USAF Says It Will Disregard WTO Disputes

Airbus got an unexpected boost in its competition for a new US Air Force tanker contract. The service removed a requirement for bidders to discuss trade disputes lodged with the World Trade Organization in their proposals.

In a move widely seen as benefiting Airbus, Special assistant to the Air Force Secretary Ken Miller told the Associated Press Tuesday bidders no longer have to show how penalties deriving from WTO disputes might affect their ability to meet contract obligations.

Airbus' US partner Northrop-Grumman has bitterly complained that requirement would have all but eliminated its chance to bid competitively against Boeing.

Northrop Grumman spokesman Randy Belote said, "Having that issue as a part of the (bidding) would have made it nearly impossible to compete. We have consistently maintained that the WTO issue was difficult, at best, to resolve within the confines of the tanker acquisition program."

The US filed a complaint with the WTO about subsidies Airbus receives from European governments. Airbus fired back that Boeing gets tax breaks and lucrative defense contracts from the US government. The dispute, simmering since 2004,  has rekindled recently with fresh protests coming from both sides.

Industry observers say the WTO should settle the dispute by next October.

Airbus and Northrup Grumman are developing a tanker based on Airbus's A330 airliner in the US. The partners have already announced plans to build the aircraft in Mobile, AL. EADS says it's prepared to shell out $30 million in the coming contract competition. That may seem a lot, but industry experts have pegged the value of a new tanker contract at more than $20-billion.

The Air Force has not published all the evaluation criteria for bidders as yet. CEO of EADS North America Ralph Crosby told Reuters the company hasn't ruled out withdrawing from the competition depending on what it sees in those criteria.

EADS faces an uphill battle in the competition. It faces stiff opposition from US lawmakers intent on keeping large defense contracts at home. In addition, not only are they facing the home team in Boeing, but the US plane maker's 707 derivative KC-135 has been the Air Force's primary aerial refueling platform for five decades -- a legacy sure to be highlighted in Boeing's bid.

For its part, EADS says it believes the military will conduct the competition fairly. Besides, the European conglomerate just won another lucrative US military contract to supply the US Army with 322 light utility helicopters.

The USAF is expected to begin accepting bids for a new tanker later this month.

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