Pentagon Cancels Tanker Contest - For Now
September 11th, 2008
In a stunning twist to the ongoing saga over the replacement for the US Air Force’s tanker requirement, the Department of Defense (DoD) terminated the contract, paving the way for the next US Administration in waiting to take the reins of this contentious award, pitting Boeing against Northrop Grumman and its partner, EADS.
Defense Secretary Robert Gates announced the contract annulment during a testimony before the House Armed Services Committee.
“It has now become clear that the solicitation and award process cannot be accomplished by January,” he said.
Image courtesy of Boeing
“Thus, I believe that rather than hand the next administration an incomplete and possibly contested process, we should cleanly defer this procurement to the next team.“
“We can no longer complete a competition that would be viewed as fair and objective in this highly charged environment,” said Gates.
Only last month, Boeing IDS chief, Jim Albaugh, had threatened to withdraw completely from the contest unless it had additional time to rework part of its proposed tanker submission to better conform to a revised draft for proposal by the US Air Force.
EADS CEO, Louis Gallois was clearly more than disappointed with the decision by the DoD.
“We have not received any detailed direction from the Air Force or Northrop Grumman. However, we have a contract and will seek an appropriate conclusion to that contract,” said Gallois.
One can surmise from Gallois’ statement that EADS’ contract stands with Northrop Grumman as its partner and subcontractor as opposed to any formal deal with the DoD.
During these “dark days” of a union strike that has hit Boeing, the company can now look to the next contract and base its new proposal on a new, equal footing, without the fear of having to lodge a protest to the GAO.
EADS will no doubt be reeling from this stalled tanker deal, not least because its plan to shift production of the Airbus A330 model to Mobile, AL, has effectively been killed off.
Image courtesy of EADS
EADS had linked winning the KC-X tanker deal with shifting A330 production to the USA, allowing capacity on its Toulouse factory for the upcoming A350XWB airplane.
“The whole notion of Airbus using Mobile to shift A330 production was murky from the very outset. I don’t care what critics say, but it was nothing more than a ploy by EADS to get the US taxpayer to fund an ageing airplane [in the A330] design that Airbus has oversold and now ran the risk of airline cancelations with the current environment of high fuel and labor costs.
EADS needed a new party to underwrite these A330’s so it could continue to cut its price to keep airlines attracted to it while the 787 is delayed because it knows the European Union won’t give it more aid in one hand while it begs for aid on the A350 with the other,” said one veteran US commentator close to the tanker deal.
“A330 in Alabama? Forget it, its dead,” said the commentator.
One of the most vocal critics of the tanker deal being originally awarded to the Northrop/EADS team was Senator Patty Murry, who said that “it’s absolutely the right decision to allow a $40 billion, 40-year contract to continue in a fair way.“
As per usual, the US Air Force now faces an even longer wait for replacement tankers.
The next US Administration will clearly have to pay close attention to and learn from the mistakes made from this protracted affair to ensure that the next contest is clear, concise and fair from the very start.
If that means making changes within the US Air Force itself to ensure a smoother contest, then perhaps its something both electoral candidates should be thinking about.
Sphere: Related ContentEntry Filed under: Aeroplane, Aerospace, Air Transport, Air Travel, Airbus, Airbus A330, Airbus Orders, Airlines, Airplane, Airplane Order, Airplanes, Airport, Airports, Aviation, Boeing, Boeing 767, Boeing 777, Boeing 787, Boeing Orders, Congress, EADS, GAO, KC-30, KC-45A, KC-767, Tanker, US Air Force
9 Comments Add your own
1. Neil A. | September 11th, 2008 at 8:07 am
I want whatever Gallois is smoking!
2. Chris Wallace | September 11th, 2008 at 2:51 pm
I am not surprised EADS is disappointed as the WA and KS delegations wield more clout within Congress then the AL one does. And that clout is very likely to increase with the November elections, regardless of who wins the White House.
And with the AL line being canceled, the KC-30A now becomes the “French” tanker again, since the FAL will be in TLS. The IAM, currently striking at Boeing over outsourcing, will be able to play the “outsourcing” card against NG (which also has IAM-represented staff) and in favor of Boeing (that’s irony for you!).
3. Doug McVitie | September 11th, 2008 at 6:22 pm
Airbus has been busy disseminating false information on the tanker as well as the company’s commercial activities for months now, at an accelerated pace recently (plus they have just appointed a new head of PR, the old one having left to take over A400M PR — she’ll be even better paid there.).
Exaggeration, hyperbole and outright untruths are now commonplace in Toulouse and, quite astonishingly, taken as gospel by the likes even of Bloomberg. This postponement is therefore a reality check for old Louis…, and I reckon one of the reasons he’s whining so vociferously.
4. Aurora | September 11th, 2008 at 6:57 pm
I want what EADS is smoking too! What contract? There is no contract with the USAF as you note.
I noticed that Northrop Grumman is still referring to their tanker as the “KC-45″ on their tanker website (BTW “America’s New Tanker”, their previous website, has disappeared). Isn’t the KC-45 designation reserved for the USAF’s next tanker? Shouldn’t Northrop-Grumman be referring to that airbus as the KC-30?
I’m not convinced there will be a new RFP or a new competition–regardless of who wins the White House in November. This will just lead to more acrimony and internecine squabbling in and out of the beltway. The only way USAF is going to get that french airplane is for the Europeans to pay for it or for the Alabama and Mississippi congressional delegations to take over 75% of the Congress. Last I looked, the demographics didn’t favor that happening in the next 50 or so years ;-). If the USAF truly wants a tanker in our lifetime then the only way they are going to get a Congressional majority to sign off on the deal is to go with Boeing. I would love to see a mix of KC-767s and KC-777s. I sincerely hope General Schwartz and the next SECDEF take the path of least resistance. Otherwise, we’ll be commenting on this competition during the NEXT presidential election in the U.S.
