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Fri, Feb 29, 2008

Aero-News Alert: EADS/Northrop Grumman Team Wins KC-X Contract Award

Boeing Says It Will Request Debrief From USAF

ANN REALTIME UPDATE 02.29.08 2350 EST: Late Friday night, Boeing issued its statement regarding the Pentagon's awarding of the KC-X contract bid to a team comprised of Northrop Grumman/EADS:

"We were just informed that our KC-767 Advanced Tanker proposal was not selected in the KC-135 Replacement Program known as KC-X.

"Obviously we are very disappointed with this outcome. 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.

"The Boeing Company would like to thank the many people who helped us in this campaign. We have received tremendous support from our suppliers, elected federal/state/local leaders, unions, community groups, and the 160,738 men and women who work for Boeing."

Original Reports

1700 EST: Moments ago, Pentagon officials announced the team comprised of Northrop Grumman and EADS has been selected to provide the US Air Force with 179 new tankers.

The newly-designated KC-45A -- a variant of the KC-330 Multi-Role Tanker Transport (MRTT), and a derivative of the Airbus A330 commercial airliner -- was selected over Boeing's KC-767.

"We are proud that the US Air Force chose the Northrop Grumman / EADS Team to modernize its aerial refueling fleet," said Ralph D. Crosby, Jr., EADS North America Chairman and CEO. "EADS has committed our full resources to support this vital program for our prime contractor, Northrop Grumman, the US Air Force and the warfighters that this system will serve for decades to come. We already have begun the work necessary to expand our US industrial footprint in support of this important program."

The Pentagon's decision marks the end of a controversial, and oft-delayed, selection process. Boeing was originally selected to provide KC-767s in 2003... but that decision was later rescinded over a procurement scandal involving an Air Force official with control over the selection process, who was later offered a job with the American planemaker.

Despite that initial loss, many analysts believed the smaller, cheaper Boeing offering still was the favored bidder for the KC-X contract, due in part to the "Made in America" label. Northrop countered that argument last year, however, with the announcement that if the KC-30 was selected, EADS would assemble the aircraft -- and the upcoming Airbus A330-200 Freighter -- in Alabama.

So far, there's been no formal response to the decision from Boeing. The planemaker had counted on KC-X to keep the 767 production line open; the decision likely marks the end for that aircraft family, after a current production backlog runs out.

It's also too soon to say if Boeing -- or other parties -- plan to contest the Air Force's decision.

1430 EST: Aero-News has learned Secretary of the Air Force Michael W. Wynne and Vice Chief of Staff of the Air Force Gen. Duncan J. McNabb will announce the winner of the KC-X tanker contract award at 1700 EST Friday.

The Air Force is considering the Boeing KC-767 and the Northrop/EADS KC-30 for the first phase of a contract to replace the Air Force's KC-135 Stratotanker fleet -- which averages 44 years old.

Boeing was initially awarded a controversial $23.5 billion lease plan to supply tankers based on the planemaker's 767 commercial airliner in 2003... but the decision was subsequently shot down by Congress, after conflict-of-interest issues involving former Air Force official Darleen Druyun came to light.

Forced to rebid for a contract it already won once, Boeing stuck with a variant of the KC-767 being built for Japan and Italy. In February 2007, the Northrop/EADS team submitted a version of the KC-330 Multi-Role Tanker Transport (MRTT.)

Like the KC-767, the KC-30 is heavily based on a commercial airliner -- in this case, the Airbus A330. Just as that aircraft is slightly larger than a 767, so goes the MRTT -- which, depending on which team is doing the talking, is either its blessing or its curse.

Boeing calls the KC-767 'right-sized' for the terms of the Air Force contract, and notes the KC-30 takes up more ramp space, burns more fuel, and costs more to buy. Northrop counters the Air Force would get more for its money in the KC-30, as the aircraft could fulfill a variety of transport roles, in addition to its tankering duties.

If selected, Boeing will assemble the KC-767 airframe in Everett, WA, with tanker-specific equipment installed in Wichita, KS. EADS plans to set up final assembly lines for the upcoming Airbus A330 Freighter and Northrop Grumman KC-30 Tanker platform in Mobile, AL if the KC-30 is selected by the US Air Force as its new aerial refueling platform.

The first phase of the KC-X contract, for 179 aircraft, is valued at $40 billion -- and arguably even more in prestige. In fact, the sheer importance of the contract almost guarantees whichever company loses the bid, will likely appeal the decision.

Stay tuned.



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