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From: leigh aulper4/17/2009 12:50:59 PM
   of 213


Date: April 17, 2009

The Air Force will not save any money if it retires some of its oldest Lockheed Martin C-5 Galaxy cargo haulers and replaces them with newer Boeing C-17 airlifters, a congressionally mandated reported has concluded.

The Institute for Defense Analyses study also found that, under certain parameters, it would be more cost-effective to use the L-3 Communications-Alenia C-27J Joint Cargo Aircraft over the Lockheed C-130J for intratheater airlift operations, according to the “Proper Mix of Fixed-Wing Airlift Assets.”

Lawmakers requested the in-depth study of the Air Force’s mobility fleet in the Fiscal Year 2008 Defense Authorization Act. The study’s findings were delivered to lawmakers on Capitol Hill last month. Inside the Air Force reviewed an unclassified summary of the report this week. The analysis comes just months before the Air Force completes its major Mobility Capability and Requirements Study-2016.

The new IDA report considered a variety of different modifications to the Air Force’s mobility fleet. The study looked at the effects of installing new engines on C-5A aircraft (the current plan calls for re-engining only newer C-5Bs), purchasing more C-17s, the tradeoffs among various tactical lift forces (C-130s, C-27s, and C-17s), using commercial airlift for military purposes in peacetime and wartime and utilizing tankers for cargo transport.

The Air Force’s current mobility program of record consists of 205 C-17s, 59 C-5As, 52 C-5Ms, 269 C-130Hs and 120 C-130Js. The service also intends to buy at least 24 C-27s.

The C-5 is the Air Force’s largest strategic airlifter, followed by the C-17. The quad-turbo prop C-130 is the service’s primary tactical airlifter. The service intends to use the twin-prop C-27s for special operations and light-airlift missions.

All of the service’s airlifters -- with the exception of the C-130E -- are structurally sound until the 2030s, according to the report. C-17s and C-5s have structural service lives beyond 2040.

The fleet “is adequate in meeting the benchmark requirements identified in the [2005 Mobility Capability Study] for moderate acceptable risk,” the report states. “Three different computer models used in the study produced somewhat different results for deliveries. The most pessimistic results matched MCS benchmark results, and with other models, lower force levels than programmed also met the MCS benchmark level.”

The study considered 36 alternative mixes and sizes and compared them both in cost and effectiveness with the program of record. The study identified several “relatively inexpensive ways” of generating higher capability from the existing force without buying more planes.

Purchasing “additional C-17s were not needed to meet the MCS moderate-acceptable-risk delivery rates used as a benchmark by the analyses conducted here,” the report states.

The IDA findings come at a critical juncture following Defense Secretary Robert Gates’ announcement last week that his FY-10 budget proposal recommends ending C-17 production at 205 aircraft. That figure has been debated over the last few years with some Air Force generals contending that the service could use more Globemaster IIIs. The Pentagon has attempted to end C-17 production several times over the past few years, but Congress ended up inserting money for additional aircraft during its review of several Pentagon spending requests.

IDA concluded that it would be highly expensive to restart the C-17 line once production is stopped.

“We also found that retiring C-5As to release funds to buy and operate more C-17s is not cost-effective,” the study concluded.

In 2007, Air Mobility Command officials floated a “30-30 proposal” -- which called for the unrestricted retirement of 30 C-5As and replacing them with 30 C-17s acquired through a multiyear contract.

“A small amount of additional capability could be achieved if all C-5s are converted through Reliability Enhancement and Re-engining Program (RERP) to C-5Ms,” the report states. “This alternative is at comparable life-cycle cost to that of the [program of record]; near-term acquisition costs are almost repaid over time in later years by reduced operating and support costs.”

Since the Air Force determines its airlift and other force requirements based on wartime demands, some models used in the study found the retirement of some of the oldest C-5As could help free up cash.

“If the appropriate acquisition planning scenarios are not [major combat operations] but are high tempo non-MCO operations such as in Iraq and Afghanistan today, we find that some C-5As could be retired to save [operating and support] costs with no loss in capability for those missions,” the report states.

“Moreover, a more cost-effective fleet than the [program of record] is one that, in addition to having fewer C-5As, uses the smaller C-27Js instead of the larger C-130Js. These observations are driven by the need for numerous geographically separated, but small loads during non-MCO operations, as currently anticipated in DOD planning scenarios,” it adds.

Researchers looked at a number of ways to increase productivity of the Air Force’s current fleet of mobility aircraft. The service could achieve 2 percent to 4 percent more productivity by flying C-5s at “wartime planning levels” meaning they could carry more fuel or cargo, depending on the mission.

Using the Civil Reserve Air Fleet to transport oversized cargo could free up C-5 and C-17 strategic airlifters that could then carry larger items thus increasing productivity by 10 percent. Utilizing host-nation aircraft adds another 4 percent to 5 percent and using tankers not tasked with aerial refueling missions could add another 4 percent.

“Use of these capabilities could also allow for a smaller strategic fleet that still meets MCS benchmark delivery requirements,” the report notes.

In the meantime, the Air Force’s Mobility Capability and Requirements Study-2016 will recommend new investment decisions for mobility aircraft. Using wargaming parameters, the study will determine the best mix and use of mobility aircraft during combat. The study’s preliminary findings are due this spring, and a final report is expected by the end of the year. -- Marcus Weisgerber

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From: leigh aulper5/3/2009 11:03:27 AM
   of 213
Lockheed Martin Delivers 50th C-5 AMP Aircraft

MARIETTA, Ga., April 29 /PRNewswire-FirstCall/ -- Lockheed Martin (NYSE: LMT) recently delivered the 50th C-5 Galaxy strategic airlifter upgraded with Avionics Modernization Program (AMP) improvements. AMP is the first part of the two-phase C-5 modernization program. The aircraft, delivered to Air Force Reserve Command's 433rd Airlift Wing at Lackland AFB, Texas, is now equipped with a state-of-the-art glass cockpit with modern avionics and flight instruments.

"This delivery brings the Air Force one step closer to realizing the full capability of an upgraded and more efficient C-5 fleet," said Lorraine Martin, Lockheed Martin C-5 program vice president. "We're currently running two very successful AMP production lines. This effort, along with the upcoming second phase of the C-5 modernization program, will ensure the Air Force has a C-5 fleet that will be highly effective for the next 40 years."

The AMP installations are taking place at Dover AFB, Del., and at Travis AFB, Calif. The fleet-wide AMP modifications are scheduled to be completed in the second quarter of 2014. A total of 111 C-5s are scheduled to be modified with AMP upgrades.

The AMP upgrades replace the analog cockpit instruments and systems in the C-5 with digital displays and equipment. This modernization phase also provides the necessary communications and navigational avionics to comply with Global Air Traffic Management (GATM) requirements, the new set of international standards for aircraft movement and reduced separation in flight.

The second phase of the C-5 modernization effort is the Reliability Enhancement and Re-Engining Program (RERP). RERP includes 70 enhancements or replacements of major components and subsystems, including the installation of GE CF6-80C2 commercial engines. Fifty-two of the 111 airplanes receiving the AMP upgrades are currently scheduled to receive the RERP upgrades. When one of the giant transport aircraft receives both the AMP and RERP modifications, it receives the C-5M Super Galaxy designation. Three aircraft (two former B-models and one former A-model) were used as the C-5M test fleet. All three of the C-5M aircraft have been delivered back to the U.S. Air Force.

The C-5 has been the backbone of strategic airlift in every military and humanitarian engagement since it entered service. It is the only aircraft capable of carrying 100 percent of certified military air-transportable cargo with a dedicated passenger compartment enabling commanders to have troops and their equipment arrive simultaneously in an area of operation. The C-5 can carry twice the cargo of other strategic airlift systems, and the C-5M Super Galaxy will be a force multiplier through 2040. Modernization of the C-5 pays for itself through savings in operation and sustainment costs.

Headquartered in Bethesda, Md., Lockheed Martin is a global security company that employs about 146,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The corporation reported 2008 sales of $42.7 billion.

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From: leigh aulper5/19/2009 6:10:00 AM
   of 213
New C-17s Not Needed, DOD Analysis Shows

May 18, 2009

By Amy Butler

Early indications from the Pentagon’s Mobility Capabilities Requirements Study suggest no need for additional strategic airlift beyond the funded procurements of re-engined C-5s and 205 C-17s already planned, says U.S. Air Force Chief of Staff Gen. Norton Schwartz.

The 2005 Mobility Capabilities Study had suggested a requirement of roughly 300 strategic airlifters, and Schwartz says he sees “no major shift in the demand signal.” The 2005 study, however, was discredited in much of Washington as a budget-driven formality under former Defense Secretary Donald Rumsfeld, and a new study has been eagerly awaited.

The new study is now under way, although official results are not expected until the fall. Unlike previous reviews, this study will take into account the requirements associated with increases in Army and Marine Corps end-strength, as well as the new U.S. Africa Command.

Even if more strategic airlift is ultimately needed, Air Force Secretary Michael Donley says an independent study presents several options before considering a buy of additional C-17s, the only aircraft made at Boeing’s Long Beach, Calif., plant.

These include leasing additional Civil Reserve Air Fleet capacity, as well as re-engining all 111 C-5s. Now, the C-5 Reliability Enhancement and Re-engining Program (RERP) calls for modifying only 49 C-5Bs, two C-5Cs and one A model for test purposes.

