Boeing a front-runner again for tanker contract

By Julie Johnsson
Posted July 8, 2010 at 3:20 p.m.

Boeing Co. once again finds itself as the front-runner as Friday’s deadline approaches for submitting proposals for aerial refueling tankers, one of the largest and most controversial contests overseen by the Pentagon.

Although the latest contest hasn’t formally begun, Boeing and its primary competitor, EADS North America Inc., are jockeying for position and exchanging shots over which company’s tanker is the superior entry for the initial $35-billion contract. Their supporters, meanwhile, are wrangling over whether a long-running trade dispute between the U.S. and European Union should also influence the contest’s outcome.

Getting an early jump into the race, EADS submitted its 8,000-page tanker proposal on Thursday. Boeing intends to follow suit early Friday morning, said Boeing spokesman William Barksdale.

Boeing’s supporters in Congress scored a public relations win Thursday as word leaked that a panel of the World Trade Organization had pushed back the release date of a potentially embarrassing preliminary ruling on U.S. subsidies to Boeing from July 16 to mid-September. Another WTO panel last month ruled that Airbus, the commercial aircraft manufacturing arm of EADS, benefited from about $20 billion in prohibited subsidies. Pro-Boeing lawmakers are pressuring military purchasers to penalize any entry that benefited from illegal government aid.

Chicago-based Boeing has at least twice been considered a shoe-in to win the first of several contracts expected to total $100 billion to replace the U.S. Air Force’s fleet of Eisenhower-era airborne gas stations. But it previously was thwarted by an ethics scandal during decade-long saga, and then upset in 2008 by a consortium led by Northrop Grumman Corp. and the Netherlands-based European Aeronautic Defense and Space Co., parent to EADS North America and France-based Airbus SAS.

This time the aerospace giant enters the contest with strong backing in Congress, which must approve funding for the winning entrant, as well as a hefty home-team advantage. Northrop Grumman withdrew from the contest earlier this year after concluding it stood little chance of winning under the present contest criteria. When it didn’t land another U.S. company to replace Northrop as prime contractor, EADS decided to bid on its own.

“Airbus knew when the tanker contest began that it needed an American partner to take the lead,” said Loren Thompson, defense analyst with the Lexington Institute, a Washington, DC-based think tank. “It’s trying to go forward now without a partner, but that’s going to make its position politically untenable.”

Boeing also is poised to enter a tanker based on Boeing 767, a smaller, less expensive aircraft with lower fuel consumption than its A330-based rival – key factors that should favor Boeing under the incredibly complex scoring system devised by military planners, analysts said. Both aircraft will be judged against 372 mandatory requirements, as well as their life-time fuel and maintenance costs.

Boeing estimates its plane would burn 24 percent less fuel than the A330, Barksdale said, lowering the Air Force’s fuel bill by $10 billion. To offset that scoring advantage, EADS would have to significantly discount the price of its aircraft, Thompson said,  which would raise politically sensitive questions about whether it was using EU aid to under-cut Boeing to win one of the largest defense contracts in history.

But EADS officials aren’t daunted by the challenge posed by Boeing and its backing from a Democratic-controlled Congress.

“Let’s put it on the table,” said Ralph Crosby, chairman of EADS North America at a press conference Thursday. “We played this game for one single reason: to win. If we didn’t think we could win, we wouldn’t have entered the competition.”

Crosby pointed to the recent spate of victories of EADS’s tanker in competitions held by other nations, as well as the A330’s continued strong sales as the 767 enters the end of its commercial life cycle. He urged the Pentagon to stick to its scoring criteria and to keep the trade dispute out of the contest.

“We spend all our time talking about a bunch of crap that has no relevance,” Crosby added. “We’re wasting a lot of time trying to derail a process because somebody’s worried because their airplane is inferior.”

Boeing, meanwhile, maintains that it should compete on a level playing field, while defending the merits of its aircraft. Boeing’s “NewGen” tanker will be outfitted with armor and defensive systems it has developed for other military aircraft, as well as new perks such the 787’s heads-up flight displays.

“This will come down to which commercial airplane makes the best combat tanker,” Barksdale said. “This is going to be the most cost-efficient choice the government can make.” He added that the 767-based tanker will cost 15 percent to 20 percent less to maintain than the Airbus offer.

Airbus officials also took a shot the WTO delay on the Boeing case, noting that a July 16 release date may have put a damper on the Boeing 787’s debut at the Farnborough Air Show later this month.

“It smells like last week’s fish,” said Allan McArtor, chairman of Airbus Americas. Asked if the U.S. Trade Representative’s office had interfered in the process, he added: “You know who the parties are, how things may or may not have happened.”

But the WTO panel, on Wednesday, informed both parties in the EU-US trade spat that it needed more time to complete its work, responded Neferterius Akeli McPherson, a spokeswoman for U.S. Trade Representative Ron Kirk.

“Any suggestion that the United States sought to delay the interim report is untrue,” McPherson said. “The only request the United States made to the panel was to issue the interim report earlier.”

Read more about the topics in this post:

Companies in this article


Read more about this company »

Comments are closed.