5. Yellowhair | September 11th, 2008 at 7:57 pm
Let’s start by looking what our friends (EADS & EU) have done for the U.S. lately:
The French & German governments used their VETO power in NATO to stop Boeing from selling C-17’s to the peace keeping forces because they are selling NATO A400M’s.
Speaking of A400M’s. Pratt & Whitney won a fair competition to build the engines for that airframe. The French government stepped in and said OH NO those engines WILL be built by a French Company leading to a 2 year delay and stripping P&W from a lucrative contract.
When Airbus was going to sell 6 of their factories the EU stepped in and stopped Spirit AeroSystems from being able to purchase any of those factories. They want them sold to European companies.
Where will the tanker profits go? That’s right Europe. Where will the technology transfer go to? That’s right Europe. Those barrel sections will be stuffed with everything. And it was done in- that’s right Europe. The politicians have put a nice bow on this package but the truth is if the amount of USA JOBS was real, EADS would not be talking about moving work out of the EURO-ZONE!!!!!!!!!! The Unions would MAKE them keep all that work there.
CAN YOU SAY PROTECTIONISM!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Now it is time to look into the politics that involved EADS and their partner by name only, Northrop Grumman and the gift that was given to them.
Mr. McCain did not want to allow the subsidy decision or risk of that decision to be mentioned in the competition. They are already subsidized by their government in the form of non-repayable loans if the plane doesn’t make a profit (can you say A380 it will take@ 400 planes to be profitable. With less than 200 planes on order I don’t see this loan being repaid. The same can be said of the A340-500 & -600). Nothing like FREE money.
This is a company from France and Europe, yes there will be a final assembly plant in Alabama (and Alabama workers have proven to be a skilled workforce) but just how much work will be done there. They state that there will be 1000 jobs for the Tanker & 300 jobs for the freighter. The rest of the jobs that they tout are already in the supplier base (or will not really exist) and will not create NEW JOBS just sustain old ones.
We talk about the scandal from the original tanker deal. The people that were involved in that went to prison and the CEO resigned. In this scandal we have John “Anti-Boeing” McCain making phone calls and sending e-mails so that the requirements for the KC-X will be changed to allow EADS to bid. Let’s not talk about the 4 staffers that worked for companies that lobbied the Senate, Congress and Pentagon on EADS behalf. These people lobbied for EADS and were on McCain’s Presidential Election staff. His finance chairman is still working for the lobby company that is lobbying for EADS AND working for McCain at the same time. No conflict of interest there!!!!
McCain brags on the campaign trail how he saved the taxpayers billions of dollars. I don’t see it and he isn’t showing any true numbers. The original deal was 100 tankers for 20 billion dollars. That works out to 200 million a copy. The new deal is 179 tankers for 40 billion. That works out to 223 million a copy. I see a 10% increase in the cost. In the original deal our war fighters would already be getting some of those planes. Who knows when they will get them under the new deal.
McCain has been extremely negative about letting the Air Force buy more C-17’s when the military truly needs them. Our troops will wait for a C-17 to be available rather than use a C-5 because they are unreliable. The Air Force has to have 2 C-5’s available for any one mission because of reliability The Air force has to make sure that they can do what’s necessary. Putting new engines on the old warhorses is not the solution. Making the best of the C-5’s airworthy and buying NEW C-17’s is the only reasonable answer. Even the first production C-17’s have more hours on them than they were suppose to at this time in their life span and some of them should be replaced. If we shut down the C-17 line in Long Beach and find out that we do need more airlift who are we going to have build them? The French? We must keep this line alive!!!!!!
How do you reward the EU for all their protectionism and down right dislike for the USA??????????
GIVE THEM A 40 BILLION DOLLAR CONTRACT…………THAT’S HOW
A country that doesn’t produce/manufacture durable goods ……..
WELL IT JUST CANNOT EXIST
Call it protectionism if you want but we need to keep the jobs and profits here in the good ole US of A !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
6. mike j | September 12th, 2008 at 9:45 pm
I sure hope McCain changes his mind on C-17 and Boeing for the tanker… as for “choices” his opponent is even worse.
7. keesje | September 16th, 2008 at 5:34 pm
Lets not talk around the truth:
Outright protectionism from the USA.
Let the best win as long as it’s American (or peceived American).
Xenophobic media campaigns work in the US.
Lets not forget the US is the biggest weapon exporter and always asks a fair chance (or more) in international competitions.
The rest of the world now knows how serious to take free trade / open market promotion from US politicians and businessmen (and everything inbetween).
Lockheed Martin got nervous negotiating JSF’s months ago allready..
And on the A400M engines non-sense : PW had no 11.000hp engine, just a rough sketch. Since then they lost the civil market & the GTF took them 20 yrs. No safe ticket to success to say it mildly.
8. Breakout | September 17th, 2008 at 9:52 am
oh come on Keesje.
So what if its “protectionism”?
This is about the security of our nation. I somehow doubt France would let Boeing win a tanker contest there, do you?
The French unions would be angry and probably go on strike, like they usually do when they throw their toys outta the pram.
9. keesje | September 17th, 2008 at 10:36 am
Fyi, the french let Boeing win their last tanker contest & operate them now. Look a bit around what equipment Europe use, it might not match your belly feeling.
Europe bought enormous amounts of US weaponary for decades, this tanker competition is seen as a revealing suprize & people are scratching their heads on further deals, and that is good news for EADS, SAAB, Dassault, BAE, Alenia, Agusta Westland etc..
Leave a Comment
Some HTML allowed:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
Trackback this post | Subscribe to the comments via RSS Feed