Boeing’s C-17 program has survived in recent years on congressional earmarks and international orders. The USAF also has nonetheless wished to retire its worst C-5s.

Meanwhile, the first C-5 of the 46 to be inducted into the M-model upgrade production line is slated to arrive at Lockheed Martin’s Marietta, Ga., facility in August with delivery following a year later.

This single C-5 will make up the low-rate-initial-production phase of the C-5M RERP upgrade program. The M upgrade includes a new propulsion system as well as improvements to several bad actors on the aircraft, including hydraulics and landing gear, says Lorraine Martin, vice president of the C-5 Reliability Enhancement and Re-Engining Program for prime contractor Lockheed Martin.

Three C-5s were modified with the M upgrade during the development phase of the program; two were C-5Bs and one was a C-5A.

Operational test and evaluation for the C-5M is slated to begin in September, lasting at least three months. The C-5M includes the General Electric CF6-80C2 engine, which Martin says provides 22 percent more thrust per aircraft. The C-5M can climb to 31,000-feet altitude in 19 minutes carrying 120,000 pounds of cargo compared to the C-5A/B’s 33 minutes to climb to 24,000 feet, Martin says.

Aside from the performance, Lockheed Martin is making some predictions related to the cost of the program. Reduced maintenance of the newer propulsion systems and replacement of the bad parts on the C-5 will “save” $9 billion over the life of the aircraft in the cost of operations and sustainment, Martin says. This is after the $6 billion cost to procure and install the kits, she says.

It is unknown whether shutting down the F-22 line in Marietta, Ga., where the C-5 work is handled by Lockheed, will impact the cost of the RERP effort.

The operational test and evaluation is expected to begin in September and last up to four months.

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From: leigh aulper8/19/2009 6:12:16 PM
   of 213
Lockheed Martin C-5 RERP Production Begins

MARIETTA, Ga., Aug. 19 /PRNewswire-FirstCall/ -- The first Lockheed Martin (NYSE: LMT) C-5 Galaxy strategic transport was inducted into the Reliability Enhancement and Re-engining Program (RERP) production line in ceremonies at the Lockheed Martin facility here August 18. The RERP modifications consist of more than 70 improvements and upgrades to the C-5 airframe and aircraft systems, and include the installation of new higher-thrust, more reliable turbofan engines.

"We have been planning this day for more than a decade and it is a day we have been working incredibly hard to get to for the past two years," said Lorraine Martin, Lockheed Martin C5 vice president. "The aircraft is here; our facilities and our team are ready to go. This aircraft will be a critical asset for the warfighter when it rejoins the Air Force operational fleet next year as a C-5M."

The C-5M is the product of a two-phase modernization effort. The first, the ongoing Avionics Modernization Program (AMP), provides the aircraft a state-of-the-art glass cockpit with modern avionics and flight instruments. Nearly half of the C-5 fleet has already undergone the AMP modifications. RERP is the second phase of the C-5 modernization effort.

The first aircraft to enter the RERP production line is a C-5B based at Dover AFB, Del. This aircraft, Air Force serial number 83-1258, was the first C-5B to come off the production line in 1985. Modernization of this first aircraft is expected to take 13 months. At rate production, the conversion time on future C-5s is expected to be reduced to eight months.

The Super Galaxy climbs higher and faster than legacy C-5s while carrying more cargo over longer distances. It also requires less tanker support. The C-5M is projected to have a much higher mission availability rate due to increased reliability.

An Air Force aircrew based at Dover AFB, Del., recently demonstrated this improved capability by flying non-stop and unrefueled from Dover to Incirlik, Turkey, while carrying 90,000 pounds of cargo on 36 standard military cargo pallets. The crew was able to complete the round trip in two days versus the normal three, and they saved 30,000 pounds of fuel by eliminating an en-route stop.

Current Air Force plans call for Lockheed Martin to deliver 52 C-5Ms (modification of 49 C-5Bs, two C-5Cs, and one C-5A) by 2016. Three C-5Ms, the former Super Galaxy test fleet, have been redelivered to the Air Force. Two aircraft are currently based at Dover. The third C-5M is scheduled to come out of programmed depot maintenance at the Warner Robins Air Logistics Center at Robins AFB, Ga., in early September and will then be ferried to Dover where it will enter operation.

Headquartered in Bethesda, Md., Lockheed Martin is a global security company that employs about 146,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The corporation reported 2008 sales of $42.7 billion.

RERP Production Process Background

After the C-5 aircraft is inducted into the RERP assembly line and the fuel tanks are drained, removal of major systems and equipment, including the current GE TF39 turbofan engines will begin. Lockheed Martin has made a significant initial investment in fixtures and ergonomic work platforms for the C-5 mod hangar at its Marietta facility. Additional investment will be made as the program ramps up its production rate.

Work will then begin on the wing and empennage, wing slats, wing trailing edges, the fuel system, and installing the engine pylon attach fittings and the pylons themselves. This work will be followed by modifications to the cargo compartment, the flight station and landing gear. Also, aircraft systems, such as environmental control, will be reworked, while others, such as the auxiliary power units, will be replaced. The last stage of modifications includes removing wiring for the old systems and installing new wiring.

Finally, the GE F138-GE-100 turbofan engines will be installed. These engines, rated at 50,000 pounds of thrust, are the military version of the CF6-80C2 engine that has recorded millions of flight hours in commercial service. This is the same engine as on Air Force One. It is expected that the F138 engines will have a 20-year on-wing service life before overhaul on the C-5M.

When modifications to the aircraft are completed, both Lockheed Martin and the Air Force will perform functional check flights of the C-5M before its scheduled redelivery to the Air Force. The first production C-5M is scheduled for redelivery to Dover AFB in September 2010.

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From: leigh aulper8/26/2009 3:04:05 PM
   of 213
Lockheed Martin Delivers Final C-5B Galaxy Transport Modified Under Avionics Modernization Program

TRAVIS AFB, Calif., Aug. 25 /PRNewswire-FirstCall/ -- Lockheed Martin (NYSE: LMT) delivered the 50th C-5B Galaxy strategic transport modified under the Avionics Modernization Program (AMP) back to the Air Force in ceremonies here today. This completes the AMP modifications to the C-5B fleet. Modification of the C-5A fleet continues at Travis and at Dover AFB, Del. Current plans call for the entire 111-aircraft C-5 fleet to receive the AMP modifications.

"Completing the B-model fleet marks a significant milestone for the AMP program," said Lorraine Martin, Lockheed Martin C-5 vice president. "We are at the halfway point in AMP aircraft redeliveries, our modification teams have consistently been on or ahead of schedule, and our quality has been exceptional. We are delivering a significant capability to the warfighter, enabling the C-5 to fly wherever it's needed around the world."

AMP is the first phase of a two-phase modernization effort for the C-5. The AMP modifications replace the earlier analog avionics in the Galaxy with a commercially available, digital avionics suite along with an integrated architecture that allows for upgrades. The entire system is designed to increase safety, ease crew workload and enhance situational awareness.

"AMP takes all the gauges you see in a legacy aircraft and consolidates them," said Lt. Col. Mike Semo, Chief, C-5M Program Integration Office at Dover. "So now, instead of knowing a distance to a certain location, you have a top-down view of where the aircraft is compared to where you're going. It gives you a lot more situational awareness, which is very important in a combat zone."

A total of 55 C-5 aircraft (50 C-5Bs, two C-5Cs, and three C-5As) have already been through one of the two AMP modification lines. As of Aug. 20, the AMP fleet has accumulated 70,156 flight hours on 15,967 sorties. The aircraft have been flown to all points of the globe, including regular operations to Europe and the Pacific as well as to Iraq and Afghanistan.

The second phase of C-5 modernization is the Reliability Enhancement and Re-engining Program (RERP). The RERP modifications consist of more than 70 improvements and upgrades to the C-5 airframe and systems. They include installation of higher-thrust, more reliable, more environmentally friendly F138-GE-100 turbofan engines, the military version of the CF6 engine that has recorded millions of hours on commercial airliners all over the world. These engines power Air Force One as well. The first aircraft was inducted into the RERP production line at the Lockheed Martin facility in Marietta, Ga., on Aug. 18.

When a Galaxy has been through both AMP and RERP, it is redesignated as a "C-5M." Current Air Force plans call for Lockheed Martin to deliver 52 C-5Ms (49 C-5Bs, two C-5Cs, and one C-5A) by 2016. Three C-5Ms have already been delivered to the Air Force.

Headquartered in Bethesda, Md., Lockheed Martin is a global security company that employs about 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The corporation reported 2008 sales of $42.7 billion.

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From: leigh aulper9/21/2009 3:35:39 PM
   of 213
C-5 upgrade might not fly in Congress Decision will affect future of Dover AFB

September 21, 2009

The News Journal

DOVER -- A week ago Sunday, the pilot and crew of a new C-5M Super Galaxy, the souped-up version of the giant cargo aircraft that has been whining over Dover for more than 38 years, set out to see what the new plane could really do.

Carrying a payload of 176,610 pounds, the aircraft, dubbed "The Spirit of Normandy," climbed to an altitude of 41,188 feet in 23 minutes and 53 seconds, a new world record for jets weighing 551,155 to 661,386 pounds. In rising to that height so quickly and flying horizontally when it got there, the C-5M broke seven other records and set first-time standards in 33 categories that had not been documented previously.

So far, only three C-5 Galaxy aircraft have been retrofitted with new avionics and new engines to become C-5Ms, and all three are assigned to Dover Air Force Base.

