Boeing in Puget Sound after the IAM 777X vote: bleak, unless something changes

With the rejection last week by the International Association of Machinists Local 751of the Boeing contract offer that would have located the 777X airplane assembly and wing production in Puget Sound (Seattle), the inevitable question arises: What is Boeing’s future here?

Seattle media and state elected officials are worried that if Boeing locates the 777X outside Washington State, and given the toxic relationship between the machinists and Boeing as well as within its own union, that this could be the start of an exodus from the state.

We agree, although we believe it will be a slow, downward spiral, not a rapid exodus–unless something dramatic changes with the current situation.

The chart illustrates our forecast of Boeing’s gradual departure from Puget Sound based on the current set of circumstances.

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Odds and Ends: XYZ–Next USAF aerial tanker specs; Analysts on CSeries ahead of earnings

KC-XYZ: The USAF hasn’t even received the first Boeing KC-46A, which was the tanker award from the KC-X competition, and it has begun drawing up specifications for the follow-on competition, the KC-Y. The KC-Y is the second tranche of replacements for the Boeing KC-135. The KC-Z will be the replacement for the Boeing/McDonnell Douglas KC-10.

Conventional wisdom suggests that one would presume Boeing will likely get the KC-Y award, since this is almost certainly to be a virtually identical specification to the KC-135/KC-Y replacement criteria. The KC-Z, on the other hand, could well be a face off between Airbus and Boeing with their KC-330/KC-777 aircraft (for Airbus) and concept (for Boeing). The Boeing 777-200LRF would be the baseline design and it is more closely the size to the KC-10 than is Airbus’ KC-330.

But it’s not as if this is immediately over the horizon. KC-Y is envisioned from 2040-45 and KC-Z in 2050-2060. So perhaps the contenders will by aircraft based on the A350, the 777-8, a Blended Wing Body or an entirely new set of airframes.

BBD CSeries: Canadian aerospace analysts believe the entry into service for the Bombardier CSeries will slip to 2015, according to Bloomberg News. Bombardier’s third quarter earnings call is October 31. There should be some guidance, we think.

Albaugh as BCA head will be key to Boeing tanker bid

There has been more foo-faw going on with the KC-X tanker competition in the past week, largely overshadowed by the first flight of the Boeing 787. Supporters of Northrop Grumman met with Pentagon officials to urge that changes be made in the Draft RFP to assure a fair and open competition.

As soon as this became public, supporters of Boeing did the same.

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Prediction: Boeing offers KC-767

Update: Defense News just published this article detailing the continuing problems Boeing has with the KC-767 Italian tanker, including the centerline hose-and-drogue problems we previously exclusively revealed in this column.

Original Post:

With Boeing and Northrop Grumman still in the Q&A stage with the USAF in advance of a Final Request for Proposals in the KC-X competition, we predict that Boeing will offer the KC-767 and not the KC-777.

Here’s why:

KC-X tanker DRFP released

Update, September 28: DOD Buzz reports Boeing is going to offer two bids, one each for the KC-767 and KC-777. Here is the link. We think this is a brilliant move.

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Here is the link to the RFP. We’ll add information after we’ve read it, which will take all weekend. One thing we did find right away: the USAF is asking for field performance data on runways 6,000 ft to 15,000 ft. This means the Boeing 777 isn’t zapped on this criteria; the 2006 RFP required 7,000 ft. runways. The Systems Requirements document does include a 7,000 ft. runway requirement. SRD document pg. 26,

On another requirement from the 2006 competition: spare engines had to be transportable in the C-130 cargo plane. A 777 GE 90 wouldn’t fit; this requirement has been changed to the C-17. The C-17 has an 18-foot wide cargo bay; the GE-90 is slightly over 10 ft wide (bare engine, without nacelle). SDR pg. 40,

Here is Boeing’s statement, issued upon receipt of the DRFP:

“Our next step is to conduct a detailed review of the document. We want to understand how requirements will be defined and prioritized and how the proposals will be evaluated. That information will help us decide which plane to offer or whether to offer both planes. We appreciate that there will be frequent, open discussion with the U.S. Air Force as we go forward. Both the Air Force and the American taxpayer will benefit from the tanker options we can offer. Boeing has a KC-7A7 ‘family of tankers’ available to meet the warfighter’s requirements. Whether it’s the agile, flexible 767-based tanker or the large 777-based tanker, Boeing will deliver a combat-ready tanker with maximum capability at the lowest cost.”

