Boeing could face competition after all for Air Force tanker

McClatchy NewspapersMarch 19, 2010 

WASHINGTON — Barely a week after French, German and British leaders pounced on the Pentagon for its handling of a $35 billion contract for aerial refueling tankers, the Defense Department said Friday that it's considering extending the deadline for bids and a European company now says it may compete.

The decision did not sit well with Boeing supporters on Capitol Hill.

"They shouldn't cave to more games from a foreign competitor," said Sen. Patty Murray, D-Wash. "I believe in fair and open competition, but this is no time to put American service members and workers on hold while a foreign company waffles."

Rep. Todd Tiahrt, R-Kan., said it would be a mistake to "yield to international politics."

Tiahrt said he had talked with Ashton Carter, the Pentagon's undersecretary for acquisition, who indicated that the European Aeronautic Defense and Space Co. had requested a 90-day extension of the bid deadline.

"For us to yield to international politics would not be in the best interest of our fighting men and women," Tiahrt said.

EADS, based in the Netherlands, is the parent company of Airbus, Boeing's chief competitor in the commercial airliner market.

Adding to the international intrigue was a report Friday by the Wall Street Journal that United Aircraft of Russia is planning to bid on the contract.

United Aircraft, an aerospace consortium owned by the Russian government, will seek to offer a tanker version of its Ilyushin Il-96 wide-body jetliner, the Journal reported. The planes would be largely built in Russia and assembled at an unidentified plant in the U.S., the Journal said.

Chicago-based Boeing was thought to have the inside track on the contract after Los Angeles-based Northrop Grumman said earlier this month that it wouldn't bid because the competition appeared to favor Boeing's medium-sized tanker. However, EADS, Northrop's partner, left open the possibility it might still compete.

Then French President Nicolas Sarkozy, British Prime Minister Gordon Brown and the German economic minister, Rainer Bruederle, started lobbying, saying the Air Force was engaging in protectionism in making it difficult for the Europeans to bid.

"This is no way to act," Sarkozy said, adding that he was going to raise the issue when he visits the White House in the coming weeks.

Brown said he was "very disappointed. We believe there must be free markets and free competition."

Bruederle said the Pentagon had intentionally drawn up new specifications to favor Boeing over EADS.

There were also warning the Europeans might file a complaint with the World Trade Organization, alleging that the U.S. was engaging in illegal trade practices. The WTO is expected to rule next week that Airbus had received billions of dollars in no-interest and low-interest loans to launch its aircraft, including the one that would serve as the airframe for the EADS tanker.

On Friday, the Pentagon said EADS North America had indicated "possible interest" in bidding on the tanker.

"EADS asked that we give consideration to extending the proposal due date," according to a statement from the office of the Secretary of Defense. "We are considering that request."

In its statement, EADS said it was encouraged when the Pentagon said it would welcome a bid from the company. But a significant extension of the deadline for bids was a prerequisite, EADS said, and "underlying concerns" that the competition favored Boeing had not been addressed.

Currently, bids are due in May, and the contract could be awarded this fall.

The contract calls for 179 tankers to replace the current force, some of which dates back to the Eisenhower era. Eventually, the contract could be worth an estimated $100 billion as the Air Force replaces its fleet of more than 600 tankers.

Boeing would use a 767 airframe assembled at its plant in Everett, Wash., for its tanker. The 767 would be converted to tankers at the company's plant in Wichita, Kan.

About 9,000 jobs are at stake in Washington state and another 1,000 in Kansas.

The EADS tanker would use an Airbus A330 airframe. The Northrop-EADS proposal called for building the initial tankers in Airbus's factory in Toulouse, France, and subsequent ones at a new facility in Mobile, Ala. Construction hasn't been started on the Mobile facility.

EADS could be looking for another major American defense firm to partner with, said Loren Thompson, a defense analyst at the Lexington Institute, a national security research organization in Arlington, Va.

"The problem is, there is only one _ Lockheed (Martin) _ and they haven't been interested," Thompson said.

Thompson said the Pentagon wants someone else to bid on the tankers to ensure Boeing would submit a "disciplined" bid with a realistic price for the tankers.

EADS could be hoping the tanker competition would be delayed until the November midterm election when Republicans, who are more sympathetic to the Europeans, could gain seats in Congress, Thompson said.

"The bottom line is EADS knows they don't have a decent chance of winning the tanker competition without a U.S. partner," he said.

MORE FROM MCCLATCHY

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