The planes essentially are demonstration aircraft, intended to show the worthiness of equipping all 111 of the jet aircraft in the Air Force's C-5 fleet with new avionics.

Lt. Col. Scott Erickson, who has been flying the C-5M since the first one was delivered to Dover in February, is sold on the modified aircraft. He serves as chief of C-5M training for Reserve pilots at DAFB and was the pilot of the record-breaking Sept. 13 flight.

"We're in a familiarization period with the M model, and ground crews, flight crews and everybody are using this time to get familiar with the aircraft," Erickson said a few days after the 90-minute flight that may prove to be historic -- provided the records are certified by the National Aeronautic Association, the arbiter of U.S. records.

"This is all a good part of the process, for us to explore the full envelope of the aircraft."

Count Rep. John Murtha, D-Pa., Sen. Daniel Inouye, D-Hawaii, and lots of other congressmen among those who aren't likely to be impressed with the C-5M accomplishments. They're resisting the Obama administration's call for a shutdown of the assembly line for Boeing's C-17 Globemaster III, describing that newer, smaller plane as the best alternative for the military's airlift needs while sending signals that the C-5 modernization program may be cut short.

Defense Secretary Robert Gates said the Air Force has enough C-17s -- if congressional designs come to pass, the fleet will total 223 aircraft, up from an original order of 180. Murtha, chairman of the House Appropriations Committee, has amended the administration's spending plan for the year that begins Oct. 1 to include $674 million for three new C-17s. The Senate Appropriations Committee, chaired by Inouye, went the House panel one better, agreeing unanimously to provide $2.59 billion for 10 additional C-17s -- in addition to eight aircraft included in a supplemental fiscal 2009 spending bill signed by President Barack Obama in June. Both committees deleted $91.4 million requested by Gates for shutting down Boeing's C-17 assembly line.

The administration requested $606.9 million for C-5 modernization, but the House committee cut $56.6 million as "funding ahead of need," while the Senate panel cut $45.1 million for the same reason.

Murtha, acknowledging that the jobs of constituents figured in his support for C-17s, noted in a speech at a technology conference in March that one Air Force official had described the C-17 as the "backbone of the nation's strategic air mobility fleet."

"It's time to re-evaluate how large of a C-5A fleet we need," he said, casting a cloud over plans for installing new avionics in the oldest C-5s, "and the committee is looking into the cost of continuing to operate these legacy aircraft."

Inouye offered even more ominous remarks as his committee began its rewrite of the administration's military budget proposal, which was unanimously approved by the committee on Sept. 10.

"The administration has recently been provided with authority to retire the aging, hard-to-maintain, and often broken C-5A force," Inouye said in a statement.

"We expect that in re-examining its airlift fleet, the Defense Department will eventually conclude that purchasing additional C-17s and maintaining the strategic asset of a hot airlift production line is the right solution."

Advantages of C-17

The C-17, deployed in June 1993, is cherished for its ability to use relatively short, unimproved runways, and typically, it's much more reliable than the aging C-5s, the first of which was deployed in 1969. The C-5's redeeming quality is its size, which makes it able to haul more cargo than the C-17. The C-5, for instance, can carry two M-1 Abrams tanks, the Army's main battle tank, while the C-17 can carry just one.

With the C-17s having proved their worth, the C-5 came under attack in the mid-'90s from congressmen and others as a maintenance nightmare. At the time, reliability rates were measured as low as 50 percent, meaning the planes were fit to fly only about half of the time -- even as some planes were cannibalized for parts to keep other planes flying. However, Lockheed Martin, the C-5 manufacturer, asserted that the frames of even the oldest C-5s were good for up to 40 more years and persuaded Congress to embrace the avionics modernization program in 1998. The engine replacement plan was approved a few years later.

From the start, Delaware's congressional delegation, spearheading an effort among C-5 supporters, has helped keep the modernization program on track against long odds through three administrations.

The avionics work is being done by Lockheed teams hosted by DAFB and Travis Air Force Base, Calif., with the planes being flown to Lockheed in Marietta, Ga., for installation of the new, more powerful GE commercial engines. In starting the avionics upgrade program in 2004, Lockheed said it would take on up to 18 local workers at Dover.

So far, 55 C-5s -- including all 50 C-5Bs, 49 of which are slated for new engines -- have been equipped with new avionics. Last month, the first C-5 -- the first "B" model to roll off the assembly line in 1985, which was based at Dover -- was "inducted" into the regular re-engining production line and is expected to be returned to the base in a year or so.

If current plans hold, two C-5Cs, modified to carry outsized loads for NASA, and one "A" model also will get new engines by 2016.

"The C-5's wings and fuselage were carefully evaluated and examined by experts, who concluded that there's another 30 to 40 years of useful life in the basic airframe of the C-5," U.S. Sen. Tom Carper, D-Del., said in a telephone interview.

"The C-17 is a great airplane, but we don't need to continue to run the C-17 production line indefinitely. Parts for the C-17 are built in probably close to 45 states, and a lot of representatives and senators see it as a jobs program. The C-5M carries roughly twice as much cargo and flies almost twice as far without refueling, and we can modernize anywhere from two to three C-5s for the price of one new C-17."

The Air Mobility Command, DAFB's parent organization, lists the cost of C-5 modernization at $90 million per plane in "fiscal 2009 constant dollars." The cost of a C-17 is listed at $202.3 million in "constant fiscal 1998 dollars."

Delaware's delegation continued to push for C-5 modernization even after DAFB was scheduled in 2002 to get 13 C-17s, the last of which was delivered last October. Dover retained 18 of the C-5B aircraft, first deployed in 1986, as 18 older "A" models were assigned to National Guard units around the country.

Better for DAFB

U.S. Rep. Mike Castle, R-Del., said DAFB supporters always had their eyes on the C-17, but wanted to modernize the C-5s as well.

"The C-5M program was essential in maintaining the C-5," Castle said, "and I think we've been successful. I rely on experts at DAFB in reaching that conclusion.

"We're very content to have that mix of C-5s and C-17s, and I'm delighted that the president is recommending continuing the C-5 modernization because that, in my judgment, means DAFB remains that much more viable."

Now, Carper said, it's up to Lockheed to blunt arguments from critics by living up to promises made to win grudging congressional approval for the modernization program.

"The key is for Lockheed to deliver what they're contractually required to deliver," he said.

"They need to deliver C-5Ms at the agreed-to price, and those aircraft have to meet a high rate of mission capability, in excess of 75 percent. If Lockheed does their job, it makes my job a whole lot easier."

No firm reliability measurements are yet available, but Steve Knoblock, Lockheed's lead C-5M test pilot, said anecdotal evidence suggests that the airplane is measuring up to the mission-capable rate quoted by Carper. With the spotlight shining brightly on the plane's performance capabilities, Knoblock said, it should be noted that increased reliability was the main objective of the modernization program.

"Those airplanes have been flying every week, as scheduled, and pretty much on time," he said of the C-5Ms.

Erickson, the lead Reserve pilot trainer at DAFB, agreed. "The flight cancellation rate, anecdotally, is markedly improved," he said.

But still, it's the modernized C-5's engines, widely used on commercial aircraft, that have DAFB's pilots singing its praises. Lockheed credits the engines with empowering the Super Galaxy to climb higher and faster than so-called "legacy" C-5s while carrying more cargo over longer distances.

C-5M has more thrust

Accomplishing one notable feat in May, a C-5M bearing a crew from Dover and 90,000 pounds of cargo bound for Iraq flew nonstop to Incirlik Air Base, Turkey, skipping the normal fueling stop at Rota, Spain. According to Lockheed, the aircraft consumed 13 percent less fuel than what would have been used by other C-5s, saved 30,000 pounds of fuel by eliminating the stop, and was able to complete its mission in two days instead of the customary three.

"You're talking about saving two or three hours of ground time, five hours with descent," Erickson said.

"If we needed to, we could get cargo into Iraq. That's something nobody else is going to do without a tanker" for refueling.

The four new turbofan engines are credited with increasing thrust by 22 percent, which, in Knoblock's words, "is like adding a fifth engine to a B model." It's those engines, Erickson said, that make the C-5M a joy to fly.

"Very much," he said when asked if he liked flying the new plane. "I don't know of many pilots who would turn down extra thrust."

With that, Erickson, Knoblock and four other crewmen departed from interviews in the 436th Airlift Wing's operations center to check out the capabilities of the only "A" model modernized for testing purposes, which was delivered a week or so earlier. Plans were for a local four-hour instrument training mission featuring tactical maneuvers and touch-and-go landings.

As an aside, Erickson said the C-5M's new engines meet the highest standard for aircraft quietness, offering a major benefit for people who live in or near flight paths and get regularly rattled by the distinctive high-pitch whine of departing C-5s.

"The C-5M is the quietest plane at Dover Air Force Base now," Erickson said. "It's even quieter than the C-17s." | Printer-friendly article page

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From: leigh aulper2/16/2010 4:38:55 PM
   of 213
Conference Call Intel - Cpi Aerostructures (NYSE Amex:CVU)
Tuesday, February 16, 2010, 3:10 PM ET -

by Maj Soueidan, President GeoInvesting

Listening to conference calls is one of the many strategies I apply for gathering Intel on future prospects of companies. Even though these calls are considered public information, investors just don’t have the time to look beyond a press release, giving us a chance to take advantage of information inefficiencies. I particularly salivate at opportunities to listen to calls between earning releases, such as investor presentations, when investors often become increasingly lazy. I look forward to selling them my shares at higher prices when the company repeats bullish information in its earnings press release.

