Pratt & Whitney and Boeing Representatives Sign Engine Contract to Power U.S. Air Force’s KC-46 Tanker — Press Release

MUKILTEO, Wash., March 27, 2012 /PRNewswire/ — Bennett Croswell, president of Pratt & Whitney’s Military Engines division, and Maureen Dougherty, Boeing vice president and program manager, KC-46 Tanker Program, hosted a ceremonial engine contract signing event today at Boeing’s Tanker Program Office in Mukilteo, Wash., for contracts previously awarded to Pratt & Whitney. The contracts support PW4062 engine purchases to power Boeing’s KC-46, the U.S. Air Force’s new airlift tanker. Pratt & Whitney is a United Technologies Corp. (NYSE: UTX) company.

“The PW4000 engine family that will power these aircraft has an exceptional track record of performance and reliability with numerous commercial customers operating the engine globally,” said Croswell. “We are confident these engines will continue to perform exceptionally well in a military application for Boeing and for our ultimate customer, the men and women in uniform.”

Two Pratt & Whitney PW4062 engines, each with a 94-inch fan blade diameter, will exclusively power each U.S. Air Force KC-46 aircraft. The program’s scope, if fully exercised, calls for as many as 368 PW4062 engines to be delivered between 2013 and 2027. Actual production engine procurement quantities will be determined over the life of the program as established by future purchase orders.

“Pratt & Whitney’s PW4062 engine offers the KC-46 program an engine that has proven performance, fuel economy, and durability – qualities that make it the clear choice to power the KC-46 Tanker,” said Dougherty. “These engines bring tremendous capability to the KC-46, which supports superior multi-role mission performance by delivering more fuel, transporting more passengers and cargo, and offering enhanced aeromedical capabilities to our United States Air Force customer.”

Pratt & Whitney has delivered more than 2,500 PW4000-94″ engines that have collectively logged nearly 110 million flight hours on commercial aircraft around the world. The PW4062 is the highest thrust model in Pratt & Whitney’s PW4000-94″ commercial engine family and is offered for both commercial freighter and military tanker applications. The two PW4062 engines that will power the KC-46 each deliver 62,000 pounds of thrust.

The PW4000 engine family has an outstanding safety record, high reliability, excellent performance and low maintenance costs. The PW4000-94″ family meets emissions and noise regulations, and offers superior fuel economy and maintainability. The PW4000-94″ engine operates commercially on the Boeing 767, MD-11 and earlier Boeing 747 models.

Pratt & Whitney is a world leader in the design, manufacture and service of aircraft engines, space propulsion systems and industrial gas turbines. United Technologies, based in Hartford, Conn., is a diversified company providing high technology products and services to the global aerospace and building industries.

This press release contains forward-looking statements concerning future business opportunities. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to changes in government procurement priorities and practices, budget plans and availability of funding, and in the number of aircraft to be built; challenges in the design, development, production and support of advanced technologies; as well as other risks and uncertainties, including but not limited to those detailed from time to time in the companies’ Securities and Exchange Commission filings.

Boeing to Close Wichita Facility

At a meeting today with its workforce Boeing (BA) announced that it will close their facility in Wichita, KS and move the work from their to Washington state. The closure will take about 2 years and lead to the elimination of over 2,000 jobs.

In their press release Boeing stated “The decision to close our Wichita facility was difficult but ultimately was based on a thorough study of the current and future market environment and our ability to remain competitive while meeting our customers’ needs with the best and most affordable solutions,” said Mark Bass, vice president and general manager for BDS’ Maintenance, Modifications & Upgrades division. “We recognize how this will affect the lives of the highly skilled men and women who work here, so we will do everything possible to assist our employees, their families and our community through this difficult transition.”

Even though the plant in Wichita is closing Boeing will still rely on Kansas suppliers for their aircraft programs.

