Boeing closer to 767 tanker deal

  • Thursday, November 29, 2001 9:00pm
  • Business

Associated Press

WASHINGTON — The House has approved $150 million to buy and convert a single Boeing 767 into an Air Force refueling tanker — a filling station in the sky for other aircraft.

The House funding, part of the $318 billion defense spending bill approved Wednesday, opens the door for new military business for Boeing’s commercial aircraft sector and positions the 767 as a candidate to replace the Air Force’s aging tanker fleet.

Boeing and Northwest lawmakers are hoping for a much bigger deal as the Senate considers its version of the measure. They want to set up a program allowing the Air Force to lease 100 tankers based on the 767 wide-body airframe assembled in Everett, at a cost of $20 million per plane per year, which ultimately could mean billions of dollars for Boeing.

That could provide a much-needed boost to Chicago-based Boeing, which announced plans to lay off up to 30,000 employees after the Sept. 11 terrorist attacks. Most of those job losses will be in the Seattle area, where Boeing builds its commercial jets.

The House also approved $190 million to test the 767 as a platform for airborne surveillance and command-and-control systems, and another $85 million to convert the Boeing 737 into an Air Force medical evacuation aircraft.

But it was unwilling to go along with the leasing plan, and approved the funding for just one aircraft.

Aviation Week &Space Technology, an industry magazine, reported this week that the Air Force may be considering outright purchase of the planes. The airline industry has been struggling since the terrorist attacks, and canceled and delayed orders mean fire-sale prices for those in a position to buy.

Boeing lists prices for 767s at $100 million to $138.5 million each, depending on version and configuration. Converting the plane into a tanker-cargo jet would cost millions of dollars more.

Boeing built the Air Force’s fleet of E-3 AWACS jets and KC-135 tankers, both based on derivatives of the 707 commercial jet. It also built AWACS planes for Britain, France, Saudi Arabia and NATO. The first KC-135 tankers entered service in 1957 and the last in 1965. The initial AWACS planes entered service in 1977.

In recent years, Boeing has been promoting the twin-engine 767 as a replacement for the smaller, four-engine E-3s and KC-135s. Japan has bought 767 AWACS planes, and Italy has ordered 767 tankers.

Rep. Norm Dicks, D-Wash., the No. 2 Democrat on the defense spending panel, said the House bill was a start toward modernizing the tanker fleet.

Now the burden is on Sen. Patty Murray, D-Wash., and other supportive lawmakers including Sens. Daniel Inouye, D-Hawaii, and Ted Stevens, R-Alaska, the top members of the defense spending committee, to include the leasing plan in the Senate’s defense spending bill and clear other hurdles in the appropriations process.

Murray spokesman Todd Webster said the proposal was in good shape, "but the fat lady hasn’t sung yet."

A White House policy statement on the House bill said the money for the Boeing 767 tanker conversion and several other modernization projects "comes at the expense of more urgent needs."

Another hurdle is dealing with 1997 legislation that requires the money for the leased aircraft be paid upfront, rather than over the life of the lease — a big pill to swallow.

Thus far, the military also hasn’t been allowed to lease noncommercial aircraft because of concerns the planes couldn’t be sold after the lease expires.

Dicks considers the concern a technicality. "We are going to keep these tankers for 40 years, too," he said. "We are never going to get rid of them."

To make its case, the company has provided pricing and delivery information. Boeing chairman Phil Condit; Commercial Airplanes president Alan Mulally, and Military Aircraft president Jerry Daniels have also met with top congressional officials.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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