Boeing may have to battle Russians, EADS for tanker contract

Associated Press and Herald Staff

The Boeing Co. may face not just one but two potential rivals for a lucrative Air Force tanker contract.

As early as Monday, Russia’s United Aircraft Corp. will announce its plans to submit a bid on the $35 billion contract to supply the U.S. Air Force with aerial refueling tankers, according to the Wall Street Journal. On Friday, Europe’s EADS said it was considering bidding even after its original partner, Northrop Grumman, dropped out. Boeing plans to offer the Air Force its Everett-based 767 tanker.

UAC, an aerospace consortium owned by the Russian government, intends to offer a tanker version of its Ilyushin Il-96 widebody jetliner, which the company has dubbed the Il-98, the source told the Wall Street Journal. UAC plans to partner with a small, U.S.-based defense contractor, which was not named in the publication, for the contract.

Less than two weeks ago, Boeing looked to be the sole bidder for the contract to replace 179 of the Air Force’s KC-135 tankers. European governments have criticized the U.S. Defense Department for its “protectionist” handling of the contract. Boeing supporters, including members of Washington’s Congressional delegation, say it’s important to retain defense contracts in the country and to build up the country’s industrial base.

Thursday, the Defense Department “indicated it would welcome a proposal from EADS North America as prime contractor for the KC-X tanker competition,” according to a statement Friday from EADS. It called the move “a significant development.”

The Pentagon said Friday that EADS has requested a 90-day extension of the bidding deadline.

EADS, the parent company of Airbus, said it would consider bidding again if it is given an extended deadline to prepare a new proposal — and, crucially, “if there is a fair chance to win.”

EADS and its American partner, Northrop, were initially awarded the contract for the tanker fleet in 2008, but Boeing protested and the deal was annulled later that year.

The withdrawal of the Northrop-led consortium left Boeing as the only bidder.

European Aeronautic Defence &Space Co. NV said the Pentagon was indicating “a willingness to extend the time frame,” and said it is “assessing this new situation to determine if the company can feasibly submit” a new bid.

But it said the Pentagon’s new stance “does not address EADS’ underlying concerns” that the request for bids is designed to favor Boeing.

EADS spokesman Alexander Reinhardt said the company, which is based in Paris and Munich, will decide in coming weeks on whether to bid — either alone or with a partner.

Boeing is offering a military version of its 767 passenger jet. Reinhardt said he thinks it is unlikely that EADS would change the larger Airbus A330 airframe on which its original tanker offer was based, because the only other suitable plane it has ready — the A310 — is old and thus unsuited for a fleet with a lifetime of 45 to 50 years.

The current deadline for bids is early May.

Pentagon spokesman Bryan Whitman said EADS has requested a 90-day extension of that deadline, which he said the Defense Department would consider. The possibility immediately sparked a fierce reaction in the U.S.

“I am very disappointed that the Department of Defense is even considering giving in to Airbus and extending the hard deadline for tanker bids,” U.S. Sen. Patty Murray, a D-Wash., said in a statement. “This is no time to put American service members and workers on hold while a foreign company waffles.”

Gov. Chris Gregoire also expressed concern over the possibility of an extended deadline. In a letter to Defense Secretary Robert Gates, Gregoire urged the Pentagon to “keep the original due date.”

An official from Mobile County, Ala., where EADS and Northrop Grumman had proposed to assemble their tanker, welcomed EADS’ decision to consider going it alone.

“I respect EADS’ need for extra time to prepare a tanker bid, and hope the Department of Defense will allow this accommodation if the company chooses to compete,” said Stephen Nodine, Mobile County commissioner. “My enthusiasm is tempered by the fact that the request for proposals remains the same and blatantly favors Boeing’s smaller, less capable aircraft.”

French President Nicolas Sarkozy accused the U.S. government of protectionism, and similar concerns were expressed by government leaders in Great Britain and Germany.

However, in extending the deadline, the Pentagon could cause Boeing to lodge a complaint with the Government Accountability Office, said defense analyst Loren Thompson, with the Lexington Institute, in a conference call earlier this week.

Boeing spokesman William Barksdale said the company “is 100 percent focused” on submitting its bid.

“Boeing recognizes it must earn the tanker contract by providing the Air Force with a modern and capable tanker that meets or exceeds all warfighter requirements and is cost-effective to buy, own and operate,” he said.

Twenty-eight of the EADS tankers have been ordered or are already in service with the air forces of Australia, Britain, Saudi Arabia, and the United Arab Emirates. Boeing’s KC-767 tanker, which can carry a smaller payload, has been ordered by Italy and Japan.