767 Line Now Under Increased Pressure

When Congress pulled the plug on the Air Force's buy/lease tanker deal with Boeing, it did more than deal the aerospace giant a $23.5 billion blow to the wallet. It also put the entire future of the 767 line in question. But, while analysts see problems ahead for the line in the short-term, the long-term outlook still seems very positive.

As ANN has reported, the tanker deal started going south after Pentagon officials discovered one of their own, Air Force procurement officer Darleen Druyun, hopped the fence and went to work for Boeing just as the deal she was negotiating with the airplane manufacturer was being completed. Boeing fired Druyun and CEO Philip Condit resigned as the scandal broke. Earlier this month, Druyun was sentenced to nine months in prison after she admitted to inflating the price of the deal as a "parting gift" to Boeing, according to the Washington Post.

Boeing executives have said they need to decide by May whether to shut down the 767 production line. Without the tanker deal, Boeing has to complete just 24 767s before the line goes idle.

The Congressional decision to punt the tanker deal "leaves the 767 where it was a few days ago, a dying program with great upside potential," said Richard Aboulafia, an aviation expert with the Teal Group in Fairfax (VA). He was quoted by the Chicago Tribune. Some analysts, however, predict that Boeing will go so far as to spend its own money to keep the line open in hopes another tanker deal is in the offing.

"I know exactly what Boeing will do," said Loren Thompson, a military analyst at the Lexington Institute. She told the Tribune, "Boeing management will devise a low-cost method of maintaining the workforce and the tooling for the 767 line because they know that once tanker modernization gets started, they could sell hundreds of airframes."

In ordering the Pentagon to put the kabosh on the tanker deal, Congress left the back door wide open by authorizing the Air Force to put the entire project out for bid once again. That means contracts for about 100 tankers will again be in play and Boeing will again be a player. Even in competing against Airbus, Boeing is likely to win, said Thompson.

"It is extremely unlikely Boeing will get anything less than the lion's share of the aircraft," Thompson told the Chicago newspaper. "In all likelihood, they will get every one of them."

In the meantime, the tanker scandal has claimed another Pentagon official. Air Force General Gregory Martin, who was nominated to become the US Forces commander for all of Asia and the Pacific, withdrew his name after Sen. John McCain (R-AZ) promised he would kill the assignment because of Martin's part in the Boeing tanker misdeal.

FMI: www.af.mil, www.boeing.com