Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

Business / Technology


Our network sites seattletimes.com | Advanced

Originally published March 22, 2010 at 6:32 PM | Page modified March 23, 2010 at 11:07 AM

Comments (0)     E-mail E-mail article      Print Print      Share Share

Airbus parent plots low-cost tanker bid

Airbus parent company EADS is looking very seriously at a low-price bid for the Air Force refueling-tanker contract against Boeing, despite the withdrawal of its U.S. partner Northrop Grumman from the competition.

Seattle Times aerospace reporter

Airbus parent company EADS is looking very seriously at a low-price bid for the Air Force refueling-tanker contract against Boeing, despite the withdrawal of its U.S. partner Northrop Grumman from the competition.

Company officials believe they may be able to beat Boeing on price, said two industry sources familiar with EADS' thinking.

Price has emerged as a key to the competition, because bidders won't get much credit for performance beyond the Pentagon's basic criteria, which were seen as inherently favoring Boeing's smaller 767 airplane.

The Europeans last week asked for a 90-day extension of the bidding period to allow them to prepare a detailed offer.

If that request is granted, EADS looks set to put the A330 tanker back into contention.

"I think it is likely," one of the industry sources said. "If the mechanics of putting the proposal together can be solved, I would expect them to do it."

Both sources asked not to be identified, citing the sensitivity of the competitive process.

The A330's chances appeared dead when Northrop Grumman bowed out of the contest March 8.

The next day, EADS Chief Executive Louis Gallois said the Europeans would not compete alone. He said the Pentagon's request for proposals (RFP) favored "the smaller, less capable airplane."

The RFP is structured so that any tanker meeting minimal conditions is a contender, after which it becomes mainly a question of price. "This is giving a huge advantage to the 767," Gallois said then.

But European Aeronautic, Defence & Space seems to have changed its stance.

The industry sources familiar with EADS' thinking both said the Europeans now believe that although the smaller 767 should logically be cheaper, the A330 may be able to undercut it.

advertising

That's a surprising expectation, given that Airbus plans to invest in building a new A330 assembly plant and tanker-conversion facility in Mobile, Ala.

Yet EADS officials believe that expense will be compensated by lower development costs, because the A330 tanker for the Air Force will be very similar to the airplane, already certified in Europe, that has won tanker contracts in Australia, Saudi Arabia, the United Arab Emirates and Great Britain.

In contrast, EADS thinks Boeing's development costs could climb because Boeing plans to offer a 767 tanker with key improvements — including a 787-style flight deck and a new refueling boom — from the tankers it sold to Italy and Japan.

The calculus goes: If EADS can sell its larger airplane as not only more capable but also lower price, the A330 will be the next U.S. tanker.

"It's all about price," the second industry source said. "The team that can put together the most aggressive package, meeting the basic technical requirements but driving a very competitive price, wins."

The Pentagon, eager to have a competition that ensures value for the taxpayer, must be tempted to let that scenario play out.

EADS spokesman Guy Hicks said Monday "there has been no decision by EADS to bid on the tanker."

But Hicks laid out reasons why a bid without Northrop could make sense.

EADS has already demonstrated success as a prime contractor to the U.S. Army on its Light Utility Helicopter program, he said. And it has built up its U.S. presence and acquired the clearance needed to work on classified defense projects.

One reason EADS is requesting an extension of the bidding period is that it wants a detailed briefing from the Air Force on the model that will be used to evaluate the operational effectiveness of each tanker contender.

Pentagon spokesman Bryan Whitman said Monday that only lead contractors Boeing and Northrop, not EADS, received briefings on that assessment model in the previous round.

"It's certainly a valid point," Whitman said. The government "would certainly consider a reasonable extension of the deadlines in the RFP consistent with past practices," he said.

Gov. Chris Gregoire and the governors of four other Boeing-supporting states have spoken out against any delay in the bidding deadline.

On the other side of the ledger, European Union political leaders have railed against U.S "protectionism" and threatened a trade war if EADS is excluded.

Asked for comment, Boeing stuck to a statement issued last week: "Boeing recognizes it must earn the tanker contract ... with a modern and capable tanker that meets or exceeds all warfighter requirements and is cost-effective."

If EADS is right that its Australian tanker can meet all the U.S. requirements with minimal changes, clearly Boeing's tanker team will have to carefully weigh the pricing in its forthcoming bid.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

E-mail E-mail article      Print Print      Share Share

More Business & Technology

UPDATE - 09:46 AM
Exxon Mobil wins ruling in Alaska oil spill case

UPDATE - 09:32 AM
Bank stocks push indexes higher; oil prices dip

UPDATE - 08:04 AM
Ford CEO Mulally gets $56.5M in stock award

UPDATE - 07:54 AM
Underwater mortgages rise as home prices fall

NEW - 09:43 AM
Warner Bros. to offer movie rentals on Facebook

More Business & Technology headlines...

Comments
No comments have been posted to this article.


Get home delivery today!

Video

Advertising

AP Video

Entertainment | Top Video | World | Offbeat Video | Sci-Tech

Marketplace

Advertising