The full press release follows:

Boeing to Close Wichita Facility by the End of 2013

– Defense budget reductions, limited opportunities for new work and competitive cost structure driving need to close facility

WICHITA, Kan., Jan. 4, 2012 /PRNewswire/ — The Boeing Company (NYSE: BA) today announced that the Boeing Defense, Space & Security (BDS) facility in Wichita will close by the end of 2013. The Wichita facility currently employs more than 2,160 employees.

“The decision to close our Wichita facility was difficult but ultimately was based on a thorough study of the current and future market environment and our ability to remain competitive while meeting our customers’ needs with the best and most affordable solutions,” said Mark Bass, vice president and general manager for BDS’ Maintenance, Modifications & Upgrades division. “We recognize how this will affect the lives of the highly skilled men and women who work here, so we will do everything possible to assist our employees, their families and our community through this difficult transition.”

Boeing Wichita is the base for the company’s Global Transport & Executive Systems business and its B-52 and 767 International Tanker programs. The facility also provides support for flight mission planning and integrated logistics.

Over the past five years, contracts in Wichita have matured, programs have come to a close or are winding down, and the site does not have enough sustainable business on the horizon to create an affordable cost structure to maintain and win new business.

“In this time of defense budget reductions, as well as shifting customer priorities, Boeing has decided to close its operations in Wichita to reduce costs, increase efficiencies, and drive competitiveness,” said Bass. “We will begin program transitions in the coming months, with the complete closure of the site scheduled for the end of 2013. We do not anticipate job reductions as a result of this decision until early in the third quarter of 2012.”

Bass said that Boeing will continue to have a significant impact on the Kansas economy and the health of the state’s aerospace industry.

“The company spent more than $3.2 billion with approximately 475 Kansas suppliers in 2011, spanning its commercial and defense businesses, making it the fourth largest state in Boeing’s supplier network,” said Bass. “Based on Boeing Commercial Airplanes growth projections for the next few years, Boeing anticipates even more growth for suppliers in Kansas. Boeing values its long-term partnership with Kansas, and we will continue to work with all of our stakeholders in Kansas in support of a robust aerospace industry in the state.”

Future aircraft maintenance, modification and support work will be placed at the Boeing facility in San Antonio. Engineering work will be placed at the Boeing facility in Oklahoma City. Although work on the KC-46 tanker will now be performed in Puget Sound, Wash., the 24 Kansas suppliers on the program will be providing vital elements of the aircraft as originally planned.

Boeing is providing employee assistance including retirement seminars, job search resources, and financial counseling, as well as help finding jobs inside or out of Boeing.

A unit of The Boeing Company, Boeing Defense, Space & Security is one of the world’s largest defense, space and security businesses specializing in innovative and capabilities-driven customer solutions, and the world’s largest and most versatile manufacturer of military aircraft. Headquartered in St. Louis, Boeing Defense, Space & Security is a $32 billion business with 63,000 employees worldwide. Follow us on Twitter: @BoeingDefense.

Air Force Continues Commitment to KC-46A

At a recent conference the Air Force Secretary, Mr. Michael Donley, discussed the key programs for the Air Force’s future. Facing a declining budget situation the Air Force as all of the services may be forced to choose which investments have a higher priorities then others. Not surprisingly the keys for the Air Force will be the F-35, Unmanned Aerial Vehicles (UAV), space and the KC-46A tanker.

The KC-46A currently being developed by Boeing (BA) will go into service later this decade to replace the aging KC-135 fleet. In terms of total cost it is one of the largest current defense programs. If the Air Force follows through with the first 170 odd aircraft the cost will be about $35 billion. There are plans to buy another 300 or more.

If there are as significant reductions to the defense budget as being discussed then the KC-46A like so many other programs may see quantities cut. This could be either the total procured or the annual buys. It could also see it being maintained at the expense of other investment programs such as new UAV or space programs.

Tankers are a key force multiplier for the United States. Declining amounts of strike assets increase the reliance on the tanker fleet. The need for the KC-46A is well established and it is a program now that the commitment to Boeing has been made that the U.S. really cannot afford to reduce. Whether this holds true remains to be seen.

