No Bad Thing

“I would rather not turn in a losing proposal than turn in one that’s not competitive,” says Jim Albaugh, President & CEO of Boeing’s Integrated Defense Systems in an interview with the Wall Street Journal.

In the wake of the GAO ruling upholding Boeing’s protest at the tanker award, the revised draft RFP has meant that the Northrop Grumman/EADS Airbus A330 derived tanker seems to still better fit the bill for the US Air Force. In response, Boeing argues that without additional time to submit a counter proposal, it would not be offering the Air Force a viable tanker solution let alone a worthy competitor to the A330.

Images courtesy of Boeing

Given ongoing labour discussions with the IAM, continual work to the delayed 787 Dreamliner and an already busy 777 assembly line, Boeing can ill afford to sink money into a 767-based tanker solution that would stand to lose in this revised contest.

Would dropping out of the contest be a backward step?

Not in the least.

Earlier this month, Azerbaijan Airlines switched one of its 787 orders for a 767-300ER, citing availability to counter the waiting period for its 787’s.

While it is not indicative of other 787 customers doing the same, or even ordering more 767’s in the interim - the fact remains that the current build rate of 777’s is not enough to placate customers seeking more efficient, new build airplanes until their 787’s arrive.

Given the inherent success of the 767 family over the last 30 years, a shift away from the tanker competition would allow Boeing to produce more 767’s for those airlines unable to add 777’s, particularly the much sought after 777-300ER. This dual strategy employing a mix of 767 and 777 airplanes to offset the 787 delays would potentially be much more beneficial than opting to pour money into a 767 tanker that stands little chance of winning the USAF requirements.

Should Boeing be successful in gaining more time to provide a bigger airplane than the proposed KC-767 in the belief that it can win, there is equally an outside opportunity to explore the ramping up of the 777 line to meet demand. Ultimately, Boeing needs to ensure it averts any strike action by employees, which would directly jeopardise the 787 and the 747-8 which has also entered production.

If Boeing doesn’t get the time extension it seeks, then dropping out of the contest to further consolidate its commercial operations which forms the bulk of its core business is no bad thing at all.

12 comments August 22nd, 2008