WASHINGTON -- The Pentagon has offered U.S. defense contractors a big financial break to encourage their attendance at the Paris Air Show, the extravagant international arms bazaar that U.S. officials want to use to show off American military hardware that helped win the Persian Gulf war.
Officials at several aircraft manufacturing firms confirmed the offer and said it would be a boost to the struggling industry.
Since March 6, defense contractors have been told they no longer will have to pay to have certain military aircraft and equipment on display at the air show, a biennial event that will be conducted June 13-23, according to several Pentagon and aerospace industry sources.
The Army also distributed a letter saying it would make a variety of helicopters available from U.S. bases in Europe.
The savings for the contractors, some of whom can easily spend $1.5 million or more to make a credible showing in Paris, have been enough of an inducement to change the minds of some financially strapped companies that thought they couldn't afford exhibit at this year's event.
"We need to demonstrate our interest in Europe and our support of American industry," a senior defense official said.
"This is a major event. Last time, we didn't do very much."
Meanwhile, military and industry officials said contractors will be responsible for paying air show organizers for "ramp space" to park the aircraft, security arrangements and other support costs -- expenses that will be construed as legal "gifts" to the Defense Department that cannot be charged back to the government.
In another benefit to contractors, the military will schedule "training" missions to have pilots fly aircraft to Paris, sparing companies from leasing the planes and paying transportation costs. In exchange, the lease-free aircraft will be the "stars" of an overall U.S. military exhibition, not part of separate corporate displays. Aircraft manufactured under military contracts become the property of the government as soon as they come off the assembly line.
Raytheon Corp., which gained renown as maker of the Scud-busting Patriot missile during the gulf war, won't set up its customary corporate exhibits and hospitality "chalet" at the air show this year. It will, however, send a team to support a U.S. Army display of a Patriot missile battery, Lawrence McCracken, a Raytheon spokesman, said Friday.
"The costs are significant for a 10-day show and were a factor in our decision not to participate as we have in past years," he said.
McDonnell Douglas Corp., the nation's largest defense contractor, also decided to attend despite financial difficulties. Ken Jensen of the firm's helicopter subsidiary -- which produces the AH-64 Apache attack helicopter -- said recently that the firm "had already made the decision not to go, and then they [the Army] requested that we reconsider."
The Army will display Apache aircraft at no charge to the manufacturer, Maj. Pete Keating, an Army spokesman, said.
For corporate promotions designed to boost foreign military sales, the Army usually leases Apache helicopters at a rate of $5,585 for each hour of flying time, he said. The going rates in the Army aircraft arsenal range from $2,481 an hour for an OH-58D Kiowa Warrior to $8,710 an hour for a CH-47D Chinook transport helicopter.
Leasing military aircraft for air shows is "extraordinarily expensive," said Joel Johnson, an official of the Aerospace Industries Association who applauded the Pentagon's gesture. "There's been a whole range of policies to make life difficult and discourage foreign sales. What we had urged for some years is that equipment be made available basically on better terms."
A senior Air Force official observed that LTV Corp. will have to lease a C-29A jet for the air show because the Air Force has no plans to add it to the U.S. military exhibit. The firm had to pay at least $4,045 a day to display the plane at an air show in England last year, he said.
In Paris, the Lockheed F-117A Stealth fighter, which dropped precision-guided bombs on Iraqi targets during the war, will be shown, even though it is not available for foreign sales, the official said. Other Air Force jets to be provided to the air show all flew in the gulf war: the McDonnell Douglas F-15C and F-15E fighters; the General Dynamics F-16C; and the Fairchild A-10A Warthog close-air-support plane.
The Pentagon's decision to commit resources to promote the aerospace industry comes at a time when industry earnings have been declining, largely due to shrinking defense budgets, project cancellations, huge losses on troubled contracts and heavy investments in development programs. It also coincides with a controversial Pentagon move to help McDonnell Douglas and General Dynamics Corp. financially by delaying collection of a $1.35 billion debt owed on the recently canceled A-12 Stealth attack plane contract.
"They're trying to bend over backwards to help us [at the air show]; usually they tell you all the reasons why they can't," Mr. Johnson said. "We're seeing an erosion of the industrial base, so something like this helps industry and the military."
Increased overseas sales of U.S. military hardware not only would enhance industry revenues, but also would keep assembly lines open and even enlarge overall production to drive down the cost of each fighter jet, helicopter or missile, he explained. "We would argue the military benefits from displaying U.S. technical pre-eminence and power," Mr. Johnson added.
Industry officials first learned of the Pentagon's aggressive approach to Paris after Paul Wolfowitz, undersecretary of defense for policy, issued a memorandum March 6, declaring that the Defense Department needed to show "a positive U.S. presence" at the air show to demonstrate support to U.S. industry. The memo was written at the direction of Deputy Defense Secretary Donald J. Atwood Jr., the Pentagon's second-in-command who manages the department and its ties to industry.
"We're not doing anything extraordinary; it's got to be at a reasonable cost," said a senior defense official familiar with the air show plans.
"We haven't decided everything we're going to do."
The official tried to play down suggestions of a cozy relationship between the Pentagon and its contractors.
"We have lawyers looking very carefully at this," he said.
For some aerospace industry executives, the Pentagon's new willingness to help was unexpected. At the same time, some of the eagerness of defense officials to show off the weapons of the gulf war struck other executives as pressure to show up in Paris.
"Now they're doing something when we're all broke and not going," groused one industry executive, who asked not to be identified. He referred specifically to appeals from the military to provide specific services for the French air show, including one request to provide a bus to shuttle Air Force personnel between Paris hotels and Le Bourget Airport.