As I just issued an update on Cpi Aerostructures (NYSE AMEX:CVU) on January 26, 2010, I was eager to listen to an investor presentation replay that took place on February 11, 2010. I hoped to attain a better grasp on my assumption that CVU would report a stellar 2009 fourth quarter as well as glean insight into the growth outlook heading into 2010.

I have been on hundreds of conference calls and I can say that this is one of the most bullish I have experienced. So much so, I added to my position. CEO, Ed Fred, was articulate and inferred several times that his aggressive EPS guidance for 2009 of $0.63 to $0.69 and long term growth expectations, supported by its new business model that focuses more on subcontracted work than primary government contracts, are still in tact. I found this particularly interesting since this is similar strategy Electronic Control Securities (OTC BB:EKCS), a stock I just profiled on the street, has embarked upon.

Unfortunately, the company did not provide specific 2010 guidance. I found this odd since during the presentation the company expressed confidence that it may able to achieve net income of $8 million in 2011 on $75 million in revenues. As in my initial article, I am left to ponder what 2010 might look like. The problem lies with the three year compounded annual growth rate (CAGR) assumption CVU issued at the end of 2008 of 50% to 60% for net income and 30% to 35% for revenues. Without getting too technical, the CAGR formula basically only takes into account your beginning and end year periods. So, over a three year period, as long as you hit the the year three number implied by the formula, it doesn’t matter what happens in year two. Regardless, loaded with the ammo of 2011 expectations and a confirmation of its long-term growth forecast, I came up with a best efforts 2010 EPS target of $0.96. Analyst estimates are calling for 2010 EPS to reach $1.01. I urge investors to make their own assumptions and listen to the conference call replay.

CVU plans to comment on 2010 guidance in its year end press release.

Additional key points from the presentation:

Has long term visibility due to contract pipeline and its emphasis as a subcontractor to defense companies such as Lockheed Martin (NYSE:LMT) , Northrop Grum Hol (NYSE:NOC) and Sikorsky Aircraft
Guidance does not include nearly 400 million of unawarded contract bids
Guidance does not account for the government having to devote funds to the repair of planes that return home from IRAQ.
Guidance does not include upside from contracts CVU is currently involved in.
Room for gross margin improvement from 25% to 30% - 35%.
Happy with results and will continue to get better Disclosure
Positions: Long CVU,

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From: leigh aulper8/11/2010 11:06:52 AM
   of 213
CPI Aerostructures Earnings Teleconference CVU US
2010-08-10 14:58:30.378 GMT

Event Date: 08/10/2010
Company Name: CPI Aerostructures
Event Description:Q2 2010 Earnings Call
Source: CPI Aerostructures
For more event information and transcripts,
visit EVTS
Q2 2010 Earnings Call


Good day, everyone, and welcome to the CPI Aero's Second Quarter 2010
Conference Call. At this time, I would like to inform you that this
conference is being recorded and that all participants are currently in a
listen-only mode.
Thank you. I will now turn the conference over to Mr. Ed Fred.

Edward Fred, President and Chief Executive Officer:
Thank you, Christy. Good morning, and thank you all for joining us for our
Second quarter 2010 conference call. If you need a copy of the press release
issued this morning, please contact Lena Cati of The Equity Group at
212-836-9611 and she will fax or email a copy to you. Also, if you would like
to listen to this call again, you can hear a replay on our website's Investor
Relations section in about an hour at
Before we get started, I want to remind investors that this conference call
will contain forward-looking statements, which involve known and unknown
risks, uncertainties and other factors that may cause actual results to be
materially different from projected results. Included in these risks are the
government's ability to terminate their contracts with us at any time, the
government's ability to reduce or modify its contracts if its requirements or
budgetary constraints change, the government's right to suspend or bar us
from doing business with them, as well as in the competition - competition in
the bidding process of both government and sub-contracting contracts.
Our sub-contracting customers also have the ability to terminate their
contracts with us if we fail to meet the requirements of those contracts or
if their customer reduces or modifies its contracts to them due to budgetary
Given these uncertainties, listeners are cautioned not to place undue
reliance on any forward-looking statement contained in this conference call.
Additional information concerning these and other risks can be found in our
filings with the SEC.
This morning I will give you a brief overview of our first half results. I
will then hand the call over to Vince Palazzolo, our CFO, so he can walk you
through the financial statement details. Then I will comment on the current
business environment, outlook for the remainder of 2010, and then briefly
wrap things up and open the call to questions.
As reported earlier this morning, for the first half of 2010, revenue was
approximately $23,550,000 compared to approximately $21,129,000 in the first
half of 2009, an increase of approximately 11%.
Pre-tax income, was approximately $3,130,000 compared to the pre-tax income
of approximately $2,216,000 for the same period last year.
Net income for the first half of 2010 was approximately $2,066,000 or $0.32
per diluted share, compared to net income of approximately $1,449,000 or
$0.23 per diluted share in the first half of 2009.
Selling, general and administrative expenses for the first half of 2010 were
approximately $2,870,000 or 12.2% of revenue compared to approximately
$2,575,000 or 12.3% of revenue for the same period of 2009.
So with that prelude, I will now hand the call over to Vince Palazzolo our
CFO, so he can walk you through the financial statement details.

Vincent Palazzolo, Chief Financial Officer:
Thank you, Ed. As reported in this morning's press release, comparing the
second quarter of 2010 to the second quarter of 2009, revenue increased 10%
to $12,544,625 from $11,437,691. Gross margin was 26.7% as compared to 24.8%.
Pre-tax income increased 31% to $1,826,254 compared to $1,389,489. Net income
increased 33% to $1,205,254 or $0.18 per diluted share, compared to $903,489
or $0.14 per diluted share.
Selling, general and administrative expenses were approximately $1,485,000 or
11.8% of revenue, compared to approximately $1,386,000 or 12.1% of revenue
At this point, let me hand the call back over to Ed for an overview of the

Edward Fred, President and Chief Executive Officer:
Thanks, Vince. As Vince just reported, the gross margin for the first half of
2010 was higher than that of the prior year's first-half. We expect that
there will continue to be normal quarterly ebbs and flows in our gross margin
as our new programs progress, but we arrived at our 2010 guidance based on a
24 to 26% gross margin range and expect to end up in that range.
New orders through June 30 of 2010 were approximately $31.1 million
significantly higher than the $4.9 million reported this time last year.
Additionally, during April we received a $10 million increase to our overall
order from Boeing on the A-10 re-winging program.
The total award amount of all of our programs should increase significantly
over the next two quarters as we expect to receive follow-on releases on some
of our major programs. There is also a real business potential from the
approximately $288 million of unawarded solicitations outstanding, once these
programs are funded and/or awarded.
In the past several years, our reputation has been elevated in our industry,
thanks to our impressive list of customers, the success we've experienced on
the important programs that we're working on and the exposure we've had and
contacts we've made at various aerospace and defense institutional investment
We are now in the midst of establishing relationships with additional prime
manufacturers, including other helicopter and business private jet companies
who've come to recognize CPI Aero as a premier supplier of aircraft
structure. Among the unawarded bids outstanding, are contract opportunities
with these potential customers. We look forward to reporting on our progress
of turning solicitations with these prospects into awards and contracts in
the future.
As previously announced, based on the visibility we currently have, we
project that 2010 revenue will be in the range of 48 to $51 million, with
resulting net income in the range of 4.3 to $4.8 million. It is our
expectation that our three major long-term production programs, the A-10, the
E-2D and the G650, will be in full scale production and generating consistent
revenue during 2011 and we therefore project that 2011 revenue will be in the
range of 78 million to $81 million, with resulting net income in the range of
8.9 to $9.5 million.
Additionally, using 2008 as the base line, our 2011 guidance affirms our
expectations for a three-year compounded annual growth rate for revenue, in
the range of 30 to 35%, with the resulting compound annual growth rate for
the net income in the range of 50 to 60%.
In early April, we completed a registered direct offering and raised 3.5
million in net proceeds through the sale of 500,000 shares of our common
stock. Through this offering, we strengthened our financial position in
preparation for continued growth and enhanced the potential liquidity of our
CPI's future has never been brighter and we'll continue to get that message
out to the investment community as often as possible. During the first half
of this year, CPI presented at the Roth, Cowen, B. Riley, Stephens and Noble
conferences with much success. And we are scheduled to present at the D.A.
Davidson Aerospace and Industrial Conference in November.
Through our ever continuing positive financial results, and the exposure we
received at these venues, the company's stock price which began the year at
$6.01 has seen a 52 week high of $11.12 just a week ago.
Additionally for the first time in CPI Aero's history, we now have
independent research coverage of the company, not just by one firm, but by
three firms. Roth Capital, initiated coverage on CPI in mid-July, followed
just days later by Stonegate Securities. And last week CapStone Investments
also initiated its report on us. So our efforts to get the message out and
increase investment community awareness of CPI, is obviously having a
significant impact.
Before closing, I would like to thank all of our shareholders for your
continued support of CPI Aero and I assure you that your management team and
your Board of Directors are working diligently to continue this profitable
growth and reach our full potential as the world's premier small business
supplier of aircraft structure.
And I would be remiss if I didn't once again thank the CPI management team
for sharing my vision of where we can take this company, but more importantly
for making it happen. I would also like to thank all of the employees of CPI
Aero for executing on that vision and being an integral part in winning such
impressive awards as the ones mentioned earlier. I look forward to the future
of this company with great eagerness and anticipation of now executing on
these contracts and then attaining new ones due to the quality of our work.
Now, before I open the floor to questions, we had two questions sent to us
previously, so I'll respond to those first.