What is noteworthy is the reference to offering the KC-767 and the KC-777. This is contrary to stated DOD intent to buy only one airplane. This is something we suggested Boeing do for the 2006 competition on the theory it would checkmate the Northrop bid. While we think the 777 is too big for the KC-X competition, a dual-offer by Boeing simply cannot be matched by Northrop.

Northrop believes its KC-30 is the right-sized aircraft in the sweet spot.

Here is Northrop’s statement:

“Northrop Grumman applauds the Defense Department and U.S. Air Force for re-starting the effort to replace its Eisenhower-era KC-135 aerial refueling tankers, and the company is looking forward to competing for and winning the contract again.

“Northrop Grumman will review the draft RFP and provide the U.S. Air Force with comments on the draft in short order.  We will defer further public comments until we have completed our review.”

Here is the synopsis as publish on the Business Opportunity website.

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Boeing kicks off tanker campaign

Update, Sept. 17: While looking for something else we came across this old item from Forbes magazine in 2004-5, when Boeing was temporarily led by the late Lew Platt following the fall from grace of former CEO Harry Stonecipher.

Platt, then the chairman and CEO, had this to say about the start of the KC-X competition then. It sounds like what we are hearing today:

Faces In The News
Boeing’s Platt Cheers Airbus, Says CEO Search Narrows
Chris Noon, 06.15.05, 1:49 PM ET

NEW YORK – Doers and doings in business, entertainment and technology:

Boeing (nyse: BA news people ) Chairman Lewis Platt plays hard, but fair. Despite the trans-Atlantic spat over subsidies, Platt doesn’t think Airbus should be frozen out of bidding for U.S. military contracts. “What I’m looking for is a level playing field. Part of that means they should be able to compete for business in the United States,” he was quoted as saying in The Associated Press. EADS, which owns about 80% of Airbus, may be disqualified from bidding on a U.S. Air Force contract for refuelling tankers because of a House of Representatives amendment barring the Pentagon from purchasing goods from any foreign companies receiving government subsidies. Brussels countered Washington’s complaint against Airbus subsidies last month with one of its own.

Aviation Week has a long story on the tanker that explains why cargo capability is desired.

Update, September 16: IAG has a 15 minute podcast with Boeing’s Bill Barksdale on the KC-7A7 program.

Separately, Sen. Patty Murray (D-Boeing/WA) and some 45 Members of Congress call on the USAF to consider the WTO findings in the competition for the KC-X contract, and Murray calls on President Obama to penalize Airbus and the KC-30 tanker for the WTO finding. The Members of Congress say the prospect of awarding the contract to Northrop Grumman (Airbus) would reward illegal action.

Don’t these guys get it? (Obviously not.) When (not if, in conventional wisdom) the WTO also finds Boeing benefited from illegal aid, what the devil will these Members of Congress say then?

As for Murray’s call for Obama to act now, Patty needs to read the WTO rules: Article 23 specifically prohibits premature imposition of penalties. Premature means before the case is over, and the case won’t be over until a final report is issued and any appeals are concluded. We know the EU will appeal and we fully expect the USTR to appeal findings on complaints that weren’t upheld. It will be years before these are completed. In the meantime, it would be illegal under WTO rules for the US to adopt any penalties.

On the one hand, Sen. Murray wants to slam Airbus and Northrop for illegal activities. On the other, she wants to do this before the WTO rules say you can, an action that would be illegal. Sen. Murray can’t have it both ways.

Update, September 15: Flight International reports that Boeing is considering moving its tanker finishing work out of Wichita (KS) in order to lower the price. We can’t help but wonder what US Rep. Todd Tiahrt (R-Boeing/KS) and Sen. Sam Brownback (R-Boeing/KS), two of Boeing’s most hyperbolic tanker supporters, might say about this.

Flight also reports in the same piece that Boeing is going to get very aggressive on pricing, having lost on this point to Northrop Grumman and the Airbus-based KC-30. This is going to be watched very closely by Northrop and EADS, because during the Round 2 USAF debrief, the companies noted that their pricing was shared with Boeing lawyers and they fear this sensitive information will put them at a competitive disadvantage in this round.

We had asked Boeing about this at the time, and Boeing’s tanker team told us the pricing information stopped with the Boeing legal team, precisely because of the proprietary nature of this information. Northrop and EADS aren’t convinced (they haven’t seen any proof on this point one way or the other) and could take action if they come to believe Boeing has an unfair advantage in this round.

