Giants fight for tanker deal

Jun. 24--PARIS -- Boeing and Airbus, as is usually the case, dominated much of the news at last week's Paris Air Show, touting big orders for new jetliners and taking pot shots at each other's products and business strategies.

Now there's a new chapter in the ongoing high-profile trans-Atlantic feuding between the two aerospace giants, each of which bears to some degree the national pride of its home country.

Later this year, the Air Force is expected to make a $30 billion-plus decision to buy a fleet of new aircraft that will serve as a next generation of aerial refueling tankers to replace the half-century-old Boeing-built KC-135s.

The matchup pits Boeing against a team that comprises Northrop Grumman, Airbus and its parent company, European Aeronautic Defense & Space Co.

In an example of the marquee-lights importance of this contest, the Northrop/Airbus/EADS team ran a full-page advertisement touting its tanker in the Friday edition of the International Herald Tribune newspaper.

Boeing wants to sell the Air Force a much-modified version of its 767 jetliner, a late 1970s design that is sold primarily in a freighter version.

If Boeing wins, one of the beneficiaries would be Dallas-based Vought Aircraft Industries, which produces much of the 767 tail assembly at its Marshall Street plant in Grand Prairie.

EADS/Airbus teamed with Northrop Grumman for its technical expertise and, more importantly, Pentagon access. Their offering would be a plane based on the Airbus A330 jetliner, a larger and newer design than the Boeing jet.

Many outside observers say that it is unlikely the Air force will opt to buy the Airbus plane, for military and technical reasons.

"The Air Force has felt from the beginning that the 767 is ideally sized for the tanker," said Loren Thompson, a defense consultant and chief operating officer of the Lexington Institute national-security issues think tank.

In dueling news conferences and one-on-one briefings with reporters last week, each team touted its strengths and subtly highlighted the competition's perceived shortcomings.

The short arguments go something like this:

Boeing: Proven experience as the primary supplier of aerial tankers to the U.S. for half a century. A proven, durable and economical aircraft in the 767, allowing the Air Force to buy more planes for less money.

War experience, Boeing officials say, has shown that what's important is the more tankers, the more planes that can be refueled, bringing more airpower to the fight faster.

Northrop/Airbus: Bigger, newer plane capable of hauling more fuel farther, carrying more troops or cargo when needed and providing the Air Force with more total airlift capability.

But this competition is overshadowed by issues that have little to do with technical arguments.

The Boeing entry is dogged by its history. Post 9-11, with airlines canceling new aircraft orders like they were radioactive, Boeing and the Washington-state political delegation pitched the Air Force a proposal to buy new 767 tankers.

The Air Force brass wasn't very interested and didn't want to spend their precious budget buying tankers when what they really wanted was hundreds of F-22 fighters. So Boeing and its political allies proposed leasing the aircraft to the Air Force, that way the generals could have fighters and tankers, too.

After numerous studies and proposal rewrites, the Pentagon agreed to a 100-plane lease deal in May 2003. But shortly afterward, a scandal broke that revealed that a senior Air Force official had approved the plan in exchange for a job for her daughter and other considerations. Congress, notably Sen. John McCain, R-Ariz., complained, and the leasing deal died.

By then the Air Force was fighting wars in Afghanistan and Iraq and putting a lot of extra hours on its aging tanker fleet. The Air Force warmed to the idea of buying new Boeing tankers, but EADS/Airbus and members of Congress warned repeatedly that they wanted an open and fair competition.

Ralph Crosby, chief executive of EADS North America, said the Air Force has put forth what appears to be a fair and open competition and that it should be decided by the aircraft that offers the most refueling capability for the buck.

"The main thing is they've opened a genuine competition," Crosby said.

A longtime defense-industry executive, Crosby formerly headed Northrop Grumman's Dallas unit before it was sold in 2000 to the Carlyle Group, which brought back the Vought name. Crosby says that his time in the Dallas area was one of the best of his career, and he speaks fondly of the Vought workers.

Crosby likes his team's chances because, he says, the Airbus plane is newer and more capable than the 767.

"The A330 has driven the 767 out of the commer- cial marketplace," Crosby said. Airbus, by contrast, has a large backlog of A330 or- ders. "Frankly, my view would be that's recognition [that] we have a superior platform."

Airbus already builds a version of the KC-30 tanker for Australia, which was at the air show, and has built smaller tankers for European nations.

Crosby also says that Boeing is way behind in delivering 767 tankers to Japan and Italy.

Boeing says it would assemble the 767 tankers on its Everett assembly line, preserving hundreds of jobs that might otherwise be lost. The aircraft would be flown to Boeing's Wichita, Kan., facility for the military modifications and testing.

Ron Marcotte, president of the Boeing division, says the age of the 767 design is irrelevant, that it will incorporate up-to-date engines, cockpit electronics and a state-of-the-art refueling boom.

The smaller 767 is "the optimal size," Marcotte says, and could fly from more and smaller airfields closer to the battles, giving the Air Force more tankers where it needs them most. He contends that the 767 burns less fuel than the bigger Airbus and will otherwise be cheaper to operate.

As for the delays with the Italian and Japanese orders for the tankers, Marcotte says those aircraft have been a good trial and that "all those lessons learned" will give the Air Force a better plane at lower cost.

EADS, which owns an 80 percent stake in Airbus, has been angling for years to get a significant toehold in the U.S. defense business, because the Pentagon annually spends more for weapons and services than most of the European nations combined.

Last fall, EADS subsidiary Eurocopter won a big U.S. Army contract to supply more than 300 utility helicopters. The bulk of those helicopters will be built at American Eurocopter's assembly plant in Golden, Miss., but the program is also bringing increased work and jobs to the company's Grand Prairie headquarters.

If it wins the tanker contract, the Northrop Grumman/EADS/Airbus team plans to build the aircraft at a new final assembly and modification center in Mobile, Ala. The project would generate more than 1,000 jobs in the area.

The team said at the air show that it was already producing one tanker at the Airbus factory in Toulouse, France, that it could deliver to the Air Force within a month or two of winning the contract.

Thompson said the Air Force is trying hard to avoid giving the appearance that international politics -- read Boeing versus Airbus -- will play any role in its decision.

But the Air Force, Thompson added, is afraid that either the Northrop/Airbus bid is so low that it can't be passed over or that Congress will try to appease both camps by splitting the order.

That latter decision would likely make the program economically inefficient for both companies and drive up the overall cost of procuring the needed tankers.


Bob Cox, 817-390-7723

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