: The first one comes
from a Robert Urbanic. The question is, are there plans to list the shares of
CPI Aero on the New York Stock Exchange?
Currently, we are on the New York Stock Exchange, not the big board
obviously. We are on the NYSE Amex. When the American Stock Exchange was
purchased by the New York Stock Exchange, we moved over along with that
purchase. And a separate exchange has been created for companies that came
from the Amex, but we're two small to list on the big board. At this time, we
are still way too small to list on the big board, keep in mind that prior to
yesterday, our market cap was somewhere between 70 and $75 million, which is
way, way, way too small to be listed on that. But again, we are on the New
York Exchange. At this point there're only two major exchanges, the NYSE and
the NASDAQ. We are on the NYSE in a sub-division of that board.
And second question comes from a Kevin Stone. And he asks, please have Mr.
Fred update us on CPI, UTX, Sikorsky, Supplier Gold status. If I remember
correctly the expectation was for CPI to have already received this status.
Mr. Stone, we are still in the process. Nothing CPI has done, to delay the
process. We're dealing with a very very large institution, obviously in
Sikorsky. I won't give you the exact date, because I don't think, I should be
giving out Sikorsky information, but we are being presented to the Supplier
Gold Board this month, the month of August. You are correct, it was supposed
to be both June and July. Again, nothing that we've done incorrectly. We have
met all the standards to be Supplier Gold, that's why we're being presented
later this month. And we fully anticipate getting approval. I cannot give you
a timeframe as to how long the approval will be after we present it. But
again, we're very very confident that we will be approved and in the very
near-term, we'll be able to announce the distinction of being one of the 15
or so Supplier Golds with Sikorsky.
Now at this point, I would like to open the floor to questions, Christy can
you allow callers to place questions now please?

Your first question comes from the line of Rick Hoss of Roth Capital

<Q - Richard Hoss>: Hi, good morning.

: Hi Rick. How are

<Q - Richard Hoss>: Good thanks. Just on gross margin and I know the range is
24, 26. Is there anything you can give us and the reason why it was the
stronger than that range?

: Just the mix of
programs in this quarter put it slightly higher than what we're going to call
the average, does that mean we're going to have a significant drop off in the
quarter. No, not necessarily....


: Right, yeah. No,
the mix should still stay in the range. It will probably be in the higher end
of that range as we become more efficient on some of these newer programs,
much more quickly than anticipated but that's really the only reason Rick.

<Q - Richard Hoss>: Okay. So there is a component to process improvement than
within that number?

: Oh, absolutely,

<Q - Richard Hoss>: Okay. And then on the SG&A, a little bit of a pick up
sequentially. Is that just a function of revenue, being that much higher or
is there a couple of things in that number?

: Well the quarter
was lower, the overall was higher, that's because with the stock price moving
as much as it did, we had tremendous stock volatility in the Black-Scholes
calculation. We pay all of our directors' fees or much of our director's fees
in stock options versus cash. We're not a company that wants to spend a lot
of cash on that kind of activity. And because of the volatility in the stock,
the stock option non-cash expense was very, very high which in general made
the overall SG&A much higher.
Other than that, I mean, I think you can see that growth in revenue for us is
not necessarily dependent on increased SG&A in a percentage basis certainly.
So, just - a couple of hundred thousand more at the half year but again,
we're not looking at for example, we have the projection out there for 2011
to take sales from almost 50 to almost 80, we don't anticipate a major gear
up or ratchet up in SG&A to accomplish that. It's not necessary.

<Q - Richard Hoss>: And the last question from me, the 288 million in

: Yes.

<Q - Richard Hoss>: I'm assuming none of this is in guidance?

: Minimal amounts,
Rick. We always have a piece of new business in our guidance.

<Q - Richard Hoss>: Okay.

: It's not usually a
significant piece. Major awards out of that $288 million would add to the
guidance we have out there.

<Q - Richard Hoss>: Okay. And so just thinking of historical performance
perspective, of the bids that you typically solicit or you place, what
percent do you think is just a reasonable expectation for a win?

: Rick, we can't give
you that anymore, because our business model has changed to some extend. When
we used to be 100% direct to the U.S. government, we could anticipate wining
13, 14, 15% of the bids outstanding, even though the industry average was in
the vicinity of five.
Now with the way we bid, the fact that we're bidding major large contracts to
major OEM's, it's not the same. For example with Spirit, we are one for two.
Now I can't sit there and tell you that in my package I'm going to win 50% of
my bids, kind of the same thing with Boeing. So it's not a percentage basis
anymore that we can go off of, skew - if I gave you that answer it could very
well skew. I can win one contract right now, in that number that would be 20%
of the overall outstanding at the moment. Now that might be the only one I
win and lose seven others. Am I really at 20% or am I at 12%? So that's not
as easy to quantify anymore.

<Q - Richard Hoss>: Okay. The point being that this 288 million is really -
if you're successful, it would be a descent upside potential for your outlook
for '10 and '11?

: 100% correct.

<Q - Richard Hoss>: Okay. Thank you, gentlemen.

: Okay. Thanks Rick.

Your next question comes from the line of Marco Rodriguez of Stonegate.

<Q - Marco Rodriquez>: Good morning, guys. Thanks for taking my question.

: No problem, Marco.
How are you?

<Q - Marco Rodriquez>: Doing well. I was wondering if you could talk a little
bit about your top line in the quarter. Did everything come in according to
your internal plan?

: Absolutely, right
on the money actually.

<Q - Marco Rodriquez>: Okay. And then kind of following up on a previous
question in regards to Sikorsky and the gold member supplier status, could
you provide a little more color in regard to this presentation that either
you are making or somebody is making to the...

: Sure. We obviously,
internally have had to prepare presentations to make to what I'll call the
Sikorsky team that comes out and does the analysis of whether or not you
qualify. We are done with that process. We obviously have a 100% on-time
delivery. We've had a 100% quality. Then the third element of this is a lean
manufacturing score. The last two times they've been in, to audit us, our
lean manufacturing score has exceeded their requirement, which now has us
eligible to be presented.
They will take - make a presentation that the Supplier Gold team that visits
the company, will now take CPI, put the presentation in their format and
present CPI to the Sikorsky Supplier Gold Board of Review if you will. And
present to them why they believe CPI is now deserving of Supplier Gold
status. Once that is done, then UTC is notified that Sikorsky is making us
Supplier Gold. What that does, is allow other divisions within the UTC family
to know that CPI is Supplier Gold. So if anything comes off in Hamilton
Sundstrand or Pratt & Whitney or any company like that, they can go to a list
and say, "huh, let me see, this company CPI makes structural parts, they do
assembly. Let me see if there is anything that can do with us, since they're
now Supplier Gold."
So, that's really the process. We're being been presented by the localized
committee to the Board of Review, in the coming weeks, in the month of August
and we'll see where it takes it us from there.

<Q - Marco Rodriquez>: Okay. So just represent, so you're not present at that
particular meeting?

: No, we are not.

<Q - Marco Rodriquez>: Okay, all right. And then I was wondering if you could
update what was your cash flow from operations and CapEx for the quarter? And
then kind of discuss the expectations of your cash flow for the second half
of this year?

: The full Q will probably be
filed tomorrow. Our cash flow for the quarter was slightly negative due to a
build up of some of those bigger programs. We anticipate that our cash flow
for the remainder of the year will come back around to the way it was in the
fourth quarter of last year and be positive again as we start delivering on
those orders. So, but it was slightly negative in the second quarter. Was
that the whole question?

<Q - Marco Rodriquez>: Yes. Okay, so...

: CapEx, you asked about
CapEx, that was the other part of the question. I knew it, I remembered
something else.

<Q - Marco Rodriquez>: Right.

: CapEx is - it was actually
fractionally lower this quarter than the - this previous six month quarter -
six month period.

<Q - Marco Rodriquez>: And then so given your expectations for cash flow for
the remainder of the year, is there any expectation that you'll be perhaps
passing your line of credit again or anything of that nature?

: Not in the current cash
flow projection, no.

<Q - Marco Rodriquez>: Okay. And then last question I have in regard to the
bids outstanding, if my memory is serving me correctly, I believe that
Sikorsky was or may be perhaps still is maybe 40 to 50% of that. Is that
still the status?

: Correct.

<Q - Marco Rodriquez>: Okay, great. Thanks a lot guys.

: You got it. Thank

Your next question comes from the line of Michael Callahan of CapStone

<Q - Mike Callahan>: Good morning, guys and nice quarter.

: Thanks Mike.

<Q - Mike Callahan>: One question I had on the revenue going forward. It
looks like there's quite a bit of growth based on the - first of all, the
second half of the year and then obviously accelerating in the next year.
Well, I guess first on 2010, I know you expect to be on pretty much full
production on the major programs, but do you have any insight as to the
timing of how that might flow through, because obviously there's going to be
a big pick ups since this current quarter?

: The third quarter
will be up slightly from the second and then the fourth quarter is where
you'll see the biggest increase getting us up in to our revenue guidance
range, if that's what you're asking?

<Q - Mike Callahan>: Yeah.

