represents more than just a high-profile win; it’s a pivotal moment for a company struggling to regain its footing since 2019. This contract signals a dramatic departure from **money-losing fixed-price contracts**, marking a critical shift in Boeing’s defense and space contracting strategy that has cost the company billions over the past two decades.
Boeing’s new F-47 fighter. Credit: US Air Force.
Breaking New Ground in Contracting
According to an Air Force official speaking to LNA, this new contract is a **cost-plus-incentive-fee award** aimed at supporting the “Engineering and Manufacturing Development” phase. This funding will enable Boeing to mature, integrate, and rigorously test all aspects of the **Next Generation Air Dominance (NGAD) Platform**. As part of the agreement, Boeing will produce a limited number of test aircraft, laying the groundwork for future production options.
Historically, Boeing’s Defense, Space, and Security unit has struggled under a blanket of fixed-price contracts that have frequently resulted in substantial cost overruns. Noteworthy examples include:
- The KC-46A aerial refueling tanker, which exceeded the fixed-price contract by over **$7 billion**.
- Transforming two passenger model 747-8s into the new **Air Force One**, incurring over **$3 billion** in extra expenses.
- Multiple defense programs, including the MQ-25 unmanned Navy refueling drone and the T-7 Red Hawk fighter trainer, added billions more to Boeing’s financial woes.
A Shot in the Arm for Boeing
The award of the F-47 contract arrives as a significant boost for a beleaguered Boeing. The company’s commercial division has been in **crisis mode** ever since the 737 MAX was grounded for **21 months** in March 2019. Although the FAA maintains strict oversight on MAX production, Boeing hopes to ramp up production to **38 units per month** by the end of this year.
Additionally, in late 2020, the company halted 787 deliveries for **20 months** due to production flaws, and while rework has recently been completed, Boeing still grapples with returning to its target of **10 aircraft per month**.
The aerospace giant has felt enduring repercussions from the COVID-19 pandemic, culminating in its **worst loss in company history** in 2024. Analysts are keenly observing how this new contract will influence Boeing’s destiny.
Analysts Weigh In on the Award
Aerospace analyst firm **Goldman Sachs** provided a compelling viewpoint, remarking, “This award comes at a pivotal time for Boeing, as it has not held the prime contractor role for a U.S. fighter jet in decades. There has been growing skepticism about long-term growth in its defense segment in light of substantial recent cost overruns.”
They also noted that Boeing’s refreshed stance involves a commitment to **avoiding further fixed-price development programs**, recognizing the importance of conservative contract terms. This shift places Lockheed Martin, which produces the **F-35**, in a precarious position as it must now contemplate its future after that program.
On the surprise nature of the contract award, **RBC Capital** called it a significant indicator that the Air Force values having multiple fighter manufacturers in its industrial ecosystem, amidst threats from Lockheed Martin and **Northrop Grumman**, the contractor for the new **B-21 bomber**.
Future Implications for Boeing
As observers point out, the focus will remain on **Boeing’s execution capabilities**. RBC cautioned, “The company’s recent struggles across its commercial and defense programs highlight execution risks for the F-47. The Air Force has yet to reveal the estimated cost for the F-47 procurement; however, RBC estimates that the engineering and manufacturing development contract is worth **over $20 billion**, predicting the total program cost to be several times that amount over its lifespan.”
Initial forecasts put the unit cost of the F-47 around **$300 million**, with engine selection still pending. The outcome of this ground-breaking contract could redefine Boeing’s future and the landscape of U.S. military aviation.
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