mm303: Boeing loses the big one

MUDGE’s Musings

Boeing Corporation is one of this country’s economic superstars. Through years of growth, organically and, as has been typical of the aerospace industry since the end of the Cold War, through acquisition, Boeing has become one of the top three defense contractors in the U.S.

Boeing competes globally with Airbus, the “upstart” European aerospace consortium, for the privilege of supplying the world’s airlines. In both roles, military and civil, Boeing has remained a shining exception to the cataclysmic conversion of the U.S. economy from manufacturing to not.

Boeing, long based where it began during World War I, in Seattle, unexpectedly transferred its corporate headquarters to Chicago, MUDGE’s home, so Boeing stories, always of interest to yr (justifiably) humble svt due to his lifelong fascination with all things aviation, now have a home town component.

Boeing, a hometown hero in several locales: Seattle, Wichita, St. Louis, Long Beach, and lately Chicago, took a hard hit Friday, when the U.S. Air Force announced that it lost its bid to furnish refueling tankers to its most bitter competitor, Airbus.

Northrop-EADS beats Boeing to build U.S. tanker

By Jim Wolf and Andrea Shalal-Esa | Reuters | Sunday, March 2, 2008; 1:58 PM

WASHINGTON (Reuters) – Northrop Grumman and Airbus parent EADS won a $35 billion U.S. Air Force refueling plane deal on Friday in a surprise blow to Boeing, until now the Pentagon’s sole supplier of aerial tankers.

Northrop Grumman Corp (NOC.N) and EADS (EAD.PA), “clearly provided the best value to the government,” Sue Payton, the Air Force’s top acquisition official, told reporters at a briefing.

The Air Force plans to buy 179 tanker aircraft over the next 15 years to begin replacing its KC-135 tankers, on average 47 years old, that were built by Boeing Co (BA.N).

[Please click the link below for the complete article — but then please come on back!]

Northrop-EADS beats Boeing to build U.S. tanker – washingtonpost.com

Some context: The turbulent saga of the KC-135 replacement goes back a number of years. The post World War II Air Force has always required the means to refuel its combat aircraft during a mission, a need that has only increased as the quantity of its global and domestic bases have decreased dramatically since 1991.

The KC-135, a first generation jet turbine powered craft, was developed in the 1950s. It was based on the original study Boeing created for a jet transport, the civil version of which became the 707.  Those craft are obsolete (you could find a commercial 707 flying these days, but not easily — think nighttime air cargo), and only intense maintenance is keeping the KC-135 in the air. They are overdue for replacement.

Boeing had a convenient answer when the Air Force came calling. Our modern 767 would be just the ticket. Bigger, faster, more fuel efficient (two turbofans rather than four turbojets), and (not stated publicly), we’ll have to close down its assembly line if we don’t get some new orders, and a nice lengthy contract from the U.S. government would be win-win.

So Boeing went after those orders quite aggressively.

A Mission to Rebuild Reputations

Upcoming Deals to Test Reforms at Air Force, Boeing

By Dana Hedgpeth | Washington Post Staff Writer | Thursday, January 17, 2008; Page D01

… Boeing had just agreed with the Justice Department to pay $615 million — the biggest penalty paid by a defense contractor — to settle allegations of misconduct, including assertions that its chief financial officer had conspired with a senior Air Force official to win work; and it had lost a contract worth about $20 billion to lease refueling tanker planes to the Air Force. The service’s former top procurement official and Boeing’s former chief financial officer went to prison. Confidence in the Air Force’s procurement system was at a low. The promises were meant to signal a new beginning.

Now those promises — and the public’s perception of the Air Force’s ability to spend its money prudently — are being tested by new contracting and public relations challenges. The Air Force is about to award two key contracts worth a total of about $55 billion, and Boeing is in the running for both deals.

One is a $40 billion plan to build the refueling tankers, a second run at the deal that was canceled after former Air Force procurement chief Darleen Druyun admitted to negotiating for a job with Boeing while representing the Air Force. The other is a $15 billion contract for search-and-rescue helicopters. Boeing had won that contract, but it was suspended when two competitors protested.

[Please click the link below for the complete article — but then please come on back!]

A Mission to Rebuild Reputations – washingtonpost.com

The 2002 negotiations would have resulted in the Air Force leasing, later buying, 100 767 refueling tankers. The principal Air Force procurement person, Darleen Druyun, apparently had a very clear idea of her place in the military-industrial complex: straddling it.

Boeing, who had hired her when she suddenly resigned from the Air Force (one of the red flags that helped unravel the 2002 deal), fired her, and she later went to prison for the conflict of interest and other ethical violations.

Meanwhile, those KC-135s just kept aging.