: And then 2011
should, again, as it happens every year with CPI, 2011's first quarter will
be much better than 2010's first quarter and then going forward the build-up
will be steady and consistent quarter-to-quarter throughout 2011. We're now
hitting stages with our delivery schedules that we'll be building two versus
- build three of these and then wait, because we have to test them and do
this and do that, with them all getting into production phase, the quarterly
revenue stream will be even more predictable than it is today.

<Q - Mike Callahan>: Okay, thanks. And then I guess, with fourth quarter
increase where really - that's where you see a substantial amount of the
growth, is that - going to be consistent year-on-year pretty much?

: Well, what is it
going to be - it's going to be consistent with previous years, for whatever
reason, and I guess the reason's probably obvious, is - other companies our
other customers. First it was the U.S. Government, who would let out a whole
bunch of new contracts in early October each year and you'd go ahead and
start working on them very rapidly and that's what boosted the fourth quarter
prior to what's going to sub-contractors. Now obviously they want to deliver
as much to the U.S. Government as they can, or to their - if it's a
commercial program to their customers. And so the fourth quarter just seems
to have a big push put in it. I think what's going to happen though now with
the production in 2011 timeframe and with the clearly defined delivery
schedules, is it will be much more predictable and I'll call it much more of
a steady growth versus a big push into the fourth quarter that we've seen
every other year. So '10 will have the big push in the fourth quarter again,
and then I think '11 will be a much smoother increase from first through
fourth on a much more linear basis.

<Q - Mike Callahan>: Okay. Thank you.

: Okay.

<Q - Mike Callahan>: And then just maybe one more thing on your bids
outstanding. Are you guys looking to maybe change the mix of your business,
heavier weighted towards commercial with the current business you're going
after or are you still to seeing a lot of opportunity on the military side?

<A - Edward Fred, President and Chief Executive Officer>: Right now, a lot of
it's still on the military side as a subcontractor. Commercial, I think will
start to pick up -- the ability I should say to bid on commercial things.
It'll start to pick up I think as 787 starts to define itself before over the
worries of whether or not they can be produced on time, the delays that
Boeing has experienced.
I think once that happens you'll either see - we'll either see us have the
opportunity to bid on 787 work or bid on other commercial work as a
subcontractor because those companies are taking on 787 work. So to me that's
the big driver right now in commercial at least for us. Is 787 getting it on
schedule, getting it start to - into production and again we'll see, either
the ability to directly bid on 787, or we will get indirect opportunities,
because the other companies are gearing up for 787.

<Q - Mike Callahan>: Okay, great. Thank you. That's all from me.

: Thanks Mike.

Your next question comes from the line of Russ Silvestri of SKIRITAI Capital.

<Q - Russell Silvestri>: Hey good morning, can you hear me?

: Yes, sir. Russ, how
are you?

<Q - Russell Silvestri>: Fine, thanks. A couple of things, one, you didn't
mention Spirit at all, I was curious about that. Second, I was - the other
questions I have related to the SG&A in particular, how much of the SG&A
component was stock-based compensation? And also just a little bit
depreciation as well on the cash flow?

: I will start with
stock-based compensation. In the six months period, half a million dollars in
round number or 97, if you want the exact number.

<Q - Russell Silvestri>: Depreciation?

: Depreciation for the six
month number is 174. Okay?

<Q - Russell Silvestri>: The third question relates to Spirit Aero. It wasn't
mentioned anywhere in the press releases, and I was just curious what's going
on there.

: Simply, because
right now, we're not in a high level of production; we're in a bit of a dip
with them, as planned nothing surprising. Because they're in their test
flight mode, if you've been following General Dynamics conference calls and
press releases. They've flown I believe three or four planes now, one set
that we're - one set of leading edges that we've worked on is now going
through bird strike. We're slowly building units six, seven and eight. And so
we're in the expected lull on the 650 program. Once they get flight
certification, which they're expecting by the end of the year, we go back
right on to the schedule that they'd given us previously, which will generate
a bunch of revenue in '11 and certainly in '12.
So 650 is right where we hoped it would to be. I don't know how much any of
you on the call follow them, but in their call, their CEO once again, General
Dynamics CEO once again reiterated they have over - they have - he's saying
200 firm orders on the G650. Any dropouts they've had have been back filled
with new customers and some of the articles that are being printed say
there's at least 250 orders now. I'm not going to speak for General Dynamics
certainly, but you can read from that what you will, whether it's 200 or 250.
Just keeping in mind that all of my projections are based on only 134, so if
we get to 200 somewhere along the way, that will be an increase to our
revenue in the out years or what have you. If its 250, if it's 500, if it's a
million, they will all be out year increases.

<Q - Russell Silvestri>: Got you. And what kind of revenue do you generate
per plane?

: I can't really
discus that Russ, because then that gives out, if you will to the general
public, the cost that Spirit is paying for certain parts and they would
really frown on me doing that.

<Q - Russell Silvestri>: Okay. And then last question I'll ask is that - as
it relates to 2012, in the past, I mean you've gone forward and given us, the
year out guidance, usually at this time of the year and I was wondering, are
you expecting to do that at the end of the third quarter or when do you -
would we expect to see or hear about 2012?

: I would think at
the end of third quarter when I make my third quarter conference call
announcement, it will be in the press release and in our public projections.

<Q - Russell Silvestri>: And what will cause you to change your target growth
on revenue and earnings particularly for 2012?

: What would cause me
to change 2012?

<Q - Russell Silvestri>: Just you - you come out with your revenue guidance
and your earnings growth of 50 to 60% with top line growing 30%, what would
cause 2012 to be different than 2011?

: Well, first off,
that that was done in 2008, for a three year period. But at this point, I'm
not sure it's going to be 30 to 35 or 50 to 60. We're still analyzing that.
If I knew that for sure, I would've announced it in this quarter, to be
honest with you. I'd like to give you folks as much information as I can.
We're still trying to put that together looking at some of the contracts that
might be close to award before I go - I don't want to put out a 2012 now and
revise it three months from now. It's a little silly. But, we're looking at
the company continuing to grow and we can get more specific about it probably
three months from now.

<Q - Russell Silvestri>: Thank you very much.

<A - Edward Fred, President and Chief Executive Officer>: Okay, Russ. Thanks.

Your next question comes from the line John Kohler of Oppenheimer & Close.

<Q - John Kohler>: Good morning, gentlemen. How are you?

: Hey John, how are

<Q - John Kohler>: Good, thanks. Thanks for the additional balance sheet
information. Thought it was pretty helpful.

: Yeah, we're glad. No

<Q - John Kohler>: I did get a question out of it. So, you're lucky.

: That's good.

<Q - John Kohler>: I noticed there was an increase in the treasury stock

: Yeah.

<Q - John Kohler>: And I was wondering, when those were purchased and what
was the reasoning behind that?

: It wasn't that they were
purchased. I traded in shares of stock, in order to exercise stock options,
so I bought, I used cash for a part of it and some of the shares I held as
part of it.

<Q - John Kohler>: Okay, great.

: So those shares go into
treasury stock.

<Q - John Kohler>: Got you. Okay. Next question, you sort of touched on it
before on the gross margin and the mix. I'm curious if I could get a little
more information on the improved time and product cycle efficiency that
you're seeing. Is that meeting your expectations or you still have some more
to go in meeting those and how much more improvement, do you think you can
bring out of them?

: Well, I think the way I
guess, I would characterize it is. We always expect to make improvements once
we're into a program. Have the improvements come a little bit quicker, than
we might have anticipated? Yes, absolutely, I think that's why you saw the
good margin.

<Q - John Kohler>: Right.

: This quarter. But again,
that's also involved in product mix. So, for example, part of the programs
that made up this mix, we're very - we're becoming more efficient more
quickly. That doesn't mean next quarter, if we work on some - another new
program and it has a high level of revenue that we're as efficient on that
one, yet.

<Q - John Kohler>: Right.

: In general, why you see the
tremendous growth, in everything in 2011, and '12 because we certainly expect
to be completely efficient on all of those jobs. How much more we can squeeze
out is very difficult to tell. I mean that's not necessarily predictable.
We're always looking for new ways. And whatever that is whether it's a better
assembling methodology, whether it's lowering the factory overheads that go
into the overall general rate of the entire company. We are always
consistently looking to keep SG&A down wherever possible, because quite
honestly it adds nothing to the bottom line of the company. So if we can keep
it down, we'd do it, and that's really the best answer I can give you right

<Q - John Kohler>: Okay. How are you holding out on floor space?

: We're still good. We're
still good. We took I think 4,000 square feet next door, literally next door
building that has probably 25% usage now due to the bad economy and used it
for storage. So all of our shipping boxes that you had seen when you came to
visit us et cetera have been moved to that location which created more actual
production or assembly space within the company. So we're still in the
terrific shape there.

<Q - John Kohler>: Okay. Sounds like you can have a shift if you need to...

: As long as the things - the
kinds of things we're working on now. If we win a whole lot of these bids
that are out or we will win a variety, we may have to take more space but
that will be a pleasant problem to have.

<Q - John Kohler>: Okay. And then last question, I'll let someone else take
over. You mentioned in the press release the E-2D and the C-2A for wing panel

: Yep.

<Q - John Kohler>: Can you break that out, is it possible? What the split was
between the two on that $27.6 million award? Was it predominantly Hawkeye or
was there...?

: We actually can't
tell you that, because we don't know it necessarily. They told us they need X
number of wings. At this moment, we don't know what that breakout is but
we'll find out eventually, between C-2 and E-2. We don't know that answer.

