🔷$2.56B Wedgetail Handshake

Wedgetail is Un-Wedged

The Air Force and Boeing finally reached a price agreement for the first 2 E-7A Wedgetail prototype airplanes.

The whopping $2.56B handshake was not easy to achieve.

The Backstory

Back in mid-2022, The Air Force finally committed to replacing the service’s aging Boeing 707-based E-3 Sentry with the 737-based E-7 Wedgetail to support its airborne early warning and control (AEW&C) mission. The plan was to buy the E-7 Wedgetail rapid prototype in FY2023, which would kick-start the E-3 AWACS to E-7 Wedgetail fleet conversion. The ultimate goal is to buy 26 E-7 Wedgetails by 2032.

Due to the ‘rapid’ nature of the initiative, Boeing got started on the work without a deal in place in what’s known as an undefinitized contract action (UCA); the Air Force committed $1.2B to the cause.

However, it soon became clear that the price would be an issue. Boeing initially assumed the US variant would be close to the UK E-7 being produced, but the requirements were divergent enough that it drove significant additional engineering.

A few months ago, after nearly a year of back-and-forth, the Air Force revealed that negotiations stalled.

This led to a phone-a-friend: They tapped Shay Assad to unblock the deal. A Pentagon contract negotiator from the 2010s, he was famously called “the most hated man in the Pentagon” for his cunning price-squeezing skills.

A few weeks ago, the play paid off: a handshake deal was reached (contract forthcoming).

So What

The price negotiations slipped the E-7 production decision 1 year to 2026.

But…the first ‘rapid’ prototype E-7 won’t show up until 2028.

Why: Despite being operational with Australia, South Korea, and Turkey, the E-7 is not a production-line aircraft—only 14 Boeing 737-based E-7s have ever been built. Because there is no production line, it takes a whopping 4 years to build an E-7 (← worth the click to explain why).

Northrop Grumman, the plane’s massive radar maker, is also a driving factor. They are gearing up to triple production of E-7 Wedgetail radar to 6 per year, mirroring Boeing’s projected peak production of building 6 E-7s annually.

Some time could be shaved off by purchasing used airplanes like the UK E-7 program is doing, but 1) finding a compatible 737 variant on the market is very tricky, and 2) the US Air Force might not want to get stuck with another second-hand airliner that used to transport cattle.

What Now

It’s hard to use ‘rapid’ with a straight face when a weapons program has these time horizons, but here we are.

‘Prototype’ is the other word to keep an eye on. The Pentagon defines a prototype as “a model built to evaluate and inform its feasibility or usefulness,” but it serves many other purposes along the way. In this case, because the production decision will happen 2 years before the first prototype is even delivered, it’s more likely being used as a way to quickly deliver a leave-behind capability with the warfighter while the program works through the bureaucratic wickets and milestone decisions.

The time horizon leaves more questions than answers, though.

Will the Air Force even buy 26 E-7 Wedgetails? As good as the E-7 is compared to the E-3, the design is already 20 years old, and by 2030, it’s likely more modern alternatives could be available. Case in point: Australia and South Korea might love their E-7s, but they are also both looking to replace them in the future.

It sounds like we’ll have to wait and see how this plays out… starting sometime in 2028 when the Air Force gets their hands on the first Wedgetail.

In That Number

$20 billion

The US cleared a $20 billion arms deal with Israel, anchored around 50 new F-15IA fighters and 25 upgrade kits for F-15I fighters to convert them to the advanced configuration.

TRIVIA

What is the E-7 Wedgetail named after?

A) a fish
B) a bird
C) the distinctive radar protrusion
D) a research project

On the Radar

The Air Force’s fleet of B-52 bombers may get another upgrade—nuclear capabilities.

• The Merge’s Take: If you thought the BUFF was already a nuke-capable bomber, you’re correct—with a caveat. Of the Air Force’s fleet of 76 B-52s, only 46 are currently equipped to carry nukes. The reason: In 2015 the Air Force stripped the cape from 30 bombers, reverting them to a conventional-only status. This was part of New START, a nuclear arms control treaty between the US and Russia. It expires in early 2026, opening the door to return the 30 bombers to nuke-capable world destroyers. Do it.

The F-35 performance-based logistics (PBL) deal is dead, and the Pentagon is back to negotiating annualized ‘cost-plus’ sustainment contracts with Lockheed Martin for 2025-2028. Under the proposed fixed-price deal, Lockmart would take over the jet’s entire supply chain, including the financial risk; the Pentagon could not be convinced it would boost readiness and save money, though.

• The Merge’s Take: The biggest chunk of money in play for the F-35 program is sustaining the jets—not selling them—so expect PBL to remain a high-interest item. There are sub-sets of the program that are probably suitable for PBL.

• The Merge’s Spicy Take: PBL is good in that it focuses on outcomes (mission readiness metrics) rather than the means (parts availability, repair actions, etc.). But…a fixed-price contract tends to incentivize ruthless efficiency—not the resiliency and redundancy that a military supply chain also values. How would PBL persist in a major regional conflict? Who knows, but when it impacts the entire world’s F-35 fighter fleet, it’s a pretty big question to ask.

They Said It
“The modern American manufacturing operating system that reimagines how to bend atoms better with bits.”

— Shyam Sankar, CTO of Palantir, describing the company’s new reindustrialization-focused software platform focused on

ICYMI, we had him on the pod a few months back—here’s the YouTube link to that great discussion.

Knowledge Bombs

• Northrop Grumman’s Model 437 attritable UAS broke cover 3 years after the concept art was unveiled…but it now has a cockpit (likely to simplify flight testing)

• Kratos has an XQ-58 Valkyrie drone variant with a landing gear in development

• The Navy installed the first carrier-based MQ-25 control room on the USS George H.W. Bush

• Lockheed acquired satellite firm Terran Orbital for $450m, far less than the initial $606m offering

• AUKUS (Australia, UK, US) exempted each other from limits on the export of weapons

• The Army plans to use the H-60 Black Hawk as the Future Vertical Lift testbed for launched effects and autonomy

• Boeing and Anduril revealed they both plan on competing for the Army’s upcoming cruise missile interceptor program

• HighCat is testing fly-by-fiber tethered drones in Ukraine to counter jamming

• Boeing’s P-8 multi-mission pod is now in Navy flight test

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ANSWER
If you guessed D or B, you’re both right (but D is more correct). When Australia went to industry in 1996 for proposals, the government initiative’s name was Project Wedgetail. Boeing ended up winning the bid, which resulted in the E-7. The Australian program was adapted from the name of the nation’s largest bird of prey, the Wedge-Tailed Eagle.