And the Winner is Boeing!

The U.S. Defense Department and Air Force announced that Boeing (BA) has been selected to provide the new KC-X aerial tanker. The design submitted by EADS NA (EADS:P) was not chosen.

The new KC-46A will be based on Boeing’s 767 airliner design.

The Secretary of the Air Force, Mr. Michael Donley, stated that the decision was based on “mission effectiveness in wartime and life cycle costs as embodied in fuel efficiency and military construction costs”. This might be a hint that the larger KC-30 aircraft from EADS might have required more investment in new and bigger facilities then the smaller 767 tanker.

The contract has been very political with states that stand to gain thousands of jobs from the program using their Senators and Representatives to push for the respective bidders.

EADS does have the right to protest the decision as Boeing did in 2008 when the contract was awarded to Northrop Grumman (NOC) and EADS. They will have to wait until their debrief by the Air Force before making any decision about that.

Even an unsuccessful protest may delay the start of the program for several weeks and the Air Force plans on receiving the first 18 aircraft in 2017. The new KC-46A will replace Cold War era KC-135R tankers some of which have been flying for fifty years.

Cross posted at Defense Procurement News.

Air Force Plans Award Before April 1st

Despite the current issues with defense funding the Defense Department and Air Force reportedly said that they hope to award the KC-X aerial tanker contract within a month. The budget sent forward for 2012 on Monday stated that the planned contract was valued at around $35 billion.

It sounds like that even with the Pentagon acting under a continuing resolution rather then an official budget that at least the winner will be announced. There is some concern that without a 2011 budget resolution from Congress a new contract of this magnitude might not be able to be awarded. This means that the Air Force will have to wait until October 2011 to have initial funding for the purchase of the new tanker.

The KC-X saga is heavy with political overtones as supporters of both Boeing (BA) and EADS (EADS:P) in Congress continue to lobby OSD and threaten problems if their preferred source is not chosen.

The Air Force has been trying since early in this decade to buy a new tanker and this award may be the last step towards doing that. Although the chances of a protest by the loser remain high and the current budget situation between President Obama and Congress may make it difficult to get the funding resolved anytime soon.

Reports Final Proposals Due Next Week for KC-X

Both Boeing (BA) and EADS NA (EADS:P) have met with the U.S. Air Force reportedly to discuss final changes to the KC-X RFP. The companies have until 11 February to submit their final revisions to their proposed solutions to the new aerial tanking requirement.

Boeing has said that they will update their proposal although EADS NA has said they may not. Swirling around all of this final burst of activity is the concerns by some in Congress, the media and at the bidders about the accidental release of information by the U.S. Air Force to each team as well as the two World Trade Organizations (WTO) rulings on both companies receiving illegal subsidies.

Some Boeing supporters in Congress are now saying that the data release gives EADS an advantage and that there should be deeper investigations. The Air Force “reassigned” two personnel as punishment and Congress did have hearings last week about the matter. Washington state, Illinois and Kansas legislators all from states that stand to gain work if Boeing wins sent a letter to the DOD IG asking them to look to see if the data released skewed the contest in EADS’ favor.

All of these conditions make it seem inevitable that there will be a protest to the contract award no matter who wins it. There will also be political pressure from supporters of both companies to review the contract and make sure that there favored winner was not treated unfairly.

All this adds up to further delays in replacing the KC-135 systems made during the Cold War. Once again this problem has been created by the disappearance from the U.S. industrial base of multiple suppliers of large aircraft. Currently only Boeing and EADS make aircraft acceptable to the Air Force to meet this requirement. If there is to be even a modicum of competition the two have to be involved which leads us to the current ugly situation of charges and counter charges of favoritism, jingoism and bias.

