Subscribe to our free daily newsletters
. Military Space News .

Subscribe to our free daily newsletters

Tanker victory spells risks for Boeing

by Staff Writers
New York (AFP) Feb 25, 2011
Boeing's triumph over European rival EADS for a major US Air Force tanker contract poses risks amid defense spending cutbacks and multiple delays to its commercial projects.

The Defense Department declared Thursday Boeing the "clear winner" of a $30-plus billion contract to supply up to 179 refueling tankers to the Air Force.

It is undoubtedly a major prize for the firm, but industry analysts highlighted the challenges that come with submitting what the Chicago-based firm itself called an "aggressive" bid.

"Since the KC-46A is a very competitively bid fixed-price contract for both development and production phases, it carries some execution risks for Boeing," Standard & Poor's analysts said in a client note.

Particularly, they said, "given the company's substantial cost overruns on some of its commercial and military programs in recent years."

Moody's Investors Service said that the difficulties could start early for Boeing, in the initial development phase.

"The development could distract engineering resources from other key programs including the near-term ramp-up of the B787 Dreamliner," said Robert Jankowitz, senior vice president at Moody's.

The tanker contract comes as Boeing is under pressure from its new 787 Dreamliner program that is now running three years behind the original schedule.

"Given Boeing's headaches getting its new passenger planes out the door, there should be concern about the company's ability to deliver the new tanker on time and on budget," said Paul Ausick of 24/

And budget will be at the forefront of policymakers' minds, as the Pentagon, like other US government bodies, struggles to cut the country's massive budget deficit.

"If Boeing misses deadlines and busts budgets, it's reasonable to expect that the Congress and the Pentagon will be reluctant to go ahead with the full complement of tankers," he said.

But there are definite rewards for the company, despite the risks.

Jefferies analysts said the contract spells benefits of "a few pennies per share" in the short term, and in the long-term a healthier business.

"Tomorrow's benefit is that the award adds balance to Boeing's business base, and continues a successful product line into the foreseeable future," they said, referring to the 767 commercial aircraft that will serve as the basis for the KC-46A tanker.

The 767 production line "would have closed within five years without this win," according to Richard Aboulafia, an analyst at aerospace consultancy Teal Group.

Orders for the long-haul, wide-body plane, which entered service in 1982, have dwindled in recent years. Only three 767s were manufactured last year.

But whatever the drawbacks and advantages, the contract may not yet be in the bag.

Thursday was the second time Boeing bested Airbus parent EADS for the contract in the world's largest defense market.

The contract was awarded in 2008 to EADS and US partner Northrop Grumman but the deal was canceled after the government upheld Boeing protests of a flawed process.

EADS has 10 days after the award to protest the Pentagon decision.

"The battle could go into overtime if EADS decides to appeal, and it's not out of the question given the outlook for defense spending in the years ahead," said Ausick of 24/

"Given the budget environment and increasingly high fuel costs, the (EADS) KC-30 was at a disadvantage. But there are a few Southern Republican politicians who may decide to hold up funding," Aboulafia told AFP.

Share This Article With Planet Earth DiggDigg RedditReddit
YahooMyWebYahooMyWeb GoogleGoogle FacebookFacebook

Related Links
The Military Industrial Complex at
Learn about the Superpowers of the 21st Century at

Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News

Boeing wins massive US air tanker contract
Washington (AFP) Feb 24, 2011
US aerospace giant Boeing on Thursday won a massive contract to supply aerial refueling tankers to the Air Force, defeating European rival EADS in a long and tortuous contest. Announcing the first part of a contract worth more than $30 billion, the Pentagon said: "Boeing was a clear winner." The US firm is now tasked with delivering 18 aircraft by 2017, but the contract is expected to gr ... read more

Ukraine's Role In European Missile Defense Not Yet Discussed

Israel successfully tests Arrow anti-missile system

Knesset urges $1.4 billion Iron Dome buy

Surface Combat Systems Center Tests Aegis BMD Capabilities

Russia vows to sell missiles to Syria

Russia proceeds with missile sale to Syria

Enhancing The Protection Of Rotary Aircraft Against Missiles

JLENS Program Achieves Critical Milestone

Fire Scout Completes First Unmanned Test Flights On Littoral Combat Ship

K-MAX Achieves Numerous Firsts During Recent Demo Flights

Northrop Grumman Awarded UAS Common Architecture Working Group Contract

AeroVironment Develops World's First Fully Operational Life-Size Hummingbird-Like Unmanned Aircraft for DARPA

Northrop Grumman Next-Gen FBCB2 System Approved For Fielding

Boeing To Demonstrate Aviation Command And Control Subsystem For US Marine Corps

RC-12X Aircraft Provides Highly-Capable SIGINT Systems To Warfighter

ThalesRaytheonSystems Announces Command View Mobile For C4I Solution

Iran To Build Advanced Fighter Jet

Russian Army To Receive Advanced Weaponry In 2011

LockMart Receives Major Contract Modification For F-22 Raptor Sustainment

Boeing Receives Second Option Of B-52 Engineering Sustainment Contract

Despite turmoil, Mideast arms sales boom

Tanker victory spells risks for Boeing

EADS 'evaluating' US Air Force tanker award data

Britain may scrap Tornadoes to save $1.6B

Japan, China agree to patch up ties

Mullen Mideast trip shows US 'worry': Iran general

US top military officer visits Gulf amid Arab revolts

Taiwan cardinal eyes China-Vatican dialogue

Scientists Build World's First Anti-Laser

Yale scientists build 'anti-laser'

'Air laser' could find bombs at a distance

ONR Achieves Milestone In Free Electron Laser Program

The content herein, unless otherwise known to be public domain, are Copyright 1995-2010 - SpaceDaily. AFP and UPI Wire Stories are copyright Agence France-Presse and United Press International. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by SpaceDaily on any Web page published or hosted by SpaceDaily. Privacy Statement