The Boeing Co.’s chances of winning a multi-billion dollar Air Force tanker contract are looking slim, writes analyst Loren B. Thompson, with the Lexington Institute.
Boeing’s rival EADS, the parent company of Airbus, seems to be the Air Force’s favorite to replace 179 of its KC-135 tankers, made by Boeing under the Eisenhower administration. The contract is worth at least $35 billion.
For workers in Everett, a Boeing win means extending production on the company’s 767 line. An EADS win would mean the European company will break into the U.S. defense market.
Boeing believes the Air Force hasn’t captured the extra costs associated with picking the larger EADS tanker, based on an Airbus A330 jet, writes Thompson. EADS tanker will require the Air Force to make modifications at some of its existing bases. Boeing’s 767-based tanker would not.
EADS’ tanker also looks to have scored higher in warfighting capability, which is based on complex computer model, the analyst writes. The Air Force admitted in November that it accidentally gave Boeing and EADS information about how the other’s tanker performed in the model.
Thompson lays out a list of pattern of bias by the Air Force towards EADS, including pushing back the initial bid deadline to allow EADS to compete without a U.S.-based partner and allowing EADS to respond late with engineering questions.
The analyst also indicates that the Pentagon’s refusal to consider an unfair trade dispute, still pending with the World Trade Organization, favors EADS. It’s a point that local analyst, Scott Hamilton disputes in this post on his Leeham Co. blog. The Air Force isn’t allowed to penalize EADS’ bid under U.S. law, Hamilton writes.
Hamilton advocates that the Air Force split the contract between EADS and Boeing.
Lexington Institute’s Thompson’s outlook is pessimistic for Boeing’s tanker chances:
“Boeing has not concluded from all this that the tanker competition is irretrievably lost, but I have. … The question is what Boeing intends to do about it.”