This will probably be the biggest contract awarded for the next decade by the Defense Department and is critical to both companies maintaining a foothold in the large military aircraft business worldwide which is leading us to the current situation which does not seem like it will end well.

WTO Report States Boeing Received Illegal Aid Effect on KC-X Undetermined

In the latest round of the back-and-forth at the World Trade Organization (WTO) between the United States and the European Union (EU) over airline development and sales the report on Boeing (BA) was leaked to the press and found that the Chicago based company received illegal subsidies from the U.S. Government and four states. In September this finding was also leaked as a preliminary to the completion of the final report.

Earlier last year the WTO had ruled in favor of the U.S. in their complaint about launch aid for EADS’ (EADS:P) Airbus products. Since that time there have been those in Congress trying to rewrite acquisition law and regulations so that the illegal aid to EADS would be taken into account in the upcoming KC-X new aerial tanker decision on which Boeing and EADS submitted bids for the initial $39 billion contract.

The findings by the WTO that both sides provided illegal aid that caused unfair competition to the other should lead to negotiations to settle the matter. The normal WTO punishment of having the losing company pay back the economic affect on the other will probably not happen due to the large amounts involved.

The two decisions may aid the Pentagon in deciding the KC-X contract as it possibly removes the issue from the competition and might limit some chances for a protest by the loser. The Pentagon has made clear for months that it cannot take into account the WTO rulings in their source selection and evaluation hence the attempts by Boeing’s supporters in the legislative branch to change the rules.

Now with both bidders confirmed to have benefited from illegal subsidies of some sort it hopefully will remove the issue and allow a competition based on merits and meeting the requirements as defined by the Air Force and Defense Department.

Navy LCS Strategy Raises Idea of Split KC-X Buy Again

In the past some analysts and members of Congress floated the idea of using both Boeing (BA) and EADS (EADS:P) as sources for new tankers. This split buy would negate contract protests and also more rapidly replace the aging KC-135 aircraft. The U.S. Air Force had always pushed back saying that the logistical costs of having two very different aircraft would be too expensive. Neither Boeing or EADS really supported the idea publicly either.

One of the leading proponents was Democratic Congressman John Murtha of Pennsylvania who died in the last year. The idea seemed to go away when the Air Force released its latest RFP and Boeing and EADS submitted their proposals.

Now the U.S. Navy’s decision to use two sources for their new small combatant the Littoral Combat Ship (LCS) is raising the issue again.

The original plan was to use two different designs and contractors to make this ship due to the large amount planned to be built. Two years ago because of cost and schedule problems the Navy changed its plan to one where several batches of ships would be awarded in separate contracts. But after receiving the proposals for the first batch the prices from the two bidders were so good the Navy has asked to go back to the dual source plan again.

There are some differences as the Navy planned for multiple providers even with the new acquisition strategy. The KC-X was always going to be one. The LCS despite two radically different hull designs meet the same basic requirements for speed, seakeeping, range and weapon layout. The Airbus 330 and Boeing 767 designs are quite different in fuel loads, range, runway and support requirements so the Air Force would still have two large, dissimilar logistic tails.

Even if Congress or others want the Air Force to copy the Navy in this case it really doesn’t make sense to do so. The original strategy should be stuck too and carried out.

Article at Washingtonian Magazine

The Washingtonian Magazine has written a good history of the KC-X aerial tanker program. It may be found here.

It is timely to look back at what got the program to this state as we wait for the next contract award announcement in the next few months.

Effort to Add EADS Subsidies Consideration to Defense Authorization Bill Fails

Senator Murray (D-WA) and Senator Brownback (R-KS) attempted to attach an amendment to the Senate’s 2011 Defense Authorization Bill today that would force the Defense Department and U.S. Air Force to take into account the World Trade Organization (WTO) ruling on subsidies to EADS (EADS:P) by European governments. Due to the fact that the bill did not win enough votes to advance mainly due to the attempt by the Democratic leadership to add the repeal of “Don’t Ask/Don’t Tell” policy on gays in the military the amendment wasn’t considered.

