EVERETT — The final outcome for a lucrative aerial refueling tanker contract remains anyone’s guess, despite a recent ruling in the Boeing Co.’s favor.
“I wish I could guess what will happen,” Richard Aboulafia, an aerospace analyst with the Teal Group, said Thursday.
His sentiments came the day after government investigators strongly backed Boeing in its protest of a $35 billion Air Force tanker contract. The Air Force awarded the deal to Northrop Grumman and partner EADS, parent company of Airbus, back on Feb. 29. The Government Accountability Office recommended the Air Force reopen discussions with the bidders.
The GAO found the Air Force made “a number of significant errors that could have affected the outcome of what was a close competition.”
The Air Force has 60 days to reply to the GAO’s ruling. And the agency has options. It could revisit the contract to replace 179 refueling tankers, making sure to comply with the GAO’s recommendations.
In that case, the outlook could favor Boeing and its Everett-assembled KC-767. The extra time in the already-drawn-out process gives Boeing a window to “refine its product,” Aboulafia said.
Coming into the competition against Northrop and EADS, Boeing’s KC-767 was thought to have a significant cost advantage over Northrop and EADS’ KC-30. The GAO faulted the Air Force’s cost estimates of the KC-767, which made Boeing’s plane look more expensive than it really was. However, even after correcting that error, it appears that EADS’ aggressive pricing of the KC-30 makes that plane competitive, Aboulafia said.
The issue of military construction to accommodate a larger tanker remains a factor in Boeing’s corner.
If the Air Force decides to do a full-scale revision of requirements, it could specify more clearly that it wants a larger aircraft, such as the KC-30.
Boeing officials have said they could have offered the Air Force a tanker version of their 777 if they had known the Air Force wanted a larger aircraft.
However, some industry observers, like Aboulafia, think the 777 may just be too big for the Air Force’s needs. The analyst suggested that offering a 787 version of the tanker would take a lot of structural revisions by Boeing. The company also would have to balance defense demands with the 787’s hectic commercial production schedule.
The Air Force’s next move could also be influenced by its new leaders.
After the secretary of defense ousted two top Air Force officials earlier this year, he recommended Gen. Norton Schwartz, from the Air Mobility Command, as chief.
The division responsible for the refueling tankers in late 2006 produced a white paper about its need for tankers. The briefing was largely regarded to favor Northrop and EADS’ tanker.
In the white paper, Schwartz was quoted as saying, “I am looking for versatility; single-mission airplanes don’t give that.” He went on to tout the advantages of a tanker that could carry passengers, cargo and defense systems.
Analysts characterize the Northrop and EADS tanker as the aircraft with greater versatility, while Boeing’s better fits the tanker-cargo bill.
Lastly, both Boeing and Northrop’s chances hinge on this year’s elections.
“Anything that reduces McCain’s power helps Boeing,” Aboulafia said.
Republican presidential candidate John McCain had a hand in removing from the tanker contract trade dispute language that could have crippled Northrop and EADS’ proposal. Boeing and Airbus have been locked in bitter battle over illegal subsidies; the dispute is still before the World Trade Organization.
“My paramount concern on the tanker replacement program has always been that the Air Force buy the most capable aerial refueling tankers at the most reasonable cost,” McCain said Wednesday after the GAO’s decision was announced. “As I have under similar circumstances, I now urge the Air Force to carefully consider the GAO’s decision and implement its recommendations as quickly as, and to the fullest extent, possible.”
Should McCain win the presidency, he could block the efforts of Boeing supporters in Congress.
Congressional members from states where Boeing’s tanker would be built — Kansas and Washington — had threatened to block funding for the Northrop-EADS tanker.
“We need to know why the Air Force chose a plane that is bigger and less efficient than it asked for — one that can’t use hundreds of our runways, ramps and hangars — and one that will cost billions of dollars more in fuel and maintenance,” Murray said in speech Thursday.
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