Tanker Deal Gone Bust

[SpeedBird]

While most folks who read the newspaper have already heard about the Boeing KC-767 lease deal being killed, the attached article reveals that there is a possibility that the contract to buy a tanker replacement could be opened up to Airbus (and anyone else) to compete for the bid. This should make for some interesting politics since there are so many in Congress who are adamantly opposed to giving the Europeans (read: French) access to our defense market. However, if one were to read the RAF review of the aircraft capabilities between the B767 and A330 for their own tanker recapitalization deal (FSTA), the A330 had a sizeable edge over the B767 in loiter time; fuel capacity; and cargo/pax hauling range. I think the lease contract termination will only force the Air Force to significantly delay a new tanker purchase by at least a few years and open up the door to a company like Omega to offer contract civilian tanker services as an interim measure.


http://www.washingtonpost.com/wp-dyn/articles/A25432-2004Oct11.html

 

[SpeedBird]

For those don't want to go through the headache of registering on the Washington Post site here is the article below:


Boeing Expects Air Force Contract
Firm Looks to Sell, Not Lease, Tankers



By Renae Merle
Washington Post Staff Writer
Tuesday, October 12, 2004; Page E01


Boeing Co. still expects to receive a contract to build 100 refueling planes for the Air Force, chief executive Harry C. Stonecipher said yesterday.

Under the 2005 defense authorization bill, the Air Force can buy as many as 100 of the tankers through a traditional purchase -- but not the lease-buy strategy it initially planned. The measure sets aside $100 million to start the program and requires the Air Force to hold a competition for a $5 billion contract to maintain the aircraft. Boeing had been awarded the maintenance work without competition.


Boeing is ready to compete, chief executive Harry C. Stonecipher says.

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[/size][/font][/size][/font][/size][/font][/size][/font]Even after passing the bill, House and Senate members continued to debate whether it requires the Air Force to hold a competition before pursuing the purchase of tankers. Sen. John McCain (R-Ariz.), a critic of the lease-buy strategy, has said it requires a competition, while some House members say it does not.

Stonecipher said there is "no doubt, none whatsoever" that a competition is not required by the bill. But, he added, "if the customer decides they want to compete it, you can bet that we're going to compete." A deal should "come to fruition" by next April or May, he said.

Stonecipher played down the threat of a competition against likely rival Airbus SAS, which was prevented from competing for the work in 2001 because it did not have the proper technology. "I don't see that they bring anything more today than they did when it was competed last time," Stonecipher said in a conference call with reporters.

European Aeronautic Defense and Space Co., which owns Airbus, has spent $80 million developing technology to make its tankers compatible with U.S. military planes and has said it would be ready to compete.

The end of the lease-buy strategy may be a larger problem for Boeing and the Air Force than currently acknowledged, said Richard Aboulafia, aviation analyst for the Teal Group. The Air Force wanted to lease the planes because it couldn't afford to buy them immediately and still continue its planned purchases of fighter jets, he said.

"When it was a lease, it was financially digestible, but if it comes straight out of procurement, that is just a non-starter right now," he said. The Air Force could delay purchasing the planes until 2010, forcing Boeing to decide how to keep its 767 production line, which has faced declining commercial orders, open for the tanker program.

The proposal to begin replacing the Air Force's refueling planes with reconfigured Boeing 767s was derailed last December after the company fired Darleen A. Druyun for accepting a position with the company while still overseeing Boeing contracts for the Air Force. Druyun was sentenced to nine months in prison Oct. 1 after admitting to giving Boeing preferential treatment for years, including inflating the price of the tanker program. The Air Force has said all of Druyun's procurement decisions are being reviewed.

"I don't know if they're tainted or not," Stonecipher said of the programs Druyun admitted improperly influencing. "I haven't seen the evidence that backs up the plea agreement. . . . But if they're tainted, we'll fix them."