Boeing Wins $35B Air Force Tanker Contract

The contract to replace the half-century-old KC-135 tanker fleet.


SEATTLE --

Washington state and Kansas are celebrating a decision to award Boeing Co. a $35 billion contract to build nearly 200 airborne refueling tankers, one of the biggest defense contracts ever that will add tens of thousands of jobs to the struggling economy and bolster regional air industries for a generation.

But Thursday's announcement that the Air Force chose Chicago-based Boeing over a bid by European Aeronautic Defence and Space Co. drew deeply disappointing reactions in Europe, where the aircraft manufacturer promised to discuss the decision with the U.S. military.

It also came as a severe setback to the Gulf Coast and to Alabama, where EADS had planned to assemble its aircraft at a former military base in Mobile.

The contract to replace the half-century-old KC-135 tanker fleet is a major boost for the Puget Sound region and Wichita, Kan., where the planes will be built and modified.

But it came as a surprise to many after defense analysts, politicians, factory workers and even company executives had expected EADS to win the decade-long battle with Boeing, which had been marked by delays, missteps and bitter accusations.

So expecting the worst, there were no big rallies were planned in Washington state and union halls quiet on a day when snow buried much of the state.

Boeing machinist Jason Redrup was riding with friends in his car when he heard Rep. Norm Dicks, D-Wash., say Boeing had won.

"Frankly, I didn't believe it when he said it," Redrup said, adding that a companion told him, "Well, we better wait until we hear from the Air Force."

At Boeing's huge Everett factory where the planes are built, workers who had gathered around TVs and computer screens shook hands and high-fived at the news, said worker Steve Morrison.

"You could hear little blocks of cheers throughout the factory," he said. Outside, car horns blared during a shift change.

"I'm going to celebrate with my wife tonight," said Rashaud Emperado, a 767 inspector, adding: "I will be celebrating this weekend. This is not just one day."

Air Force Secretary Michael Donley said the contract "represents a long overdue start to a much-needed program."

"What we can tell you was that Boeing was a clear winner," Deputy Defense Secretary William Lynn said.

Lynn said the losing bidder can appeal, but he believes the process was fair and there will be no grounds for a protest.

EADS said in a statement Friday that it would go over the issue with the Air Force, but said nothing about a formal appeal.

"This is certainly a disappointing turn of events, and we look forward to discussing with the Air Force how it arrived at this conclusion," EADS North America Chairman Ralph D. Crosby, Jr. said.

The company said it was sending a letter to its employees explaining that the decision does not mean the end of EADS' efforts to expand in the United States.

German Foreign Minister Raider Bruederle said "we assume that the decision will now be analyzed closely by EADS North America and its American partners and that possible further steps and consequences will be considered in that." Bruederle did not elaborate.

Lawmakers from Alabama were bitter and suggested politics played a role.

"I'm disappointed but not surprised," Republican Sen. Richard Shelby said. "Only Chicago politics could tip the scales in favor of Boeing's inferior plane. EADS clearly offers the more capable aircraft."

Republican Rep. Jo Bonner vowed to get a full accounting of why the EADS bid was rejected.

"This competition has been challenged before and it's not unlikely it will be challenged again," Bonner said.

The tankers, basically flying gas stations, are crucial for the military, allowing jet fighters, supply planes and other aircraft to cover long distances. The last Boeing-built KC-135 was delivered in 1965, and the Air Force is struggling to keep them in flying shape.

Boeing has built 767-based tankers for Italy and Japan, but many components will be different in the U.S. version. As a result, production and the plane's first flight are not expected until 2015, said Jean Chamberlin, vice president and general manager of the tanker program.

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