The two whose states stand to gain several thousand jobs if Boeing (BA) wins the KC-X contract will have to wait for this bill to be re-considered or add the amendment to another one. Certainly there are Senators from Alabama and other Southern states who favor EADS who might try to work against the amendment.

Currently the U.S. military cannot consider these kind of trade disputes and rulings in their source selection which is why the attempt was made to add the rule.

This continues to show that the fight for this contract will continue in Congress, the media and across the internet.

Amid Annoncing Orders Boeing and EADS Snipe About KC-X

The two civil airliner giants both attended the Farnborough Air Show with Boeing (BA) conducting the first overseas flight of the new 787 and EADS (EADS:P) sending an A380. Both companies announced substantial orders from a variety of airlines and leasing agents while also taking the time to criticize their opposition’s bids for the KC-X new Air Force aerial tanker.

Boeing received an order for sixty 737 aircraft from Mr. Udvar-Hazy’s new leasing company as well as Emirates Airlines needing thirty 777 wide body aircraft. GE’s leasing company also bought forty 737 aircraft and Avalon twelve. Royal Jordanian airline purchased three of the new 787.

EADS got an order from Russia’s Aeroflot for eleven A330. That carrier already operates sixty-four A320 and 10 A330. Hong Kong Air followed with a plan to buy fifteen of the new A350 XWB, the equivalent of the composite 787, and ten A330. The Chilean carrier LAN also bought fifty A320.

All-in-all both companies felt very good about their orders and the future of the airline industry. There are hopes that the world economy is recovering and this will lead to more sales and greater investment in new equipment.

At the same time the two companies sniped at each other about the ongoing U.S. Air Force KC-X aerial tanker contract. Boeing submitted a bid to use their new 767 variant, NewGen Tanker, to replace the aging KC-135 fleet. EADS has based their proposal around the A330 like they did with their last proposal.

Boeing is making clear that they will offered a very competitive price based on their reducing production costs by leaning out their line. Boeing believes that in the end the contest will be decided on price and they plan on having the best price including lifetime operating costs.

EADS agrees that price is important but at the Air Show the CEO, Mr. Gallois, made clear that there won’t be a sacrifice of profit to just win the contract. Due to problems with the A380 and the A400M transport aircraft EADS has some financial issues to face and while it might be attractive to win the contract the company may not really be able to afford to not have some money made on it. The size of the recent commercial orders indicate that the military contract while it would open the European company up to a new market is not critical to their future.

The European Union (EU) has appealed the recent WTO ruling that their aid to EADS amounted to an illegal subsidy. The company and leaders in Europe have also decried the decision by the trade body to delay their ruling on the similar Boeing case. Boeing’s allies in the U.S. have used the WTO decision to say that EADS has an unfair advantage in the KC-X competition as it received the subsidies. EADS and the EU is countering by saying that the U.S. military contracts over the last fifty years to Boeing are the same thing.

The Pentagon has made it quite clear that despite the desires of some in Congress they cannot take the WTO decision into account in their source selection.

It will be a long hot summer at this rate, and when the decision is announced in November the chance of a protest by one of the losers is very high. The contract is a key military one in the next few decades no matter what each company says about it. Winning the contract will give them a leg up on their competitors for the future orders for tankers and aid them in getting more and better commercial contracts.

Defense Procurement News Post on WTO Report

Here is an article I wrote at our sister site, Defense Procurement News, about the WTO subsidies report and the KC-X contract.

Alabama Offers Advantages to EADS For KC-X as Boeing Workers Strike

If EADS’ (EADS:P) American subsidiary wins the contract from the U.S. Air Force for the new aerial they will assemble the basic aircraft at a new facility in Mobile, AL. When they along with Northrop Grumman (NOC) had the short lived contract two years ago to build the KC-45 derivative of the Airbus A330 the plant would have been used then. Once the contract was lost to Boeing’s (BA) protest the plans to use the plant were put on hold.

