Airbus, Northrop Grumman win Air Force tanker contract

McClatchy NewspapersFebruary 29, 2008 

WASHINGTON — A European aerospace consortium and the Northrop Grumman Corp. Friday won a $30 billion to $40 billion contract to begin replacing the Air Force's aging fleet of aerial tankers.

The decision to use an airplane built in Europe was a stunning setback for The Boeing Co. and it ignited an instant firestorm on Capitol Hill. Chicago-based Boeing, which has built the Air Force's tankers for the past half-century, gave no indication whether it would appeal the award but said it was exploring its options.

Despite a major Pentagon procurement scandal, Boeing had been heavily favored to win the contract, which could be worth an estimated $100 billion as the Air Force replaces its fleet of roughly 530 mostly Eisenhower-era aerial tankers.

Air Force officials said the Northrop Grumman-European Aeronautic Defense and Space Co. bid outpaced the one from Boeing in most areas. EADS is the parent company of Airbus, Boeing's main rival in the global commercial airplane market.

"More passengers, more cargo, more fuel offload, more patients that we can carry, more availability, more flexibility and more dependability," Gen. Arthur Lichte, the commander of the Air Mobility Command at Scott Air Force Base in Illinois, said of the Northrop Grumman-EADS KC-45A tanker.

Neither Lichte nor other Air Force officials would provide details on their evaluation of the competing bids, saying they'll debrief both companies in the next several weeks. They denied that the procurement scandal had tainted Boeing's bid.

"There was absolutely no bias in this award," said Sue Payton, the assistant secretary of the Air Force for acquisition.

The first planes would become operational in 2013, Lichte said, adding that he hoped there wouldn't be any delays from a Boeing protest or congressional actions.

"From a warfighter's point of view, we need to get on with this," Lichte said

Northrop Grumman-EADS said the contract would create 25,000 jobs involving 230 suppliers in 49 states.

The Northrop Grumman-EADS tanker is based on the newer Airbus A330 airframe. The planes are built in Toulouse, France, with final assembly planned for a new plant in Mobile, Ala.

Boeing would have built its tankers, based on its 767 airframe, at its plant in Everett, Wash.

The tanker program will be the second largest Pentagon contract ever, behind the $200 billion Joint Strike Fighter, said Loren Thompson, an analyst with the Lexington Institute, a military research center.

Lawmakers with Boeing plants in their states were dismayed by the announcement.

"I am shocked," said Rep. Norm Dicks, D-Wash., a senior member of the House Defense Appropriations Committee and a major Boeing supporter in Congress. "There will be an uprising on the Hill. There are a lot of members who just won't accept this."

Other lawmakers with Boeing connections also were stunned, including Republican Sen. Pat Roberts of Kansas. The Boeing tanker would have been finished in Wichita.

"I am extremely disappointed in the Air Force's decision," Roberts said. " . . . I look forward to seeing their justification for this unfortunate outcome. If this decision holds, it will be at the cost of American jobs and American dollars, if not our national security."

Alabama lawmakers were elated, however.

"The Northrop Grumman-EADS team put forward a competitive offer to build the tanker and won the competition on the merits of the proposal and the outstanding capabilities of the aircraft," said Sen. Jeff Sessions, R-Ala.

Both sides had engaged in heated public relations campaigns to promote their tankers. Northrop Grumman-EADS sought to portray their A330 as an American-built tanker that was newer, larger and could carry more fuel, passengers and cargo. EADS has been gunning to crack the U.S. defense market, and Los Angeles-based Northrop Grumman hasn't produced a military plane since the B-2 Stealth bomber.

Boeing claimed its 767 was all-American, cheaper to operate, could fly into smaller airfields and would take up less ramp space.

"This is going to be a huge shock to many people because Boeing has been building Air Force tankers since the Cold War," said Thompson. "And many experts, like me, didn't believe they could lose."

The Northrop Grumman-EADS tanker was ranked superior in four of five categories, Thompson said, and the Air Force seemed to be especially impressed that it was bigger and could carry more fuel. Northrop had taken a risk in teaming with a European company, potentially alienating members of Congress and some of its customers, Thompson said.

"This is a huge achievement for Northrop because they took a big risk and convinced the Air Force to think creatively about the mission," he said.

Congress had originally approved a $23 billion deal for the Air Force to purchase 80 of the 767 tankers and lease 20 more. But the deal collapsed amid a 2003 procurement scandal that sent Boeing's chief financial officer and a top Air Force acquisitions officer to prison. Boeing's chief executive officer resigned. The investigation into the lease agreement was spearheaded by Arizona Sen. John McCain, who's now the frontrunner for the Republican presidential nomination.

Dicks said he had to wonder whether the scandal had affected how the Air Force looked at Boeing's bid, but added the scandal had left an opening for the Northrop Grumman-EADS bid.

"Anything can happen in a competition," he said. "But this is an industrial base issue."

In a press release, Northrop Grumman called the tanker a "game changer."

"Clearly the U.S. Air Force conducted a thorough and transparent competition in choosing their new tanker, which resulted in selection of the aircraft that best meets their current and future requirements," said Gary Ervin, a Northrop Grumman corporate vice president. "By selecting the most capable and modern aircraft, the Air Force has embraced a system that provides a best-value solution to our armed forces and our nation."

Ralph Crosby, chairman and CEO of EADS North America, said, "We are proud that the U.S. Air Force chose the Northrop Grumman/EADS team to modernize its aerial refueling fleet. EADS has committed our full resources to support this vital program for our prime contractor, Northrop Grumman, the U.S. Air Force and the warfighters that this system will serve for decades to come. We already have begun the work necessary to expand our U.S. industrial footprint in support of this important program."

Boeing said it was "obviously" disappointed.

"We believe that we offered the Air Force the best value and lowest risk tankers for its mission," said Bill Barksdale, a Boeing spokesman. "Once we have reviewed the details behind the award, we will make a decision concerning our possible options, keeping in mind at all times the impact to the warfighters and our nation."

Rob Hotakainen and Dave Montgomery of the McClatchy Washington Bureau contributed to this report.

ON THE WEB

Northrop Grumman's press release on the contract.

McClatchy Newspapers 2008

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