<Q - John Kohler>: Okay, great. Thanks very much.

: Okay. Thanks John.

Your next question comes from the line of Michael Potter of Monarch Capital.

<Q - Michael Potter>: Hey guys. Congratulations on...

: Hey, Mike. How are

<Q - Michael Potter>: Another really good quarter.

: Thank you. And
before you ask your question, let me just tell everybody Mike's solely
responsible for the full balance sheet and income statement you see on our
press release folks so, thank him not me.

<Q - Michael Potter>: Yeah, please send me the gifts. Anyway, just a couple
of quick questions, on the Supplier Gold, if I heard right, you mentioned
that 50% of the bids outstanding were with Sikorsky?

: That was just about
right, about 130, 150 million, somewhere in that middle entity.

<Q - Michael Potter>: Will the Supplier Gold status will that help to break
the log jam that's been occurring there for a long time?

: We can only hope
so. Again I think I've said this a numerous times. Historically, when they've
given out Supplier Gold to a company, they've also accompanied it with a
decent sized award. So, yes we're hoping that we've got a $130 million worth
outstanding with them that we get a nice chunk of business to go along with
that Supplier Gold award. The log jam is constantly being - we constantly try
to break it even without Supplier Gold. We literally have a person up in
Sikorsky every single week of the year and sometimes two days of the week,
because A, they're that bigger a customer - that important a customer to us,
B, the general vicinity allows us to the up there within an hour and half,
ferry ride and we're trying to get as much of their business in this facility
as we can. So, I do believe it will help amazingly, if we're able to get the
Supplier Gold.

<Q - Michael Potter>: Okay. And then on the Boeing, on the A-10 opportunity,
want some additional work. Can you just review exactly, is there a further
opportunity for Boeing to offload more work and on the - I guess orders that
we received so far, does that cover all the wing sets that Boeing is
contracted to provide the Air Force?

: Okay. First answer,
the first contract that we got, basically 70, $71 million. We got another $10
million added to that, I'll call it unsolicited. We didn't put out a bid for
it. What we are doing is providing wing subassemblies, if you will, the wing
tip, the pylons, various either flaps or slats or panels or whatever. I think
they wanted to see how good we really were. To a lot of companies, CPI is
still a very small, very unknown entity.
Once they saw the quality of what we produced and how we went about our job,
they came back to us and said, when your stock gets here, we're putting in
light, we're putting in various tubing, we're doing this, we're doing that.
We think we'd like to give you that so that we don't have to do it here. You
can add more and more to your assembly. And that's what accounted for the $10
million worth of extra work that was added to that.
Now you ask is there more potential? Absolutely. We're discussing with them
now more of that same exact potential where they've said, "well you did this
really - now you've added the lights and they look terrific and we love what
you did on the flashing thing at the end of the wing tip; how about these
things too." So we're constantly talking to them about increasing the scope
of what it is we do, okay. So that's the answer to your first question.
The second part is as of right now we are under contract that the $81 million
that we have in contracts from them is for the 242 chipset orders they have
with the U.S. Government. Now, there's an awful lot of talk going on that
that 242 will go up somewhere over 300 chipsets. There are about 368 10s.
There's a discussion as to how many of them are sitting in the desert. It's
anywhere from 0 to 20 or 30. But they have asked the U.S Government to
re-outfit the entire fleet with the new wings. We'll see if that occurs. If
that occurs, obviously we would expect to be producing X number more units
over 242.

<Q - Michael Potter>: Okay.

: Okay.

<Q - Michael Potter>: That's perfect. Thanks guys.

: Thanks Mike.

[Operator Instructions]. Your next question comes from the line of Scott
Hudson of MSI Fund

<Q>: Hey guys. Regarding the three major long-term production programs, can
you give me sort of a feel as to how those trend, post 2011, do they - I
mean, is it a drop-off - a significant drop-off or is it kind of a ramp down?
How does - how should I look at that?

: It's neither. It's
still an increase on all three major programs. 2011 is just the first year of
major production.

<Q>: Okay.

: If you do a little
core -- industry research and look at GD's delivery schedules for G650s, look
at Boeing's delivery schedule on A-10 wing sets. You'll see '12, '13, '14
should all increase on those three programs. There's nothing here - we don't
want you to have the impression that 2011 is our banner year, it's our banner
year compared to every year prior. It is not our banner year going forward.
We anticipate if we continue to bring new business into this company that
'12, '13 and '14 should all be better than '11 because the three major
programs are all going to be better than they were in 2011.

<Q>: Got you. Thanks so much.

: My pleasure.

Your next question comes from the line of Paul Berger of TLA Associates

: Oh, no.

<Q>: Good morning guys.

: How are you Paul?

<Q>: Good. On the outstanding bids...

: Yeah.

<Q>: I'm interested separately the half that's with Sikorsky and the other
half. Can you give us any more color and has anything been added or dropped
out? And do you see any fruition?

: I can't give you
any more color. I really can't talk about who the customers are and what the
programs are et cetera. As far as drop out, it was a very quiet quarter.
There wasn't a lot of drop out. There wasn't a lot added, which is not
atypical for summer months quite honestly for whatever reason besides
vacations and the obvious. No major proposals tend to come out during this
period of time. So, there was - like I said little bit of dropping out, a
little bit of adding in some of the dropping out were in programs that went
away, but as we told you guys in the past, that number we give you is only
for things that are less than 12 months old. There are one or two that are
more than 12 that we've taken out, but are still very active, not going
anywhere, not going to be un-awarded in our opinion.
As far as fruition, yeah, we're hoping a lot of it comes to fruition. There's
a healthy chunk of it right now that we know is extremely active and will be
awarded. Now will it be us? I sure hope so, I can't guarantee that obviously.
We know - where we're highly competitive and where we may not be as
competitive and - we kind of figure that into our winning percentage and
possibility going forward, okay?

<Q>: Very good, yeah.

: I thought maybe
you'd fell asleep on this, Paul.

<Q>: I was thinking about it.

: Okay.

<Q>: Thanks Ed.

: Sure, thanks, Paul.

There are no further questions. I will now turn the conference back to

Edward Fred, President and Chief Executive Officer:
Thank you, Christine. Since, nobody has the question, I'll address it very
briefly and simply tell you, no, we have no idea why the stock price did what
it did yesterday. There was no news, there was no secretive news, there's no
anticipated bad news, whatever occurred yesterday occurred, again, completely
outside the realm of anything we said, did, or had control over. So again, I
assumed somebody would ask the question today, you didn't. So I just felt
that I would address it. But there is no knowledge on our part as to why the
stock performed the way it did yesterday, so.
With that I will thank you all for participating in the call, we'll talk to
you again in three months. And thanks for your support.

Ladies and gentlemen, this concludes our conference for today. Thank you all
for participating, and have a nice day. All parties may now disconnect.

This transcript may not be 100 percent accurate and may contain misspellings
and other inaccuracies. This transcript is provided "as is", without express or
implied warranties of any kind. Bloomberg retains all rights to this transcript
and provides it solely for your personal, non-commercial use. Bloomberg, its
suppliers and third-party agents shall have no liability for errors in this
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performance or use of such transcript. Neither the information nor any opinion
expressed in this transcript constitutes a solicitation of the purchase or sale
of securities or commodities. Any opinion expressed in the transcript does not
necessarily reflect the views of Bloomberg LP

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From: leigh aulper10/7/2010 10:32:50 AM
   of 213
Upgrades To Giant C-5 Galaxy Airlifter Greatly Increase Performance & Reliability
16:49 GMT, October 5, 2010 The U.S. Air Force currently operates two types of jet-powered cargo planes capable of traveling intercontinental distances: the giant C-5 Galaxy and the smaller but more nimble C-17 Globemaster III. There are 111 Galaxies in the fleet, and the service plans to own a total of 222 Globemasters when production is completed. No other nation has anything remotely approaching the reach or carrying capacity of the U.S. airlift fleet. But the C-17 has lately been the darling of the fleet while the C-5, although capable of carrying far more cargo, has been something of an embarrassment. The main reason why was that the C-5 was equipped with aged, under-powered engines that caused chronic reliability problems. It wasn't hard to convince Congress that additional C-17s needed to be bought, because C-5s were out of service so much of the time.

Now that looks likely to change, thanks to a series of upgrades that will transform many Galaxies into a vastly improved "M" variant. The C-5M is so much better than earlier "A" and "B" versions that it's almost as though the Air Force has bought a new plane:

-- Carrying 45 tons of cargo, the C-5M can fly 900 nautical miles farther than earlier versions of the Galaxy without refueling, and 2100 nautical miles farther than a C-17.

-- Carrying the same load to a destination 4,200 nm distant, a C-5M requires only 5400 feet of runway to get airborne, compared to 6300 feet for an earlier Galaxy and 7800 feet for a C-17.

-- If filled to make maximum use of its cargo capacity, a C-5M can transport twice as much cargo as a C-17 -- six troop carriers versus three, 36 pallets versus 18 -- while flying 50 percent farther.

-- When moving comparable loads, C-5Ms cost 35 percent less than C-17s to carry a pallet of cargo a given distance, and consume 40 percent less fuel -- while generating considerably less greenhouse gases.

