KC-X Tanker Competition: Thompson Hits Target
While deliberations on the draft RFP for the KC-X tanker contract are still continuing, Arizona Senator and former Presidential candidate John McCain bizarrely questioned the US Air Force focus in this contest favours a smaller airplane.
The single most critical component of the KC-X competition that may ultimately decide whether the 767 or A330 wins the deal is that of infrastructure. Quite why a Republican politician supports a foreign entity for a strategic military procurement is as bizarre as the very short-lived Airbus “E-Squared” concept (quietly born and brushed aside) during the limelight of the Boeing Sonic Cruiser days.
Adding to the complexity of this new RFP is the issue of the preliminary WTO ruling against Europe and Airbus, and in particularly the aspect of retrospective penalties for all Airbus airplanes from the A300 to A380 that received state launch aid that the US Air Force may well have to factor in.
Image courtesy of UnitedStatesTanker.com
Amidst the melee of the arguments and counter-arguments, Dr. L. Thompson from the Lexington Institute summed up the crux of the political matter thus and hit the nail on the head:
“It is important to recognize that the argument over illegal subsidies is really between Boeing and Airbus (or between the United States government and the European Union), and that Northrop Grumman is a bystander that has been dragged in because Airbus made the plane it wants to use for its tanker. But once the controversy is seen for what it is — a trade dispute — it becomes obvious that Boeing is right and Airbus is wrong. European governments have violated free-trade rules by subsidizing Airbus for decades, providing benefits that an impartial panel of trade experts has determined to be illegal, and as a result of those benefits U.S. companies have lost hundreds of billions of dollars in sales.“
Dr. Thompson’s comments echo those of Boeing’s legal counsel team whom I spoke with at length on the subject and the central issue surrounding the KC-X contest is one that far from being swept aside, is gaining more momentum.
“We’ve had a finding that its against international rules to have given these subsidies and with those subsidies obtained market share that one shouldn’t have been able to obtain otherwise and be able to use those very same subsidies to do it all over again [in the KC-X competition] and that’s the part that’s an economic matter and a trade policy matter which is offensive,” said Bob Novick, a member of Boeing’s legal team dealing with the WTO ruling.
With unemployment in the United States running at high of 10.2%, both Northrop Grumman/EADS and Boeing will argue that they are the best choice for securing future jobs in this much specialised arena.
Thompson ends by saying:
“…how can the Pentagon simply ignore the position of the U.S. Trade Representative, when trade deficits are destroying the value of the dollar and the military is planning to conduct many more competitions for weapons systems based on commercial products available from overseas sources? “
He has a point. Several in fact.
The real issue is just how far all sides will go to force the WTO edict onto the US Air Force and factor that into the final RFP.
Northrop Grumman may well be thinking about an exit strategy if the A330 subsidies come into play, because it and EADS would have a hard time proving the same charges for the 767, particularly when infrastructure costs of the eventual procurement will factor in cost of production. There is no tanker facility for the A330 in the US. The 767 does.
On the bright side, EADS will no doubt be pleased that the A330MRTT successfully transferred fuel through the boom during night time refuelling tests - although again the image leaves a lot to be desired.
As much as the press and supporters of a tanker line in Alabama may want to avoid it, on the face of it, the costs the A330 incurs may just be one the US Air Force may not be willing to bear - but let’s be fair, the 767 and A330 both have much to play for on Capitol Hill.
61 comments November 11th, 2009
