Tanker Travails

Today’s YouTalk covers the recent decision by the US Air Force to select the KC-45A (formerly KC-30) over the KC-767 for the KC-X tanker requirement.

Not surprisingly, this selection has set off a fire storm of controversy in the media and on FleetBuzz.com (click here).

[Registration is free by the way and this thread alone is worth the effort!]

In lieu of this selection, Boeing issued a stern statement this past Friday about serious concerns it has and is likely to protest this win.

It gives me pleasure to introduce FleetBuzz.com member, Aurora, who has today kindly supplied the article.

Thank You.

Tanker Travails

Like most folks on planet Earth, I was stunned by the U.S. Air Force’s selection of the Airbus’ A330 tanker over the home-grown Boeing 767.

As of this writing there are many unknowns concerning the selection and there are allegations in the press already that the Air Force may have “misled” Boeing, speculation of whether or not Boeing will protest, and the debate on whether or not this is in the best interest of the United States, its military, its industry, and its citizens.

I am not going to pretend to have any answers here, but in this editorial I felt it important to summarize the issues to date and where this may be going. I’m going to state my bottom line up front: this is not over—not by a long shot!

Images courtesy of Northrop Grumman, Boeing

Under U.S. law, no military procurement can be considered as final until the annual budget is approved by the U.S. Congress and signed into law by the President. To characterize this process as sometimes controversial and political would be to say water is wet. So what, one might ask; the Air Force made their selection, this deal is done, right? Not so fast.

Within minutes after the Air Force announcement of the winner (which curiously was made on a Friday evening), there were cries of protest from legislators, union officials, and aerospace workers in those states that would be adversely affected. Boeing had previously stated that were it to lose the competition 44,000 jobs would be affected and that they would be out of the tanker business. This carries some serious implications, not only for the affected employees, but for the U.S. aerospace infrastructure. Northrop Grumman is touting the creation of 25000 jobs, but this is still a net loss of 19000 in the estimation of many observers. Further, the wings and most of the fuselage of the KC-30 will actually be manufactured in Europe.

Keep in mind that the United States military relies on their tanker fleet to be able to project air power on a moment’s notice around the globe. It is a vital component in their contingency planning. With this decision, the Air Force seems to be ignoring not only the fact that future parts could be embargoed if one of the European countries disagreed with U.S. foreign policy, but that this decision fails to take into account that EADS is at least 5% owned by Russia—a point made by Senator Patty Murray (D-Wa) recently (unbelievable, isn’t it?).

Last I looked, Russia is a country which is not very friendly to the United States at the moment. Granted the Russians have no say in the management of the company—for now. However, who can guarantee that won’t change? There is significant political risk, which could only be mitigated if Northrop Grumman were to manufacture the aircraft wholly in the United States. That is most unlikely. Air Force and U.S. Department of Defense officials have been quick to point out that these considerations are “not their concern” in so many words or less. In fairness, they are correct; they were limited by law in the scope of their deliberations. Correct or not, this is not sitting well with many members of Congress.

And this is where we pick up the story…. A couple of days after the announcement that Airbus had won the day (despite the efforts of one Air Force general to paint the KC-30 as an “American tanker”), both Democratic contenders for president, Senator Hillary Clinton and Senator Barack Obama, criticized the decision. Senator John McCain, who led the charge to expose the law breaking by a few individuals that “tanked” the original tanker lease deal, was less specific.

Nonetheless, one would have to be living in a dream world not to believe that this issue will not worm its way into the U.S. presidential campaign, either as a stand alone issue, or as a poster child of the evils of outsourcing, jobs transferring overseas, and erosion of the U.S. aerospace infrastructure and defense industry. Grist for the populist mill!

Now critics readily point out the fact that Boeing has outsourced most of its 787 program and they are correct. So what’s the big deal? For starters, the 787 is a commercial program, not a key ingredient of the American power projection equation. True, part of the 767 is manufactured in Japan, but I don’t recollect millions of Japanese taking to the streets to protest U.S. policy, or the Japanese foreign minister overtly working to scuttle U.S. foreign policy. Japan is viewed as a friend by the majority of the U.S. public. France?

Don’t forget either that all members of the U.S. House of Representatives and a third of the U.S. Senate are up for re-election. Which of them wants to be perceived as the champion of job growth in France? Interestingly enough, last Wednesday Northrop-Grumman proudly announced that 2000 jobs were going to transfer from Europe to the U.S. EADS quickly quashed that thought and said no European jobs were being transferred. Hmmm….who’s in control here?

The key point in all of this is that this deal is not yet “a deal”—not even remotely.

Already congressional hearings have been held and Congressman John Murtha, the powerful chairman of the House Appropriations Committee, reminded Air Force officials that Congress could kill the KC-30 by not appropriating money for it and that there were political considerations in all of this. Even more ominously, polls are indicating that Senator Clinton and Senator Obama are both running ahead of Senator McCain in the presidential race. Many pundits expect both Democratic senators to pound home populist themes as they campaign in Pennsylvania in the coming weeks. This tanker selection is a heaven sent opportunity for both, and not quite so heaven sent for the candidate who set events in motion that resulted in the tanker deal being re-bid. How will Senator McCain respond? So where is this going? I think the safe answer is that in the short run: nowhere.

There is still the issue of whether or not Boeing will protest the award. Remember, there are no style points awarded if they don’t, just as there are no points for second place in this competition.

Another way of looking at it is that the “half life” of the Pentagon’s “goodwill” is about 5 minutes; after that its “what-have-you-done-for-me-lately?”

From where I sit, there is no downside to Boeing protesting, just as there was none for Lockheed Martin or Sikorsky on the CSAR-X award.

They have nothing to lose by protesting.

Even if Boeing does not protest (and, again, I can see no reason why they shouldn’t; I suspect the other side would have already filed had this gone against them), I expect this controversy to continue to roil and become an issue in the American Presidential and Congressional election campaigns.

Northrop Grumman, EADS, and the U.S. Defense Department will likely want to bring this deal to closure as soon as possible. However, there are many, many members of the U.S. Congress who will do their level best to ensure that does not occur. Every now and then, Congress gets a golden opportunity to remind Americans that their government still works—for them! Even if the Air Force maintains that employment, U.S. content, outsourcing, and preservation of the defense infrastructure are not their worry, it is clearly in the domain of Congress to deal with these issues–and Congress seems to be stepping up to the plate.

The dust likely won’t settle until after the next Administration takes charge in January 2009. By then, quite a lot will have happened. But in the final analysis, I predict it won’t be about pallets carried, MTOW, ramp footprints, etc. Perhaps in the end “best value” won’t be just what the Air Force thinks is “best value” for the buck, but “best value” for the our aerospace industry, our aerospace workers, and our military. After all, I have never heard it said, nor seen in print, that the KC-767 was in any way inadequate, only that is was smaller.

Was the Air Force beguiled by the big-ness of it all?

But I do want to congratulate the Air Force for one thing; they managed to unite members of both parties on an issue in a way not seen in years. Score one for real bi-partisanship.

Aim High!

12 comments March 10th, 2008