Italy to penalize Boeing on tanker

Bloomberg just moved this story, reporting the Italy will fine Boeing for its late KC-767 tanker, following penalties assessed by Japan.

Update, 1145 AM PDT: We’ve been on the phone with reporters this morning discussing the tanker competition and what Boeing might do–the latter in the wake of the Aviation Week story that Boeing is considering adopting a no-bid position following the revised RFP that will give extra credit for extra fuel off-loading capability. We thought we’d recap our thoughts.

  • First, we don’t know what Boeing will do, but we think it will stick with the competition. We don’t think Boeing will have come this far to simply fold its tent and go away. Boeing has nothing to lose (except the cash costs associated with the re-bid) and everything to gain, even if winning is a long shot.
  • It’s to Boeing’s advantage to drag this out as long as possible, even if it loses. The longer Boeing can keep the contract from Northrop Grumman, the longer it stays out of EADS/Airbus hands. The longer the contract is denied Airbus, the longer before any US production facility is built. The longer no US production facility is built, the longer the pressure of the Euro-Dollar exchange rate hurts Airbus.
  • The longer the contract is delayed, the more the likelihood the World Trade Organization rules on the US-Boeing complaint over so-called “illegal” subsidies to Airbus. Although this doesn’t have a thing to do with the technical merits of the contract, an adverse ruling by the WTO (which is expected on at least some points) will become more political fodder for Boeing’s supporters in Congress.
  • The longer Boeing can draw this out, the better the chances in Congress. It’s presumed the Democrats will increase their majority in Congress in the November elections; the new members take office in January. The labor unions associated with Boeing’s bid are typically behind the Democrats, and the Ds are making the contract award to Northrop campaign issues for the presidency and in some critical Congressional races.
  • From a stockholders’ point of view (and we’re one of them), Boeing is doing what it needs to do.

Update, 345 PM PDT: The Financial Times is reporting that Boeing is sticking in the competition, at least for now, after its meeting with the USAF. The FT reports that Boeing is continuing dialog with the Air Force to refine the Draft RFP for a final RFP. Here is the story, though a subscription may be required.

Reuters reports that Boeing remains “discouraged,” however, in this story, citing defense analyst Loren Thompson.

Update, 800PM PDT: Business Week has this piece about Boeing staying in the competition, probably plans to ask the USAF to extend the timetable and some discussion about a “KC-777.”

12 Comments on “Italy to penalize Boeing on tanker

  1. Quote: From a stockholders’ point of view (and we’re one of them), Boeing is doing what it needs to do.

    Yes…. so much for:
    ‘keeping in mind at all times the impact to the warfighter and our nation.’
    Boeing Statement on U.S. Air Force Aerial Refueling Tanker Decision
    ST. LOUIS, Feb. 29, 2008

    Boeing really does have all the right options available on the table, judging by the above :o(

  2. “The needs of the warfighter” disappeared the minute the contract went to Northrop. To Boeing’s supporters, it’s all about jobs and Airbus.

  3. Does the government acquisition process change if Boeing withdraws and it becomes a sole/single source contract? What are the consequences/differences of awarding a sole source contract vs a competition? I’m not up on my governmentese.

  4. Why can’t Boeing throw a couple of fuel bladders into the lower cargo hold, and magically be able to offload the same amount of fuel as the KC-30? Boeing knows lower hold fuel bladders from the KC-135, and from their inherited KC-10.

  5. If Boeing do go with KC-777 or KC-764, it will be interesting to see what their PR put out on the size issue this time. The money they already wasted in commissioning the Conklin de Decker ‘study’ will probably have to be buried in the R&D budget!

  6. John,
    Good question. That’s the problem with the USAF wanting a off-the-shelf airliner for a tanker. Sure its cheaper and quicker than asking for a custom designed/built tanker. Todays airliners are designed to be very fuel efficient at carrying passengers. The airframe and wings are designed to nearly max out at the designed maximum pax load. Pax per volume are a lot lighter than fuel, or even cargo for that matter. To beef up the airframe to handle a heaver load, it adds weight and hurts fuel consumption per seat mile. To carry more weight, you also need more lift from the wings. That adds weight, but also more drag. To overcome the weight and drag you need more thrust…..hence more fuel consumption.

    So while the 330 may be more desirable as an airliner (more efficient on a per seat/mile basis), it actually makes for a worse tanker. The 330, while competing against the 767 for a KC-135 replacement, is actually larger than the KC-10. The KC-10, being an older generation airline design, can carry over 100,000 of fuel than the 330.

    I think both the 300 and the 767 do use some fuel blatters under the deck, but no where near as much as the 135 and 10 do.