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Boeing is wasting no time kicking off its campaign to win Round 3 of the KC-X tanker competition.

This Reuters story says Boeing won’t get fancy in its proposed KC-777 or KC-767 (marketed, for the moment, under the generic name KC-7A7, until Boeing understands what the US Air Force wants and then decides which tanker to offer). Boeing won’t offer a tanker based on its proposed KC-767 Advanced Tanker, the so-called Frankentanker that was offered in Round 2 as a paper concept combining major components from the 767-200, 767-300 and 767-400.

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KC-777 ready to go?

Update, 6:00PM Paris Time:

By now readers probably have seen the news from the Air Show on this topic: Boeing is prepared to offer either a 777-based tanker or a 767-based tanker, depending on the RFP requirements. Bloomberg News has a good summary of the IDS briefing on this topic. It may be found here. As far as the factual reporting goes, we don’t have anything to add to the Bloomberg piece. There is a full tanker briefing tomorrow, at which the media has been promised more detail.

Barring any more downpours like we had today to further dampen the spirits of aviation, we will be there..

Original Post:

This is the second in a series of articles from the EADS Media Day and the Paris Air show….

There was an interesting buzz at the Aerospace Journalist of the Year Awards dinner on the eve of the launch of the Paris Air Show.

Word was circulating that Boeing will announce at its Integrated Defense Systems briefing at 11 am June 15 that the company is prepared to offer the USAF a tanker based on the 777-200F should the new Draft Request for Proposals outline requirements for a larger medium tanker than Boeing’s previous KC-767-200AT offering.

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As the World Churns

Only a few days ago, President Obama’s Office of the Management and Budget suggested delaying the tanker competition for five years. Now the Wall Street Journal reports that another House Member wants to split the tanker acquisition. You can see the report here, and in this case it’s free. Meantime, the conspriracy theorists actually have a pretty good one. A commenter on the DODBuzz blog thinks the delay is designed to give Boeing the opportunity to develop the 777 into a tanker. See the March 11, 9:28am posting. As conspiracy theories go, we like this one. No clue if there’s any validity to it, but the timing does work.

Update, March 12: George Talbot has this long item that the White House denies it wants to delay the tanker program.

The Hill has this piece that House Member John Murtha is preparing legislation for a split buy, with the winner getting a larger piece of the pie, and a production rate of 24 a year rather than the 12-18 originally proposed.

Update, March 13: George Talbot of The Mobile Press-Register has this piece about Boeing, Northrop and their respective supporters banding together to kill any Obama Administration proposal to delay the tanker procurement for five years, as suggested by OMB. The White House denies it has any plans to do so, but the stakeholders aren’t convinced.

Reuters reports more about John Murtha’s plan to kick-start the procurement in this item.

2009 ‘Year of Boeing tanker’

The head of the Boeing Tanker Program call this the ‘Year of the Tanker,” according to a news release from the company.

In the news release, Dave Bowman, VP and GM of the program, vows to win the KC-X competition that is to be resumed this year. It’s unclear yet whether the Pentagon will simply pick up where it left off last September when suspending the competition or whether an entirely new process will be started.

Boeing claims 44,000 jobs will be supported by its KC-767 tanker. Northrop claims 48,000 jobs for its KC-30. Boeing claims its tanker is 85% American content by value; Northrop claims its tanker is 60% US content (and that the KC-767 is 69% US content). Boeing’s supporters, notably Sen. Murray, challenge Northrop’s jobs claims but have nothing concrete to back up the challenge. (We’re highly skeptical of both claims, for reasons we’ve written about many times.)

But what is truly “American built?” The Wall Street Journal today (Jan. 26)  has a very interesting article asking this question of the automotive industry. The parallels to aerospace are apt.

Boeing’s internal press release on the tanker follows.

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Final RFP due this week on Tanker; new podcast

It’s believed the Final Request for Proposals on Round Three of the KC-X tanker program will be forthcoming this week–it was due Friday, but another meeting with Boeing, Northrop, the USAF and DOD was held Saturday.

In the meantime, Innovation Analysis Group/AirInsight has produced another podcast on the subject. This one features Amy Butler, the senior Pentagon correspondent for Aviation Week magazine, Addison Schonland and Scott Hamilton. Butler gives her on-the-spot observations about the prospect Boeing could no-bid this competition; the potential for a Boeing offering with a KC-777 or a “KC-764″ (767-400);commentary about the Draft RFP, and more. This podcast is 24 minutes.