Delayed production ramp-up on Boeing T-7A jet trainer sees costs mount at Saab
Swedish airframer details negative impact totalling roughly $50 million per year.
Saab is absorbing increased costs of around SKr500 million ($50 million) annually due to the slower than expected ramp-up in production of the Boeing T-7A Red Hawk advanced jet trainer for which it produces the rear fuselage.
Speaking during the company’s third-quarter earnings call on 23 October, Saab chief executive Micael Johansson made what has become a standard-item reference in its financial updates to “under-absorption and ramp-up costs when it comes to the T-7”.
Chief financial officer Anna Wijkander confirms that the company is experiencing “a bit higher negative impact from that programme than we previously guided at SKr100 million per quarter”, while Johansson confirms: “We are roughly on a yearly basis at SKr500 million affecting the Aeronautics [unit] business margin.”
The Swedish company has already established a new facility in West Lafayette, Indiana to support production for the T-7 programme, but activity so far has been lighter than originally expected.
“It’s a bit of a struggle to get that ramp-up going,” Johansson says. “It will take a few years before we are up and running at the level of 50 systems per year that will generate a good business, and with more contracts coming in as well.”
In addition to supplying the US Air Force (USAF), Boeing expects to also secure multiple international orders for the new-generation trainer.
Saab’s CEO details the challenge facing the company as involving investing heavily to equip its production line for increased automation, along with factors such as personnel recruitment and retention.
“You have a factory and a big amount of people, and the flow and the number of aircraft getting out of the factory right now is not high enough to support that,” he says. “We have to ramp up the T-7 and get out of this slow delivery pace that we have today to Boeing.”
The US prime performs final assembly of the Red Hawk at its St. Louis site in Missouri.
Despite the current situation, Johansson stresses: “We are getting there. It is the most modern factory that we have, but it is not easy to move a production facility from the centre of gravity in Linkoping [Sweden] with all the aeronautics competence to a new place and training and having the right people.
“We are investing a lot to make that happen, because there will be hundreds and hundreds of aircraft leaving that facility, so it’s worth every investment that we do.”
The USAF last month detailed a schedule under which its Northrop T-38 replacement jet should reach delayed initial operational capability (IOC) status in August 2027. That milestone will represent the availability of a first squadron of 14 aircraft for use by its Air Education and Training Command, along with a cadre of instructor pilots.
The service expects deliveries to pick up to a rate of one aircraft per month next year, and for full-rate production to be achieved around 2029.
Following its victory in the USAF’s T-X competition, Boeing secured a $9.2 billion contract in September 2018 to deliver 351 of the single-engined type. At that time, the service was expecting to be able to declare IOC status with the new model during 2024.
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