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Tanker deal comes at crucial time

Production for Air Force 'will span decades' for both Boeing and its suppliers

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By Michelle Dunlop
Herald Writer
It's the jet that just won't back down.
The Boeing Co.'s 767 has been down for the count on several occasions over the past decade.
After the terrorist attacks of Sept. 11, 2001, demand for all aircraft dropped, including for the 767.
Then an ethics blunder by Boeing leaders ruined a deal with the Air Force to keep the 767 going as a refueling tanker. Six years ago, Boeing's chief financial officer told investors the company would probably have to halt production on the 767 because it didn't have enough orders to keep the line going until a second tanker contest could start.
A few years later, the fate of the 767 was in jeopardy again when the Air Force initially selected rival bidder EADS' tanker to replace its KC-135 fleet. But the mighty 767 persisted.
Late last month, the U.S. Air Force extended the life of Boeing's Everett-built 767 once again.
"In the history of the Boeing Co., there are always a few dates everyone remembers," said Boeing's Jim Albaugh at the Everett factory last week. "I think employees will remember Feb. 24, 2011: That's the day when we won the tanker competition."
On Friday, disappointed EADS officials conceded Boeing's victory and ruled out a protest that could delay Boeing's work on the tanker.
For Boeing's 767 workers and for the community, the announcement brought a sigh of relief and a sense of economic stability.
"It's the kind of positive news that can turn an economy around," said Ray Stephanson, Everett's mayor, at Boeing's tanker rally Feb. 25.
Dennis Muilenburg, president of Boeing's defense division, called the economic impact of Boeing's deal to supply the Air Force with 179 of its 767-based tankers widespread. The program "will span decades," he said.
It couldn't come at a better time for the 767.
Without fresh orders, Boeing's 767 line would run out of work in 2013. The Air Force expects Boeing to begin flight testing the new tanker in 2015. That means Boeing likely will begin assembling the first 767-based tanker in 2014, Kim Pastega, the program's general manager, predicted last week.
Also last week, Flightglobal wrote that Boeing and FedEx are in talks about developing a 767-400ER freighter that would bridge the gap in production work between when Boeing's 767 order base runs out and production on the tanker begins. Even before the tanker win, Boeing's Albaugh predicted the company would land new 767 orders, noting the market's demand for widebody commercial aircraft. On the day of the tanker decision, Muilenburg concurred.
"What this does is just add to the strength of that line," he said.
The tanker win also prolongs work at Boeing's 767 suppliers.
"Today is not just a Boeing win, it's really a win for the entire supply chain," Muilenburg said in a call with journalists on Feb. 24.
Although Boeing declined to quantify the foreign content of the tanker, Muilenburg said the "large majority" is American made.
Here in Snohomish County, the company has more than 20 major 767 suppliers, including Contour Aerospace, Korry Electronics and Giddens Industries. In the state, the supply chain grows to nearly 70 767-related suppliers that will continue to get work from the tanker contract, according to estimates by John Monroe, a retired Boeing executive who now works with the Economic Development Council of Snohomish County.
Those suppliers employ as few as 16 workers to as many as 1,000. Boeing has estimated that the tanker will support 11,000 jobs in Washington state.
Some of the work, however, will depend on the configuration of Boeing's tanker. Boeing hasn't released the specifics about its tanker -- the model of 767 being used. However, Boeing's Muilenburg said last week that the company will begin providing details soon. Boeing was criticized in the last tanker contest by EADS for offering "Frankentanker" -- a tanker that used too many pieces from different 767 models.
For this contest, Boeing officials emphasized that their tanker offering was not another mismatched 767.
"We're basing this on a proven, reliable airframe," Muilenburg said.
Boeing has disclosed that its new 767 tanker will feature a 787-like cockpit, an upgraded boom system and fuel-saving winglets. The company hailed its tanker's fuel efficiency as a major reason Boeing won the contract, estimated at $30 billion. The company estimated its tanker would save the Air Force roughly $36 billion -- a figure EADS disputed -- in fuel costs and maintenance over 40 years compared to the tanker offered by EADS.
"You can blame conspiracies, protectionism or politics. KC-X probably came down to mere fuel prices," noted Richard Aboulafia, an analyst with the Teal Group.
By the numbers
Boeing's 767 Commercial airplane program
1982: Date of first delivery
50: Remaining commercial orders
997: Commercial deliveries
2: Number of 767s to be produced monthly by mid-year
Boeing KC-135
49: Average age of the KC-135 tanker.
1965: Year of last delivery
200,000: Maximum pounds of fuel transferred
732: Number of planes produced
414: KC-135s in the Air Force's fleet
180: Number of planes remaining in active duty
$39.6 million: Cost for each plane.
900: The number of gallons per minute
1.92 billion: Number of gallons of fuel transferred via KC-135s and KC-10s since Sept. 11, 2001
Boeing's NewGen 767 tanker
11,000: Number of jobs that Boeing says its tanker will create in Washington state
372: Number of Air Force requirements that the tanker had to meet
$36 billion: Amount of money Boeing says its tanker saves in fuel and maintenance cost over 40 years compared to EADS' tanker
40: The number of years the Air Force expects to operate the new tanker



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