In 2007, the bidding process was restarted. This time, EADS, the parent of Airbus, in order to make their deal more acceptable to the U.S., took on a U.S. partner, Northrop-Grumman (no. 2 defense contractor), and made commitments for final assembly of its KC30s in Alabama.

The KC30 (now renamed by the Air Force KC-45A) is a militarized and repurposed Airbus 330, a twin engine widebodied airliner, similar to the 767.

Since its launch in the early 1990s, Airbus has delivered over 500 330s, taking those sales from the Boeing aircraft, which is about 10 years older and thus not nearly so modern, especially concerning its electronics and control systems.

Special Report: Was Mobile’s future unveiled at Paris Air Show?

(PARIS, France) July 9 – With dozens of planes taking to the skies above Paris, much of the talk on the ground focused on a refueling tanker.

NBC15 News was at the Paris Air Show as the public got to see the KC30 Air Force refueling tanker for the first time. The assembly would take place in Mobile if the team of Northrop Grumman and EADS wins the contract to replace U.S. Air Force’s aging tanker fleet.

The KC30 is an Airbus plane militarized by Northrop Grumman.  NBC15’s Bruce Mildwurf and Chief Photographer Mike Corry toured Airbus’ massive facility in Toulouse, France with Governor Riley and several of Alabama’s congressional leaders to see what the future of Mobile could look like.

Northrop Grumman and EADS put together a chart comparing the KC30 to its Boeing rival – the KC767.  They contend it shows the KC30 is more effective, holds more fuel, is more fuel efficient, carries more pallets, passengers and is price competitive.

kc30

[Please click the link below for the complete article — but then please come on back!]

Special Report: Was Mobile’s future unveiled at Paris Air Show? – NBC 15 Online

A bit later than promised, this past Friday the Air Force, bending over backwards to assure a fair and transparent (in government, always a dicey concept) process, selected the Northrop/EADS KC30.

Good news for Mobile, Alabama, Los Angeles (Northrop-Grumman headquarters) and Ottobrunn, Germany, Paris and Schiphol-Rijk, Netherlands (EADS HQs); bad news for Chicago, Wichita and Seattle.

As it affected a home town hero, the story was reported extensively in Chicago.

Tanker deal loss staggers Boeing

Airbus-based jet wins $35 billion contract

By Julie Johnsson and Aamer Madhani, TRIBUNE REPORTERS Julie Johnsson reported from Chicago and Aamer Madhani reported from Washington | March 1, 2008

… The winning proposal gives the military “more passengers, more cargo, more fuel to off-load, more availability, more flexibility, more dependability and it can carry more patients,” said Gen. Arthur Lichte, commander of the Air Force’s Air Mobility Command….

Boeing short in all areas

Air Force officials declined to say where Boeing’s proposal came up short. However, they rated the Northrop/EADS plane superior in every one of the five categories used to assess the tanker offerings.

“The fact that the Air Force thought there wasn’t a single measure where the Boeing proposal was ahead suggests their chances of an appeal aren’t good,” said Loren Thompson, defense analyst with the Lexington Institute, a public-policy think tank.

Boeing and its congressional supporters could pressure the Pentagon into splitting the contract between the two suppliers, although doing so would be far costlier for the government.

Boeing also may benefit from a congressional backlash over awarding such a large program to an overseas contractor, especially since Boeing estimated its proposal would create 44,000 jobs.

“I am very concerned that this decision means that the women and men in our military will not get the best tanker to meet our nation’s security needs,” said Rep. Rick Larsen (D-Wash.), whose district includes Boeing’s factory in Everett.
Lichte bristled at the suggestion that the program could face a political firestorm over outsourcing.

“This is an American tanker,” Lichte said. “It’s flown by American airmen. It has a big American flag on the tail, and every day it’ll be out there saving American lives.”

[Please click the link below for the complete article — but then please come on back!]

Tanker deal loss staggers Boeing — chicagotribune.com

This is a morality tale for the 21st century. If the Air Force is to be believed, the KC767 is inadequate in most respects, compared to the winning EADS KC-45A.

The winning proposal gives the military “more passengers, more cargo, more fuel to off-load, more availability, more flexibility, more dependability and it can carry more patients…”

In retrospect, in light of the 2002 events, one can suppose that Boeing knew all along that the 767 derivative was inferior to its Airbus competition, and decided, with the Air Force’s (or at least one key officer’s) connivance to level the playing field.

By 2008, KC767’s chief attribute was apparently the not inconsiderable one of that “Made in the U.S.A.” label, with all of the U.S.A. jobs so implied.

And, ultimately, that wasn’t enough.

It’s it for now. Thanks,

–MUDGE

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6 Responses to mm303: Boeing loses the big one

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