Boeing, Airbus brace for tanker decision

By @ibtimes on

The U.S. Air Force prepared on Thursday to announce the winner of an epic $35 billion procurement battle between Boeing and Airbus over 179 aerial refueling planes, its third attempt to start replacing a fleet of planes built before humans first landed on the moon.

Less than a dozen top Air Force and Pentagon officials know the outcome of a price shootout that saw both companies submit very aggressive offers, but which analysts increasingly expect Airbus parent EADS to win.

Air Force Secretary Michael Donley and Pentagon acquisition chief Ashton Carter are due to announce the winner at a short news conference after U.S. financial markets close, but the losing bidder could protest the decision and its backers in Congress could try to reverse the move legislatively.

The Air Force has failed with two previous attempts to begin replacing its 50-year-old KC-135 Stratotankers, which gas up fighter planes and other aircraft in mid-flight, extending the range of military operations.

The decade-long saga has sparked transatlantic tensions and clashes in Congress among lawmakers eager to bring high-paying aerospace jobs to their states.

Just before the announcement, top Pentagon and Air Force officials plan to call the companies and key lawmakers, who are in their home districts during the current recess.

EADS and Boeing Co, arch rivals in the market for passenger jets, have fought bitterly in public over the contest with expensive advertisements while their respective supporters have battled it out at dueling news conferences.

Both Boeing and EADS, through its North American subsidiary, are offering variants of existing twin-engined wide-body passenger jets: the Boeing 767 and the Airbus A330.

Defense consultant Loren Thompson this week predicted EADS would win the bidding because Airbus generally underbid Boeing in commercial deals and was likely to have done so again, especially given its desire to build big planes on U.S. soil.

European defense expert Howard Wheeldon, senior strategist with London brokers BGC Partners, said EADS was the most likely winner, although he said he would not completely rule out the possibility that the award for 179 aircraft might still be split between EADS and Boeing.

Analysts widely expect the losing side to file a protest against the decision with the Government Accountability Office, the arm of Congress which rules on federal contract disputes, which would then have 100 days to rule on the case.

The Air Force has been trying since 2001 to begin replacing its Boeing-built KC-135 tankers.

An initial $23.5 billion plan to lease and then buy 100 modified Boeing 767s as tankers, fell apart in 2004.

EADS, partnered with Northrop Grumman Corp , won a 179-plane deal in February 2008, only to have it canceled after government auditors upheld parts of a protest by Boeing.

Northrop subsequently pulled out, leaving the European aerospace and defense company to bid alone.

Top Pentagon officials have been walking on eggshells ahead of the announcement, keen to avoid any comments that could be used in a possible future protest.

(Reporting by Andrea Shalal-Esa and Tim Hepher; Editing by Tim Dobbyn, Dave Zimmerman)

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