EADS has already stated that if they executed the contract all A330 transport production would be transferred to America from current European plants. There are several benefits to EADS by doing this. First the weak dollar will help lower costs of materials and production. Secondly Alabama is a right-to-work state and a non-union workforce is almost guaranteed. This will be a big change from the highly unionized and regulated workforces of the company in France, Germany and Spain.

There is currently a movement by both U.S. and foreign companies to move production and other services back to the United States. A good deal of these decisions are being driven by the dollar’s strength and to take advantage of excess capacity.

The Japanese automakers have been doing this for years driven by U.S. requirements for car assembly in the States. Honda, Toyota, Nissan and others have plants primarily in Southern States primarily due to the lack of unions as well as the desire of those states to provide economic assistance and financial incentives. Volkswagon for example has just started production of a large plant outside Chattanooga, TN to illustrate that this process is still on-going.

If a company like EADS is going to produce aircraft for the U.S. military it would make sense to try and assemble these in the U.S. As already demonstrated during the last two years of struggle over the KC-X contract it helps them get Congressional support. The advantage of a non-union workforce will not only help costs but prevent potential issues with labor relations and strikes.

Strikes are one of the most disruptive events that may affect production for the military. The only worst thing is really sabotage. The Sikorsky Aircraft Corporation (SAC) strike in 2006 affected production of the UH-60 Black Hawk aircraft for the Army and the SH-60 model for the Navy. These aircraft were and continue to be critical to U.S. operations in Afghanistan and Iraq. The strike was settled after six weeks but it left bad feelings between the company, its unions and customers.

Boeing has suffered several strikes over the past few years. These have not only affected their civil aircraft production but also military products. On Sunday the union representing workers at their St. Louis, MO plants voted to authorize a strike if negotiations don’t resolve contract issues related to seniority. The threat was quickly followed by workers in Kansas where the new Boeing tanker would have some work done.

The workers at the Long Beach, CA facility where the C-17 transport is manufactured have now been on strike for two weeks due to current contract negotiations. This just further illustrates the point that despite the priority of military systems even they may be delayed by the Boeing workforce.

Boeing has moved to counter the reliance on unions by establishing a production facility in South Carolina which is also a right-to-work state. In this way they are mirroring the Japanese automakers and EADS.

At a time when one of the biggest messages in Boeing’s favor is to not delay the KC-X contract any longer by allowing time for EADS to bid or waste time with a competition. If a strike did happen that delayed 767 tanker production once Boeing won the contract it would be a serious black eye for the company and its supporters.

Boeing could try to avoid this by slowly moving production to its South Carolina facility which presumably will be non-unionized but that would antagonize its Washington based Congressional allies. There would also be a cost associated with the move that might increase the cost of the production beyond what the Air Force wants or initially awards. The hope is that the KC-X will use a fixed price contract so Boeing would have to have a good estimate going in and try to limit upfront costs.

EADS by starting out in Alabama avoids the potential issue with a unionized workforce. This should also have mean labor costs for the assembly portion of the aircraft. Score one in the foreign company’s favor.

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House Adds Language to Force Pentagon to Consider Subsidies to Defense Authorization Bill

The House of Representatives in their vote on the 2011 Defense Authorization Bill added an amendment sponsored by Washington and Kansas members to force the Pentagon to consider the WTO ruling on illegal subsidies when it comes time to consider EADS’ (EADS:P) bid. The Pentagon has made it clear in the past that their contracting and acquisition laws and regulations do not allow them to factor that into their cost evaluations. This language if it is in the final version of the bill when it is passed after Conference will supposedly make them do that.

One question though is the Air Force plans to receive bids on July and announce a decision in the late Fall. There is a good chance that the source selection if it follows that schedule will be complete before the bill makes it out of Congress. While the Authorization Act often is done before the Appropriations one it is often not complete by 30 September as it should be. The Pentagon could also argue to ignore the language setting up some sort of court fight. EADS could also adjust their prices to take into account the effect of the WTO ruling.

