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Boeing loses military contract

U.S. Air Force awards US$35 billion deal to Airbus' parent company

Boeing loses military contract

Aerospace giant Boeing suffered a crushing defeat Friday when it lost a massive U.S. Air Force contract for refueling tankers, which it has supplied to the U.S. military for half a century.
The Pentagon's announcement awarding a contract worth an initial US$35 billion for a partnership of Northrop Grumman and the European consortium EADS, parent of Airbus, deals a new blow to Boeing, which had won the deal in 2003 but had it canceled due to a procurement scandal.
The loss was nonetheless a surprise for Boeing in one of the largest defense contracts in recent years at a time when the industry is bracing for the end of a period of military growth under the administration of U.S. President George W. Bush.
Many analysts had expected Boeing to win the deal to replace its own fleet of KC-135 Stratotanker, produced by Boeing between 1956 and 1965 to refuel warplanes in mid-air.
The U.S. armed forces is still using its fleet of 500 KC-135s for refueling, including in Iraq and Afghanistan, as well as other locations far from U.S. air bases.
Boeing had argued its replacement aircraft, based on the Boeing 767, would be 24 percent more fuel-efficient than the Northrop-EADS planes, and would be more easily maneuvered because of their smaller size.
However, the Boeing planes would also carry 25 percent less fuel than the modified Airbus A330, to be known as the KC-45A.
The latest tanker saga will remain a dark chapter in Boeing history. The Chicago-based firm had won a US$20 billion contract for 100 new refueling planes in a lease-purchase deal that had drawn wide criticism in Congress.
That contract was voided after a Pentagon inspector general's report found the price had been inflated and after a scandal in which a former U.S. Air Force procurement official got a job with Boeing after overseeing a the tanker plane deal.
The former official and another Boeing executives served jail terms in the case and a shakeup at Boeing forced out then-chief executive officer Phil Condit.
The fierce rivalry for the contract highlighted friction between the United States and Europe over trade.
Based on Boeing's argument, a complaint by Washington lodged with the World Trade Organization, argued that the European Union was illegally subsidizing Airbus, a subsidiary of the European Aeronautic Defense and Space Company.
Brussels shot back that Boeing was effectively subsidized by generous U.S. military contracts.
Amid the tension, the tanker contract was reopened in 2006, and Airbus joined forces with U.S.-based Northrop, promising to build its airplanes in the United States.
The Pentagon made a number of changes in the contract to eliminate some provisions that would have excluded the Northrop-EADS bid, after threats from Northrop with withdraw.
Boeing said it was weighing its options after the decision.
"Obviously we are very disappointed with this outcome," said Boeing spokesman William Barksdale.
"We believe that we offered the Air Force the best value and lowest risk tanker for its mission. Our next step is to request and receive a debrief from the Air Force. Once we have reviewed the details behind the award, we will make a decision concerning our possible options, keeping in mind at all times the impact to the warfighter and our nation."


Updated : 2021-04-17 02:45 GMT+08:00