Pentagon to Announce Winner of $35 Billion Contract Thursday

The nearly ten-year wait over the the Air Force’s plan to spend $35 billion for new aerial fuel tankers is set to end tomorrow when the Pentagon announces whether Boeing or Airbus will be awarded the lucrative contract The New York Times reports.

The competition for the contract has been closely followed in aviation circles especially in the midst of a trade subsidies battle where both sides have argued that the other has received unfair government aid. Due to the size of the contract, tomorrow’s winner will certainly come under strong criticism from the loser with more allegations of unfair advantages.

Both companies have a lot at stake, especially since the contract for the planes, which are essentially flying gas cans, could later be extended to $100 billion even if military spending falls. But the competition also includes thousands of high-paying jobs, and whether they will end up at Boeing’s plants in Washington State and Kansas or in Alabama, where EADS would build a factory if it won.

Many analysts have predicted that the contract will be awarded to Airbus due to a more attractive proposal from the European aerospace company and the fact that Airbus was originally awarded the contract back in 2008 before an appeal by Boeing caused the Pentagon to re-examine the proposals (Airbus is offering a modified A330 while Boeing is offering its 767 for the tanker bid).

A victory by EADS, parent company of Airbus, would symbolize a shift in the process of awarding military contracts which have traditionally gone to American corporations such as Boeing, Lockheed Martin and Northrop Grumman among others.

Boeing’s supporters acknowledge that they are worried. And if the Air Force picks EADS, that could revive concerns in Congress about putting a major military contract in the hands of a foreign company, though EADS says its North American subsidiary would eventually assemble much of each plane in Mobile.

Lawmakers who support Boeing contend that the Pentagon’s formula for judging the bids favors the larger European plane over Boeing’s smaller one. They also complain that EADS, which is partly owned by European nations, could use subsidies to underbid Boeing even though the EADS plane would normally cost at least 10 to 15 percent more to build.

Some analysts, including Teal Group’s Richard Aboulafia have predicted that the fierce nature of the competition over the contract may force the Pentagon to split the contract between Boeing and Airbus but due to the cost efficiency of using one aircraft for the entire fleet, such a split may be unlikely.

The winner will be announced Thursday afternoon and we will have analysis up shortly thereafter.




This entry was posted in 767, A330, AIRBUS, BOEING and tagged , , , , , . Bookmark the permalink.

One Response to Pentagon to Announce Winner of $35 Billion Contract Thursday

  1. Thanks for the reminder! I’ll stay tuned today for the big news.

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