Boeing, Airbus May Each Get Some Of The $100 Billion Pie

With the prize possibly the most lucrative Pentagon contract in history, Boeing and a consortium of Northrop and EADS, which manufactures the Airbus, have been battling over which company will replace the aging fleet of KC-135 tankers for the Air Force. The struggle has already has already seen contracts re-opened for bidding three times, and a scandal that resulted in jail time for some Boeing executives.

A330 Tanker

And on Capitol Hill, the talk is about free trade, patriotism and jobs.

The Chicago Tribune reports that the KC-135 fleet averages 50 years of age, and that refurbishing them could cost in the billions. But neither side can deliver the knockout punch to grab the contract, so lawmakers say a split might be only way to resolve the dispute.

Congressman John Murtha (D-PA), who chairs the House Appropriations Subcommittee on Defense, is set to reveal some of the details of his vision for splitting the contract this week. He put language in the House Defense Authorization Bill that would allow the Pentagon to buy tankers from both companies. The Pentagon, however, says it is against such a move.

Both companies told the Tribune they would be open to getting some of the work, rather than none at all. Northrop-EADS has proposed a tanker based on the Airbus A330-200 airframe, which won the last round of bidding. But Boeing, which offered a smaller, less expensive B767-based tanker said the Air Force did not follow its own procurement rules, and Congress agreed, nullifying the contract. Now, Boeing has proposed a tanker built around the larger B777, which is similar in size to the A330.

B767 Tanker

For the Pentagon's part, Defence Secretary Robert Gates says his primary concerns are two separate supply chains and different crew training, all of which would likely be more costly. The Tribune reports he still favors a "winner take all" contract for the tankers.

Both companies have strong supporters on Capitol Hill, with jobs in their states and districts on the line. Paul Nisbet, aerospace analyst with JSA Research, says the cost of the progrmas may not be the determining factor. "I'd be surprised if they'd do it (split the contract)," he told the paper. "But politics has won over economics many times before."

FMI: www.boeing.com, www.northropgurmman.com, www.eadsnorthamerica.com