Boeing now favored to win tanker, experts say

By Michelle Dunlop, Herald Writer

LYNNWOOD — Three out of three analysts agree: The Boeing Co. likely will land the U.S. Air Force tanker contract.

“Boeing will get the first round,” said Michel Merluzeau, managing partner with G2 Solutions. Boeing’s “767 is going to be the winner of a competition.”

Merluzeau spoke Tuesday at the Pacific Northwest Aerospace Alliance annual conference in Lynnwood. Analysts Richard Aboulafia, with the Teal Group, and Scott Hamilton, with Issaquah-based Leeham Co., also agreed that Boeing is poised to win the roughly $35 billion tanker contest. Doing so would secure Boeing jobs on the 767 line here in Everett for years into the future.

Boeing is competing against duo Northrop Grumman and EADS for the contract to replace the Air Force’s aging KC-135 aerial refueling tanker fleet. The Air Force said Monday that it won’t release its final requirements until Feb. 23 at the earliest. This is the Air Force’s third try at awarding the contract, and it’s the first in a series of three competitions the Pentagon plans to hold.

Boeing’s chances at winning the tanker contract could get a significant boost if Washington’s Rep. Norm Dicks succeeds Rep. John Murtha, D-Pa., as chairman of a powerful House appropriations defense subcommittee. Murtha, who died Monday, had been a strong supporter of splitting the Air Force contract between Boeing and Northrop.

Murtha’s death “was the tipping point,” the Teal Group’s Aboulafia said. “This is … a slam dunk” for Boeing.

Dicks is now the senior Democrat on the committee and is expected to be chosen by the House Democratic Caucus to succeed Murtha. He is a strong Boeing supporter and the company is atop the list of his campaign contributors, according to the Center for Responsive Politics. Northrop Grumman was also a major Dicks contributor, according to the nonpartisan organization.

Boeing offered the Air Force a tanker based on its Everett-built 767 jet in the last contest. The Air Force, however, initially selected the larger KC-30 tanker, based on an Airbus A330 airplane, offered by Northrop and EADS. But the Pentagon halted the contract after government auditors found flaws in the contest.

The Air Force released a fresh draft of requirements for the tanker last fall. Northrop’s chief executive Wes Bush has complained that the new rules favor Boeing’s smaller KC-767 aircraft. The company has threatened to drop out of the competition unless the Pentagon makes significant changes to the final requirements.

Analyst Hamilton doesn’t think the Air Force will make those changes. He agrees with Northrop’s Bush that the Air Force seems to want Boeing’s KC-767 this time around.

“I do think there is a high likelihood that Northrop will not bid,” he said.

That would pave the way for a Boeing win. Defense Secretary Robert Gates told members of Congress last week that the contest will proceed even if Northrop and EADS drop out.

Although Northrop looks to be on the losing end of this contest, don’t count the defense contractor or the KC-30 out of future contests, Merluzeau said. The Air Force showed a clear preference for the KC-30 in the previous round, he said.

“I don’t think the KC-30 will go away,” he said.