Congress Continues To Try And Micromange KC-X Process

In the latest move by Congress to try and get the U.S. Air Force and DoD to consider the WTO rulings on EADS (EADS:P) subsidies, legislation has been introduced that will require at least a report by the Pentagon on their affect on the competition.

Congressman Adam Smith (D-WA) (No shock there?) is trying to amend the 2011 Defense Authorization Act to require the Air Force to detail the advantage the subsidies gives EADS prior to issuing the contract. Since the DoD cannot consider the ruling in awarding the contract this at least gets a record out of the effect (if any) on the contest.

Reports Boeing Unhappy With Fixed Price KC-X Contract

Last week reports started to come out that Boeing (BA) may not bid on the KC-X new aerial tanker program. This was due to concerns that the Air Force’s plans for a fixed price development and first production contract may not allow the company to make a profit.

Boeing has denied these reports and it would certainly seem strange for them not to after all of the arguing and noise about giving the contract to them for American jobs. There is though real concern that the contract may limit the ability of the winner to make money on it. In the past fixed price contracts for development often have not worked costing the contractor millions that it can only hope to make up on production.

It would be somewhat ironic that the Pentagon’s desire to limit their cost and exposure would cause even more delays to this critical program. One that is so critical that a sixty day delay in the RFP process has been attacked by legislators, media, retired military and unions.

Congress Wants WTO Taken Into Account In KC-X Bidding

Kansas legislators in both the House and Senate are planning to introduce a bill that would require the Pentagon to take WTO rulings into account. The Department of Defense has maintained that in accordance with U.S. laws and regulations that those matters cannot be considered or punished in contract awards. If it did that would be a violation of the WTO itself.

The bill would allow price adjustments to be made in bids to reflect illegal subsidies rulings. The legislators, Senator Brownback (R-KS) and Congressman Tiahart (R-KS), claim it would be applicable to any defense contract but it is obviously targeted at EADS (EADS:P) and their KC-X bid. The legislators claim that without taking these subsidies into account the price of the A330 based tanker will be artificially low.

They would prefer the contract go to Boeing (BA) who would do substantial work in Kansas on their tanker program.

No Shock Here – Washington State Politicians Support Boeing

In this report the Governor of Washington, Ms. Gregoire, and Senator Patty Murray make clear that awarding the KC-X contract to Boeing (BA) will protect jobs in that state. The two Democrats rightly point out that several thousand jobs at Boeing support the 767 program as well as supply parts and components to the company.

In another not surprise the two showed up at a rally with union members and local officials.

Once again the U.S. finds itself in this situation due to the severe reduction in the defense industrial base twenty years ago that leaves only Boeing and its competitor European company EADS (EADS:P). For there to be any chance at competition with a goal of saving money for the Pentagon the two have to bid against each other – jobs or not.

Boeing Reorganizes To Form Division For KC-X

Boeing (BA) announced yesterday that they are forming a new division within the company called “Airlift and Tankers” (A&T). This group will have responsibly for the C-17 production and the hopefully capture of the KC-X and production of the KC-767 tanker.

Jean Chamberlin will be assigned as vice president and general manger of A&T.

The group will face serious challenges in the future if the KC-X is not won as C-17 production is winding down for the Air Force and the number of overseas sales is not large. There continues to be support in Congress to keep the C-17 going and if the KC-X contract does go to another source that pressure will only increase.

Good Luck to Ms. Chamberlin in her new job.

Good Summary Of The KC-X Situation

The Kansas City Star has this lengthy article that describes the whole situation and explains how we got where we are with the KC-X tanker RFP. The article by Cleon Rickle may be found here. Key takeaways are:

“”I am confident Boeing can build the best plane for the Air Force, no matter the competition,” said U.S. Sen. Pat Roberts,of Kansas. “However, I urge the Department of Defense to run a fair competition and avoid coddling EADS to the detriment of American warfighters who have waited eight years for this contest to end and decades for a new tanker.”

