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Boeing, Airbus brace for US tanker decision

by Staff Writers
Washington (AFP) Feb 24, 2011
Boeing and Airbus braced Thursday for the Pentagon's decision on their long and tortuous battle for a $35 billion Air Force aerial refueling tanker contract.

Several analysts have tipped the European Aeronautic Defence and Space Company, parent of France-based Airbus, to win the politically charged contest, one of the biggest procurement contracts in US history.

But some analysts also say an Airbus victory could spark a new challenge to the process by Boeing, extending the nearly 10-year old battle which pits the world's two largest aerospace companies.

The Defense Department said it would hold a news conference on the contract decision Thursday afternoon.

"Today at 5:10 (pm -- 2210 GMT) we will have a short briefing on the selection of the KC-X tanker contract," Colonel David Lapan, a Pentagon spokesman, told reporters.

The US Air Force has been trying for nearly a decade to begin to replace its aging aerial refueling tanker fleet of Boeing-built KC-135s that date back to the 1950s.

At stake is a contract, estimated at $35 billion, for an initial 179 tankers.

EADS is looking like the favorite to land the deal, said Loren Thompson, an analyst at the Lexington Institute think-tank based just outside the US capital.

"Judging from the frequency with which Pentagon acquisition chief Ashton Carter has been talking up the notion of a 'globalized' defense market recently, European aerospace giant EADS is the winner," Thompson said Wednesday in an online blog.

Thompson said the Air Force would announce the winner Thursday after the financial markets close.

The first time the contract was awarded, it went to Boeing, but it was subsequently canceled amid a Pentagon procurement scandal.

EADS won the contract in a second try in 2008, together with US partner Northrop Grumman, but the decision was withdrawn after the Government Accountability Office upheld Boeing's objections that the process was flawed.

EADS is now competing without a main partner, but with support from a number of US equipment makers.

EADS North America chairman Ralph Crosby said last week the firm had lowered its final bid to a "very competitive price proposal."

Boeing's chief executive Jim McNerney earlier described their bid as an "aggressive" attempt to beat its "subsidized" European rival.

This third attempt has been marked by fierce lobbying from lawmakers seeking jobs for their states -- for Boeing, in Washington and Kansas, and for Airbus, in Alabama.

A separate dimension has been a long-running trade dispute between the United States and the European Union at the World Trade Organization over public subsidies for Boeing and Airbus.

The Defense Department insists the winner will be decided on the merits of its bid.

Thompson cautioned that the Pentagon announcement may not close the book on the matter.

"Boeing could challenge the rating methodology and several other facets of the selection process, but since price is the key discriminator in the outcome, it is more likely to pursue a political strategy focusing on EADS use of prohibited trade subsidies in developing and marketing its planes," he said.

The rivals are offering militarized versions of their commercial aircraft and promising the contract would pump tens of thousands of jobs into the post-recession US economy still struggling with high unemployment.

The EADS KC-45 is based on the long-haul Airbus 330. EADS says it has 31 percent more capacity and a longer range than Boeing's offer, the KC-767.

It would be assembled in Mobile, Alabama, where EADS expects to produce at least 12 aircraft a year and says the program would create 48,000 jobs.

Boeing is proposing the KC-767, or NewGen Tanker, built around its long-haul 767 plane. The plane would be assembled at Boeing's plant in Everett, Washington, and equipped in Wichita, Kansas. Boeing says a win would provide 50,000 jobs.

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