Of course, the C-17 has important virtues too, such as the ability to back up on the ground using thrust reversers and land in some places where C-5s do not fly. But after a year of testing three pre-production models of the upgraded C-5M, a delighted Air Force is beginning to realize that its ugly duckling may now be as good or better than the C-17 swan in many measures of performance. In March, the Air Force Operational Test & Evaluation Center in Georgia rated the C-5M as "effective, suitable and mission-capable" -- adjectives that didn't used to be applied to the Galaxy very often. Although the program to modernize the plane's electronics and engines ran into some cost problems, it looks likely the improvements will pay for themselves through greater productivity, improved fuel efficiency and reduced maintenance costs.

There's a lot of talk these days about bolstering the efficiency of the military, with much of the discussion focusing on process improvements where progress is hard to measure. But the Air Force's C-5M program offers a different, more concrete path to achieving big savings. A plane that once spent much of its time in hangers awaiting repairs will now be highly mission-capable, and unlike other strategic airlifters will be able to fly straight from the East Coast to the Middle East without having to refuel -- producing huge savings in logistics costs. The Air Force has taken a mature but sound airframe (30 years of service life remaining) and made it markedly more flexible, reliable, versatile and productive. The engines are actually ten times more dependable on the C-5M than they were on earlier versions. They're even more environmentally friendly. If Pentagon policymakers ever decide to reward medals for bolstering efficiency, the people who are executing the C-5M effort deserve to be early recipients.

Loren B. Thompson, Ph.D.
Early Warning Blog

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To: leigh aulper who wrote (199)10/7/2010 10:55:03 AM
From: leigh aulper
   of 213
Aeroplane upgrades could futureproof US Air Force fleet
By David Axe |04 October 2010

SkyLifter blimp could carry entire buildings 1,000 milesSocial network connects driversRenault goes electro-bonkers at the Paris Motor ShowEven four decades later, its dimensions are awe-inspiring. The C-5 Galaxy cargo plane, built by Lockheed Martin, is 247 feet from nose to tail. Its wings measure 223 feet across. Resting on its 28 wheels, the airlifter towers 65 feet over the tarmac. Fully loaded with up to 135 tons of cargo, the C-5 weighs more than 380 tons and can still reach speeds of up to 520 miles per hour. The biggest aeroplane in the world by some measures when the first of 127 copies entered US Air Force service in 1970, today the Galaxy has been eclipsed by the slightly larger Russian An-124. But it's still one of the biggest machines ever made.

For all its impressive dimensions, the C-5 has been a lacklustre performer. Just five years after entering service, the Galaxy fleet began to suffer structural cracks that required building all-new wings for the first 77 copies -- a process that lasted until the mid-1980s. In the meantime, the Air Force restricted the plane's payload to a modest 25 tonnes. Ten years later, the Galaxy's TF-39 turbofan engines -- four per plane providing 43,000 pounds of thrust per engine -- began acting up.

The Air Force's stated goal was that three-quarters of C-5s would be ready to fly at any moment. In reality, just over half were in flying condition. By the turn of the century, the giant plane had developed additional problems. Its avionics, state-of-the-art when designed in the 1960s, couldn't meet the UN's Global Air Traffic Management standards, meant to ensure flight safety in crowded airspace. Increasingly unsafe and often unable to fly, the C-5 was "getting old," said Lorraine Martin, a Lockheed vice president.

In 2000, the Air Force took a hard look at its biggest aeroplane. There were two basic choices: replace the C-5 with newer but smaller Boeing C-17s, or do something to fix the Galaxy's reliability and safety problems. The results of that study led directly to a cavernous hangar at a Lockheed facility in Marietta, Georgia, where today a highly-skilled workforce is using specially-developed tools and procedures to conduct industrial surgery on a steady procession of finicky old C-5s. The result is an essentially brand-new aeroplane -- and potentially a new philosophy for the world's biggest and most powerful air force.

The C-5 has forced the Americans to redefine what "old" really means for military aeroplanes. Where once planes were simply discarded after a preset number of flight hours, today with carefully considered upgrades they can keep going and going. The implications are enormous for the military, and for the taxpayers that fund it.

Diagnosis and prognosis
The Air Force's study of the C-5's health concluded three things: the aluminium airframe with the new wings had 80 percent of its life remaining; the engines, and the avionics, did not. Fixing the latter might cost $150 million per aeroplane, compared to $250 million for a factory-fresh C-17. But if $100 million bought another 40, 50, even 60 years of service for the biggest aeroplane in the Western world, it was well worth the cost, proponents argued. Against the wishes of many elected officials, the Air Force decided to buy new engines and avionics for the 52 healthiest C-5s rather than funnel that money into newer C-17s. The new aeroplane would be designated the C-5M Super Galaxy -- "M" for "Modernised."

First, Lockheed needed partners. For avionics, the Maryland-based, number-two US arms-maker tapped Honeywell in New Jersey. Honeywell would provide new radios, autopilot, collision-avoidance sensors and electronic displays to replace the 1960s-style, round dials in the cockpit. General Electric, the Connecticut-based company that built the C-5s original TF-39 engines, won the contract to provide more powerful, reliable and fuel-efficient and also quieter CF-6 engines as replacements.

Lockheed and the Air Force were bullish about the project's prospects. They estimated that the C-5M fleet would save a million dollars a day in maintenance and fuel costs compared to the unmodified C-5s. General Norton Schwartz, then chief of US Transportation Command, anticipated a big improvement in the percentage of Galaxies ready for action. "For me, 75 percent is the floor, not the ceiling," he said.

While the Air Force inspected its C-5s at eight different air bases scattered across the US, in order to find the best candidates for surgery, Lockheed prepared its Marietta facilities to receive the first giant airlifter. That meant installing tailor-made, six-story scaffolding in four of the site's massive hangars. "The scaffold looks like a web that encompasses the aircraft," Martin explained. "Our folks can work right up to the aircraft with their eyeballs next to the [wing] leading edge."

Lockheed was familiar enough with the Galaxies to know that each one would require special treatment. Over the years and thousands of flight hours apiece, the Galaxies have stretched, compressed and warped in different ways. That especially applies to the support pylons that connect the engines to the wing. "None of the original holes and fittings are in the same place from aeroplane to aeroplane," program official Jeff Armentrout said. "You must fit the new pylon very precisely. It's meticulous work ... a lot of it done by hand from inside the fuel tank" in the wing.

To get a perfect fit the first time, every time with the new, custom pylons, Lockheed brought in laser scanners capable of precisely measuring the distance between rivet holes. In total, Lockheed spent $24 million getting Marietta ready for C-5 work. Outfitted with lasers, standing atop the new scaffolding, Lockheed's 350 C-5 surgeons were ready to receive their first patient. It arrived in 2005. After the plane's leftover fuel was carefully offloaded, work got underway.

In the beginning, surgery took between 12 and 18 months per jet. The first C-5 rolled out of the hangar in May 2006 and flew for the first time in June. It and the next two Super Galaxies would spend the next three years in testing in Marietta and at an Air Force base in California. In 2007, Wade Smith, one of the engineers on the test program, reported cautious optimism. "We have no problems with the engines," he said. "The increased thrust has been very impressive."

By 2009, cautious optimism had given way to outright bragging. At a base in Delaware, the Air Force loaded up one of its new C-5Ms with 80 tons of cargo, intending to bust several altitude, payload and time-to-altitude records. In a 90-minute flight, the Super Galaxy broke 41 records, including one set in 1989 by a supersonic Russian bomber. "This doesn't happen very often ... not in one flight," said Kristan Maynard, an official from the record-keeping National Aeronautic Association.

Armentrout dubbed the improved C-5 a "rocketship." It might have taken 40 years, but the one-time biggest plane in the world was finally living up to its potential.

While the first three C-5Ms conducted tests and broke records, Lockheed kept bringing additional planes into its hangars for modification. Confidence increasing, the company said it would hire more workers to boost the production rate to 11 or more Super Galaxies per year.

Testing began shifting into war zones. In February, a C-5M delivered cargo to Iraq for the first time. And in July, two C-5Ms teamed up with eight older Galaxies for a comparative exercise delivering 100 US Army helicopters to Afghanistan from a Navy cargo yard in Rota, Spain.

The contrast between the new and old Galaxies was stark. The eight older C-5s together managed just 23 missions, compared to 23 missions for the two C-5Ms, according to Colonel Patrick Cloutier, one of the mission's commanders. The C-5Ms carried 55 percent of the total cargo, despite flying one fewer mission than their older kin. The Super Galaxy ended the 30-day operation with a 96-percent reliability rate. The older C-5s scored 82 percent. "In short, the C-5M did what it was designed to do: deliver cargo more effectively and efficiently than its predecessor," Cloutier said.

As such, the Super Galaxy promises to relieve some of the headaches associated with the war effort in land-locked Afghanistan. Owing to restrictions on shipping arms through China, Russia and Iran and Taliban attacks on convoys through Pakistan, roughly a quarter by weight of all supplies for the NATO war effort arrives by air. The air bridge accounts for a growing percentage of the cost of the war. As it proved in July, the C-5M could help reduce those costs. Not bad for an aeroplane that's older than most of the people who fly it.

"This really is a modern aircraft for a modern Air Force," boasted Lieutenant Colonel Mike Semo, an Air Force officer attached to the modernisation program. But it's a modern aircraft with its origins in the 1960s. For an Air Force that has traditionally fixated on always buying the latest, brand-new hardware -- F-22 and F-35 stealth fighters, C-17 cargo planes, killer drones -- the C-5M is a powerful reminder that newer isn't always better. With the right design and some careful surgery, old aeroplanes can evolve.

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