published Friday, February 25th, 2011

Boeing beats out EADS to win air-tanker contract

By Rob Hotakainen

McClatchy Newspapers

WASHINGTON — Boeing won a $35 billion aerial tanker contract from the Air Force on Thursday, securing one of the largest military contracts in history and ending a nearly decade-long fight.

The contract calls for producing 179 new tankers. But the deal eventually could be worth more than $100 billion as the Air Force replaces its fleet of 600 or so Eisenhower-era tankers.

“It’s the happiest day in my professional life, if you want to know the truth,” said Democratic Rep. Norm Dicks of Washington state, where the tankers will be built. “To finally win this thing, after 10 years of struggle. . . . How sweet it is.”

Dennis Muilenburg, the president and chief executive officer of Boeing Defense, Space and Security, said the first 18 aircraft will be delivered by 2017. He said the company is “humbled by this opportunity” and “absolutely honored” to have won the contract.

“Our teams are ready to go to work,” he said, calling it “a rapid-based program.” And he said the economic impact is widespread and “will last for decades.”

Boeing’s bid was chosen over the company’s longtime nemesis, the European Aeronautic Defense and Space Co., or EADS, parent of France-based Airbus.

Had it won the contract, EADS planned to build the airplanes at a new plant in Mobile, Ala.

Republican Rep. Jo Bonner, who represents the Mobile area, called the decision “deeply disappointing.”

“Unfortunately, the best tanker for our military was not selected,” he said. “I intend to demand a full accounting as to why. . . . While there was great optimism that our team would ultimately prevail, we’ve also been conditioned to expect the unexpected. This competition has been challenged before and it’s not unlikely it will be challenged again.”

The announcement by the Air Force is an attempt to end an almost decade-long saga over the aerial refueling tankers.

The tanker competition has been marked by a major Pentagon procurement scandal and political maneuverings on Capitol Hill. At first, the Air Force planned to lease the tankers from Boeing, but that would have cost more than buying the planes outright. When the contract was put up for bidding, EADS teamed with U.S.-based Northrop Grumman to win the contract. But the Government Accountability Office upheld a protest filed by Boeing and overturned the contract.

That led to last year’s rebidding, which again was marked by controversy.

Boeing’s congressional allies had complained that the competition was unfair. They said EADS could underbid Boeing with the help of billions of dollars it received from European governments in market-distorting subsidies.

In June, the World Trade Organization ruled that four European governments had for four decades provided illegal subsidies to Airbus, putting Boeing and the American aerospace industry at a competitive disadvantage. The Air Force, despite strong objections from Boeing’s supporters on Capitol Hill, didn’t take the subsidies into consideration in deciding on the tanker contract.

The WTO later ruled that Boeing had also received illegal subsidies, but not to the degree that Airbus did.

Then in late January, at a hearing of the Senate Armed Services Committee, senators from both parties loudly criticized the Air Force after military officials acknowledged that they’d accidentally disclosed secret data to Boeing and EADS before the companies had submitted their final bids.

In recent weeks, politicians from Washington state and Kansas had stepped up their lobbying by contacting President Barack Obama and Defense Secretary Robert Gates, saying it would be wrong to give such a lucrative contract to a foreign company, particularly at a time of high unemployment in the U.S. Lawmakers from Alabama and Mississippi likewise pushed the White House and the Pentagon for EADS to win the contract.

It’s unclear what will happen next. EADS could appeal the decision, or its allies in Congress could try to withhold funding for the project.

Officials with Chicago-based Boeing said the company is prepared to create 11,000 jobs in Washington state and 7,500 jobs in Kansas. Overall, the project will support 50,000 jobs with more than 800 suppliers in more than 40 states, Boeing officials said.

Labor officials were ecstatic, too. AFL-CIO President Richard Trumka called the decision “a huge boost to America’s workers.”

“America’s workers are the best in the world, and this contract rewards their hard work and innovation,” he said.

“This is the best news ever, and so deserved, I can’t believe it,” said Democratic Sen. Patty Murray of Washington state, who had lobbied Obama for the contract. “This has just been a long, long battle. And Boeing got it because they’ve got the best price, the best plane. And I couldn’t be more ecstatic.”

In Kansas, Republican Rep. Mike Pompeo, who represents the Wichita area, where the airplanes will be converted into tankers, said: “The positive impact of this win cannot be overstated.”

At the Pentagon, Air Force Secretary Michael Donley said the announcement represents “a long-overdue start to a much-needed program.” He said the selection process “took into account mission effectiveness in wartime and lifecycle costs as embodied in fuel efficiency and military construction costs,” adding that both bidders met all the requirements.

The Air Force’s decision, announced at the Pentagon in a late-afternoon news conference, came as a disappointment to Mobile Mayor Sam Jones, who expected EADS to win.

“I was very, very surprised by it,” he said. “From all indications, everyone thought EADS had an edge.”

EADS officials expressed “disappointment and concern” and said they planned to analyze how the decision was made.

“This is certainly a disappointing turn of events, and we look forward to discussing with the Air Force how it arrived at this conclusion,” said EADS North America Chairman Ralph D. Crosby Jr. “For seven years our goal has been to provide the greatest capability to our men and women in uniform, and to create American jobs by building the KC-45 here in the U.S. We remain committed to those objectives.”

He said that, “with a program of such complexity, our review of today’s decision will take some time,” Crosby said.

The Boeing tanker will be based on a 767 airframe built at its factory in Everett, Wash., and converted to military use at its Wichita facilities.

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THE KC-X TANKER AT A GLANCE:

— The KC-X tanker is designed to be the answer to the Air Force’s aging fleet of KC-135 Stratotankers.

— Most of the KC-135s were built and put into use when President Dwight Eisenhower was in office and were first used to refuel B-52 bombers in mid-air. The first tanker was assigned to missions with the Air Force in 1957.

— The Air Mobility Command at Scott Air Force Base in Illinois oversees the tankers, their missions and the repairs.

— More than half a billion dollars is invested annually to upgrade, repair, replace and maintain the KC-135 Stratotankers which in turn, give the U.S. military the ability to extend the range of its aircraft with the ability to refuel in midair instead of having to land to refuel.

— In late 2008, Deputy Department of Defense Secretary Gordon England moved $3 billion meant for replacement tankers into maintaining the KC-135 to keep it flying.

— The Air Mobility Command has two models of the air refueling tanker: The KC-135 Stratotanker and the KC-10 Extender.

— There are 415 KC-135s and 59 KC-10s in the Department of Defense inventory.

— The Air Force has been trying to replace the KC-135 for at least a decade.

— In January 2007, the U.S. Air Force formally launched the KC-X program and sought bids for new tankers.

Source: Belleville News Democrat

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(c) 2011, McClatchy-Tribune Information Services.

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