Air Force stuns Boeing on tankers
WASHINGTON – In a stunning setback for The Boeing Co., the Air Force on Friday awarded a $30 billion to $40 billion contract to begin replacing its aging fleet of aerial tankers to a European aerospace company and Northrop Grumman.
The decision to use a plane built by Boeing’s chief rival in the world’s airplane market, Airbus, ignited an instant firestorm on Capitol Hill. The plane will be built in France and assembled in Mobile, Ala.
Chicago-based Boeing, which has built the Air Force’s tankers for the past half-century, gave no indication whether it would appeal the award but said it was exploring its options.
Despite a major Pentagon procurement scandal, Boeing had been heavily favored to win the contract, which could be worth an estimated $100 billion as the Air Force replaces its fleet of roughly 530 mostly Eisenhower-era aerial tankers.
Washington state lawmakers were furious.
“The federal government has decided to take American tax dollars and build this plane overseas,” said Sen. Patty Murray, D-Wash., who visited workers at Boeing’s Everett plant just after the announcement. “You can put an American sticker on a plane and call it an American plane, but that doesn’t make it an American plane.”
Rep. Norm Dicks, a senior member of the House defense appropriations subcommittee who’s known in some circles as “the congressman from Boeing,” said he was shocked. He predicted the decision would be widely criticized in Congress.
“There will be an uprising on the Hill,” said Dicks, D-Belfair. “There are a lot of members who won’t accept this.”
Dicks, Murray and other members of the state’s congressional delegation said they would wait for details of the contract competition to emerge before deciding what to do, but congressional hearings were one possibility. Congress also has to approve money for the tanker project.
‘ABSOLUTELY NO BIAS’
Air Force officials said the bid from Northrop Grumman and the European Aeronautic Defense and Space Co. outpaced Boeing’s bid in most areas. EADS is the parent company of Airbus, Boeing’s main rival in the global commercial airplane market.
“More passengers, more cargo, more fuel offload, more patients that we can carry, more availability, more flexibility and more dependability,” Gen. Arthur Lichte, commander of the Air Mobility Command at Scott Air Force Base in Illinois, said of the Northrop Grumman-EADS KC-45A tanker.
Neither Lichte nor other Air Force officials would provide details on their evaluation of the competing bids, saying they’ll debrief both companies in the next several weeks. They denied that the earlier procurement scandal had tainted Boeing’s bid.
“There was absolutely no bias in this award,” said Sue Payton, the assistant secretary of the Air Force for acquisition.
The first planes would become operational in 2013, Lichte said, adding that he hoped there wouldn’t be any delays from a Boeing protest or congressional actions.
“From a warfighter’s point of view, we need to get on with this,” Lichte said.
Northrop Grumman-EADS said the contract would create 25,000 jobs involving 230 suppliers in 49 states.
The Northrop Grumman-EADS tanker is based on the newer Airbus A330 airframe. The planes are built in Toulouse, France, with final assembly planned for a new plant in Mobile.
Boeing would have built its tankers, based on its 767 airframe, at its plant in Everett.
The tanker program will be the second-largest Pentagon contract ever, behind the $200 billion Joint Strike Fighter, said Loren Thompson, an analyst with the Lexington Institute, a military research center.
‘THE MOOD HERE IS ANGRY’
In Everett, union members who’d gathered at the Machinists union hall intending to celebrate the tanker contract instead found themselves hastily arranging a protest rally.
“I would have to say the mood here is angry,” said Connie Kelliher, International Association of Machinists District Local 751 spokeswoman. “I don’t think that anyone who has worked on this 767 tanker project can believe that the deal went to a plane designed overseas.”
The Machinists represent, among others, workers who build 767s in Boeing’s huge Everett wide-body plant.
The Society of Professional Engineering Employees in Aerospace, which represents Boeing engineers and technical employees, also expressed shock.
“I’m surprised the Air Force chose an unproven technology and inferior product for this important program that supports the men and women in our armed forces,” said SPEEA President Cynthia Cole.
For Boeing and its workers, the contract loss will mean an end to the 767 assembly.
But that moment will likely be a significant time in the future. Boeing’s backlog of unfilled 767 orders is now 51. At Boeing’s present production rate of one plane a month, the last one will emerge from the Everett plant in a little more than four years.
Issaquah-based aerospace analyst Scott Hamilton said he doubts anyone working on the 767 line or the tanker project will lose a job because of the failure to win the new contract.
In fact, Boeing officials told SPEEA on Friday that none of the engineering or technical workers associated with the project will be laid off, said SPEEA spokesman Bill Dugovich.
Predicted Hamilton: “The engineers will go to work on the 787 or the 777 upgrade or new 737 project.”
The two assembly bays at the Everett plant where the 767 is built could be converted to another 787 production line, Hamilton said. The 787 has 860 orders.
Boeing’s total airliner backlog now stands at 3,458 orders. At today’s production rates, Boeing production lines could be working at full steam for more than seven years to reduce that to zero even if the company received no new orders during those seven years.
‘A HUGE SHOCK’
Both sides had engaged in heated public relations campaigns to promote their tankers.
Northrop Grumman-EADS sought to portray its A330 as an American-built tanker that would be newer and larger and could carry more fuel, passengers and cargo. EADS has been gunning to crack the U.S. defense market, and Los Angeles-based Northrop Grumman hasn’t produced a military plane since the B-2 Stealth bomber.
Boeing claimed its 767 would be all-American and cheaper to operate, could fly into smaller airfields and would take up less ramp space.
“This is going to be a huge shock to many people because Boeing has been building Air Force tankers since the Cold War,” said Thompson, the analyst. “And many experts, like me, didn’t believe they could lose.”
Part of the surprise stemmed from the fact that the Air Force apparently paid little if any attention to the likely political fallout over the selection of a plane designed and partially built in Europe.
At a news conference, the Air Force pointedly mentioned that the issue of American job creation wasn’t considered in making the decision.
“This is a huge achievement for Northrop because they took a big risk and convinced the Air Force to think creatively about the mission,” Thompson said.
The Northrop Grumman-EADS tanker was ranked superior in four of five categories, Thompson said, and the Air Force seemed especially impressed that it was bigger and could carry more fuel.
‘ANYTHING CAN HAPPEN’
Congress had originally approved a $23 billion deal for the Air Force to buy 80 Boeing 767 tankers and lease 20 more.
But the deal collapsed amid a 2003 procurement scandal that sent Boeing’s chief financial officer and a top Air Force acquisitions officer to prison. Boeing’s chief executive officer resigned. The investigation into the lease agreement was spearheaded by Arizona Sen. John McCain, who’s now the presumed Republican nominee for president.
Dicks said he had to wonder whether the scandal affected how the Air Force looked at Boeing’s bid, but added that the scandal left an opening for the Northrop Grumman-EADS bid.
“Anything can happen in a competition,” he said. “But this is an industrial base issue.”
Boeing said it was “obviously” disappointed. “We believe that we offered the Air Force the best value and lowest-risk tankers for its mission,” said Bill Barksdale, a Boeing spokesman. “Once we have reviewed the details behind the award, we will make a decision concerning our possible options, keeping in mind at all times the impact to the warfighters and our nation.”
Les Blumenthal: 202-383-0008
John Gillie: 253-597-8663
Rob Hotakainen and Dave Montgomery of the McClatchy Washington Bureau contributed to this report.