“We will offer a modern, more capable tanker in response to the Defense Department’s decision to encourage competition for this major taxpayer investment,” said EADS North America chairman Ralph Crosby, Jr. “Our KC-45 is the only real, flying, low-risk solution that today meets the demanding Air Force air refueling requirements and is actually in production now. ”

Boeing and Lockheed See Struggle Ahead On Earnings

Winning the KC-X contract will certainly help Boeing (BA) out a lot.  Read my analysis from BNET: Government on the recent reported earnings of Boeing and Lockheed Martin (LMT).

Washington State’s Senators Questioning Air Force Moves

The two Democratic Senators from Washington state, Maria Cantwell and Patty Murray, are raising questions about some recent changes to the KC-X RFP that in their eyes favor EADS North AmericaForexyard.com is reporting that three changes were announced last week that included how the encryption material or “COMSEC” would be treated as well as a clause allowing duty free import of aircraft components.

These two additions especially have attracted the attention of Boeing (BA) supporters as in their view they make it easier for a non-U.S. company to bid.  The Air Force is saying the COMSEC change clarifies how all contracts will treat this important security matter.  Obviously COMSEC material is tightly controlled doubly so when it comes to handling by non-U.S. personnel.

As the contract goes through its process sniping and criticism of every move, change or event will happen from either side’s supporters.  This contract is so large and so important to the two companies that things like this should be expected.

Analysis: EADS Participating In KC-X Contest

This is an article I wrote at BNET: Government about EADS decision to submit a proposal.

“The decade-long saga to replace the KC-X aerial tanker contract begins a new chapter. The European aerospace giant EADS (EADS: P) and Airbus, its subsidiary, announced that it will definitely submit a contract proposal to the Air Force. The program will replace the aging Cold War KC-135 tankers (pictured).

Boeing (BA) thought it had won the contract for at least 179 new aircraft earlier this year when Northrop Grumman (NOC) who had bid in partnership with EADS withdrew from the bidding. Then, earlier this month, the Pentagon agreed to extend the deadline, at EADS’ request, to allow it time to submit a new bid.”

Read the rest at BNET.

Boeing Statement On EADS Bid

Boeing (BA) issued a press release last night in response to EADS’ (EADS:P) decision to bid on the contract. In part it reads:

“We are confident in the superior value and capabilities of our NewGen Tanker and intend to present a compelling case for it in our proposal. While we are disappointed in the bid submission delay, we hope for a fair and transparent competition free of any additional changes intended to accommodate a non-U.S. prime contractor.

We also remain deeply concerned about the ability of a heavily subsidized Airbus/EADS to accept levels of financial risk that a commercial company such as Boeing cannot. We regret that these concerns will not be addressed in the bid evaluation, even when the U.S. government has proven in a world court that those subsidies are illegal and directly distort competition between Airbus and Boeing.”

It will be an interesting competition.

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Alabama Senator Sessions Responds To Congressman Dicks

Senator Jeff Sessions (R-AL) issued a press release today criticizing Washington Congressman Norm Dicks (D-WA) for his comments basically telling EADS (EADS:P) not to attempt to bid on the KC-X contract.

In the release Sessions makes clear his desire for competition in the tanker contract while continuing to support EADS who have proposed assembling the Airbus 330 aircraft in Mobile, AL. Sessions writes: “Defense companies should understand that, contrary to Representative Dick’s comments, the majority of members in the House and Senate want a robust competition engineered not to benefit a single company, but to produce the best airplane for the war fighter.”

In Sessions view having EADS submit a bid along with Boeing (BA) will only strengthen the program. The award of what will amount to a sole-source contract to Boeing if EADS or another company does not bid will be a difficult process for the Air Force leaving many different avenues for criticism. This is especially true if Boeing has their struggles down the road.

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