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Originally published March 4, 2011 at 9:20 AM | Page modified March 4, 2011 at 1:20 PM

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EADS won't appeal $35B Air Force tanker decision

The European plane-building company that lost out on a $35 billion refueling tanker deal said Friday it won't appeal the Air Force's decision to go with Chicago-based Boeing Co. in one of the biggest defense contracts ever.

Associated Press

WASHINGTON —

The European plane-building company that lost out on a $35 billion refueling tanker deal said Friday it won't appeal the Air Force's decision to go with Chicago-based Boeing Co. in one of the biggest defense contracts ever.

One week after the military chose Boeing, officials of European Aeronautic Defence and Space Co., said they were disappointed with the decision but did not want to extend a multimillion-dollar fight that has already dragged on for a decade.

"It's time to put the interest of the warfighter first and we're stepping aside," Ralph Crosby Jr., chairman of EADS North America, said at a news conference.

The Air Force picked Boeing to build nearly 200 giant airborne refueling tankers to replace the Eisenhower-era, KC-135 tanker fleet. The contract, which eventually could be worth as much as $100 billion, will mean tens of thousands of U.S. jobs, with Washington state and Kansas getting the bulk of the work.

EADS had planned to assemble the aircraft at a closed military base in Mobile, Ala.

Crosby did little to dispel the notion that Boeing came in with a low bid to prevent its foreign competitor from gaining a foothold in U.S.

Boeing's bid, Crosby said, was "an extremely low-ball offer in order to achieve their strategic objective."

Sean O'Keefe, chief executive of EADS North America, said the company's focus now is on "future opportunities and our continued growth."

The tankers - basically flying gas stations - allow jet fighters, supply planes and other aircraft to cover long distances. That's critical today with fewer overseas bases and with operations under way in Iraq and Afghanistan, far from the United States.

Pentagon officials said at their announcement that because the price difference between the two bids was greater than 1 percent of the total, cost essentially was the deciding factor.

The award gives Boeing an initial $3.5 billion for engineering, manufacturing and development of the first four aircraft. Under the contract, 18 tankers will be delivered to the Air Force by 2017.

Dennis Muilenburg, president and chief executive of Boeing's defense business, said that Boeing will be able to make the plane more cheaply because it will be made on the same production line as the civilian version.

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The $35 billion contract calls for producing 179 new tankers. It could end up being a first installment on a $100 billion deal if the Air Force decides to purchase more aircraft.

"There is no doubt about it, the tanker will be built in Washington state by Washington workers," said Sen. Patty Murray, D-Wash.

Crosby suggested that if Boeing falters, EADS would be ready.

"Should they fail to deliver, we stand ready to step in with a proven and operating tanker," he said, citing the company's tanker that is in production for other countries.

Said Sen. Jeff Sessions, R-Ala.: "Now, the winner must deliver on their promises."

Through the years, the Air Force's efforts to award the contract have been undone by Pentagon bungling and the criminal conviction of a top Defense Department official.

Initially, the Air Force planned to lease and buy Boeing planes to serve as tankers, but that fell through. The Air Force later awarded a contract to Northrop Grumman Corp. and EADS, but in 2008 the Government Accountability Office upheld Boeing's protest of the contract.

The Air Force reopened the bidding in 2010, only to be embarrassed again as it mistakenly gave Boeing and EADS sensitive information that contained each other's confidential bids.

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Online:

Boeing: http://www.boeing.com/

EADS North America: http://www.eadsnorthamerica.com

Pentagon video of announcement: http://tinyurl.com/4rjpllv

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