Rivals Vie For $40B Air Tanker Deal

Team Infidel

Forum Spin Doctor
Boeing makes a better product in my opinion.... hope they get it.

Boston Globe
February 23, 2008 Jobs, reputations at stake as Boeing, Northrup/EADS bid for Air Force pact
By Associated Press
WASHINGTON - The Air Force is likely just days away from handing out one of the biggest Pentagon contracts in years - a deal valued at up to $40 billion to replace 179 planes in its fleet of aerial refueling tankers.
For the three companies bidding, there is more at stake than just the monetary award: jobs and reputations.
Boeing Co. has supplied the Air Force with refueling tankers for nearly 50 years and doesn't want to let go of that. The incumbent is considered the favorite to win - an assumption already reflected in its stock price.
But European Aeronautic Defence and Space Co. and its US partner, Northrop Grumman Corp., want in on the game. For France-based EADS, the parent of rival Airbus, the contract would be entry to the massive American military market, just as overseas spending cools. And for Northrop Grumman, it would tap into a major new military revenue stream at a time when Pentagon spending may be leveling off.
Analysts say the tanker award could be made public any time after Pentagon officials meet Monday to sign off on the Air Force's tanker purchase plan.
The contract - worth $30 billion to $40 billion over 10 to 15 years - is the first of three deals to replace the Air Force's entire fleet of nearly 600 tankers, which allow aircraft to refuel without landing.
For Wall Street, the award's potential really takes off with the follow-on contracts probably going to the incumbent. Up to $100 billion over the next 30 years is at stake, said Loren Thompson, a defense industry analyst with Lexington Institute, a policy think tank.
Thompson said the Air Force will eventually buy more than 400 new tankers to modernize its full fleet in "the biggest new aircraft contract anywhere in the world." The Air Force currently flies 531 Eisenhower-era tankers and another 59 tankers built in the 1980s by McDonnell Douglas, now part of Boeing.
Because Northrop Grumman is considered an underdog, its shares probably will jump if it wins, but may not take a drubbing if the contract goes to Boeing.
Yet Boeing's stock would almost certainly take a hit if the company loses, but only rise moderately if the award comes through since a win is already factored into the share price.
On Capitol Hill, members in both parties are lobbying hard for a victor whose spoils include local jobs.
Chicago-based Boeing would perform much of the tanker work in Everett, Wash., and Wichita, Kan., and use Pratt & Whitney engines built in Connecticut. The company says a win would support 44,000 new and existing jobs at Boeing and more than 300 suppliers in more than 40 states.
"The Boeing proposal is far superior," said Representative Norm Dicks, a Washington Democrat, a senior member of the House Appropriations Subcommittee on Defense who represents a district that is home many Boeing jobs.
Northrop Grumman, based in Los Angeles, estimates a Northrop/EADS win would produce 2,000 new jobs in Mobile, Ala., and support 25,000 jobs at suppliers nationwide.
Alabama senators Jeff Sessions and Richard Shelby, both Republicans, are cheering for the French to come to Mobile, as is Representative Jo Bonner, an Alabama Republican, who represents the district where Northrop has said it would assemble its tanker.
 
Actually, in this case, Boeing isn't making the better product. Airbus' design is significantly newer and larger, and their jet is signifcantly more capable. There's no question that if I was buying a small fleet of jets (say, 6 or so) I'd buy the Airbus.

That said, Uncle Sam isn't buying 6 jets. He's buying 179, and the Airbus tanker is huge. It won't fit in our existing KC-10/C-17 hangars, and you can't fit 40 of them on the ramp at our existing tanker bases, like you can the 767.

The original 767 deal was crooked, so they're having to hold this contest to prove that everything's on the up and up. But the fact is, the Air Force really doesn't have any choice but to buy the 767.

Ironically, as far as offloading gas is concerned, neither jet can do the job as efficiently as the KC-135. If we REALLY wanted the best tanker for the money, we'd replace the KC-135 the same way they finally replaced the C-130-- buy buying a brand new version of the same jet.
 
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