Boeing Unveils Modified 767 Aircraft

Boeing Co. on Monday announced a newly designed KC-767 as its proposed aircraft for a $40 billion Air Force contract competition to replace 179 refueling planes. The Chicago-based company said at a press conference that it tweaked the design of its long-range 767 freighter plane to improve fuel efficiency and allow it to take off and land on shorter runways, giving it greater flexibility in combat situations.

Boeing is competing against Northrop Grumman Corp., which is expected to offer its KC-30, a modified Airbus A330, at a discounted price.

"They can afford to make improvement to the aircraft - by putting in a couple of bells and whistles - and still be well below the price competition," said Paul Nisbet, analyst for JSA Research Inc.

At stake for both competitors is a multiyear contract to replace a portion of the military's older fleet of KC-135 aircraft, a medium-sized refueling plane made by Boeing. The $40 billion contract is the first installment of an expected three-phase deal that calls for more than 500 planes and could be worth an estimated $100 billion.

The Boeing-led team includes Smiths Aerospace, a unit of Smiths Group, Rockwell Collins Inc., Vought Aircraft Industries Inc., Honeywell Inc. and Spirit AeroSystems Inc.

Boeing said it would primarily build the refueling tankers at facilities in Everett, Wash., but that additional work - and flight tests - would take place in Wichita, Kan. Boeing estimateed that if the Air Force selected the KC-767, the contract would support more than 44,000 American jobs and 300 suppliers.

The tanker program has been on hold for three years, after Boeing lost the contract amid an ethics scandal that resulted in prison terms for a former company executive and a former high-ranking Air Force official.

Boeing's 767 is, on paper at least, more affordable than Northrop's aircraft, with a listed retail price of roughly $120 million. But industry insiders expect Northrop Grumman, which is partnering with European Aeronautic Defense and Space Co., the parent company of Boeing's arch rival, Airbus, to heavily discount its KC-30 to increase its competitiveness. The current retail listing of the A330 is roughly $160 million.

Both aerospace manufacturers typically sell planes to prime customers at a discount.

Last week, after much speculation that Northrop would bow out of the competition, the Los Angeles-based defense firm said it would bid on the contract. Northrop officials said changes made by the Air Force addressed concerns it had that the contract specifications would unfairly favor Boeing.

The Los Angeles-based company has been viewed as the underdog in the competition with a heavier, less fuel efficient aircraft. The Airbus tanker would have a maximum fuel capacity of 200,000 pounds.

Northrop spokesman Randy Belote said Northrop's K-30 would tack on roughly 20 percent in fuel capacity.

Shares of Boeing fell 80 cents to close at $89.20 on the New York Stock Exchange, while shares of Northrop rose 40 cents to finish at $74.40.

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