  7. Geez! For the uninitiated, let’s point out some OTHER things about the KC-45 vis-à-vis Boeing’s product line. The A330-200 airframe is also shorter than the B767-400, and only a ‘tidge’ longer than the -300.
    RE: A330 “Optimization?”
    Pfft. The voluminous cabin and expansive wing on the A330 is delightfully coincidental from an ‘optimization’ POV. Airbus sought to gain market share early by making all their planes ‘wide-bodies’ from the start.
    The A330 is optimized more for lower production costs than anything else. The A330 uses a lot of earlier A300 series components, and that has to do with commonality that lowers airline pilot cross-aircraft training/rating needs.
    The bulk of the A330 airframe is common to the much higher gross weight A340 for one reason: Airbus wanted high commonality for the planes they were launching at the same time to cut engineering and production costs, and that includes using basically the same big, beautiful wing.
    That wing which can lift an A340 very well is what lets the KC-45 lift more fuel/cargo out of shorter runways than any other comparable aircraft. As an aside, we ought to ask ourselves: What’s the “fuel efficiency” of a KC767 that can’t lift the fuel you need out of the specified field length?
    I have generally been a fan of Boeing’s products over EADS since Airbus came into existence, and have generally preferred their design philosophy as well, BUT the A330-B767 niche is one area where the Airbus product has the clear edge.
    I am confident NG and the AF will make the KC-45 a great tanker, just like I was confident the AF and Douglas would make the so-so early DC-10 into a great plane as well. People tend to forget the DC-10 had serious problems early on, (they had a propensity for losing doors in flight if I remember correctly) and that the fixes and the extra set of gear on the mains from the -30 onward let it become a great plane and greater tanker. [Personally, I preferred the L-1011, but it was an expensive and complex beast to manufacture with its level-in-flight floor at an optimal cruise angle of attack, among other things.]
    Relative fleet fuel efficiencies are dependent upon HOW a fleet is employed. I would expect the AF to optimize operations to make the most of each aircraft’s characteristics. this is further complicated by the use of past operations as a basis for planning future ones. All of this makes single sortie to sortie comparisons rather puerile, don’t you think? The AF has long signaled that they are looking more towards the Pacific where the space between airfields is farther apart. This will drive changes in how tankers are employed.
    I trust the acquisition folks to know the need better than any contractor, pundit, or politician.

  8. Mac,
    NG was stripped of the contract award as you are well aware. Therefore, they are not allowed to call the KC-30 the KC-45. Neither should you or any of us. At the moment, there is no KC-45.

    Second, I think you are putting too much faith in to the hands of the acquisition folks. They seem to have demonstrated that they can’t even follow the guidelines for evaluation and scoring of the bidders – even though they spelled them out in the RFP that they wrote. Also, the acquisition folks are not air-refueling or tanker operations experts. I doubt they have any one on staff with a background in the utilization of tankers. They are purchasing folks; they know the world of purchasing everything from paperclips, bullets, to radar repair services. The USAF had to communicate to them what their needs were without telling them which plane to buy. Would you feel comfortable telling someone else to go out an buy you a car (and you can’t tell them which manufacture or model to buy)? I doubt it. They might be masterful negotiators and buyers, but you might not like what they bought for you.

    Clearly, the USAF did not give the acquisition folks any requirements/limits in terms of size. Because it now seems like we’re seeing the start of an “arms” race in what plane can carry the most fuel. Soon we may see that it’s the KC-380 vs the KC-747. I feel that this tanker buy is headed for long delays from all sides; Boeing, NG, congress, and DoD. I predict that we’ll be seeing this thing going back to square one and starting over.

    If we ignore size, and compare the KC-10 to the KC-135. The KC-10 (given the RFP evaluation criteria) is the better tanker. Funny thing is though is that the KC-30 is larger than the KC-10 and a KC-10 to KC-30 comparison shows the KC-30 tanker to be inferior. The KC-767AT that Boeing proposed is smaller than the 767-400. It is a little larger than the KC-135 yes, but it is closer in size to the 135 than it is to the KC-10 or KC-30. In a comparison to the KC-135, (again using the RFP evaluation criteria), the KC-767AT is superior to the 135. The original RFP stated that extra credit would not be given for extra offload above the requirement. As the GAO protest upheld, NG should not have been given extra credit for it higher fuel capacity. If extra credit was going to be given for extra offload, then Boeing would have likely bid another aircraft against the KC-30. Clearly, Boeing thought NG would not get any extra credit for the larger fuel capacity of the KC-30, so they went with a plane closer in size to the KC-135. Now that the DoD has changed the rules, Boeing may change the plane it bids.

    One problem with ignoring size is that if the new KC-45 is much larger than the KC-135, a lot of money will need to be spent on building all new hangers and enlarging ramps to accommodate them. The money from that will come from the budget of the USAF. To spend more on hangers and ramps means you have less to spend on F-35’s, UAVs, operations, or even people.

    I question the notion that the USAF will change the way they use tankers. I don’t think bigger is better. I do think having a mix of tankers is optimum. Many medium size (close in size to the 135) tankers, and several large ones (close to the 10) is a good mix.

  9. GasPasser,

    Neither the KC-30 nor the KC-767AT use any lower hold fuel tanks. Both use only wing and center wing box fuel tanks.

    Boeing has made removable lower hold tanks for long range aircraft such as the 777-200LR, and an otherwise empty aircraft with full wing tanks is not at MTOW, so there should be margin for the KC-767AT to add 15-20,000 lbs of fuel in the lower holds.

  10. About a year ago, Boeing indicated that it had increase the fuel-carrying capability of the KC-767AT. We don’t recall the amount but the figure referenced by John seems to ring a bell. Perhaps this is how Boeing achieved the increase.

  11. Let us remember,
    1. The GAO only sided with Boeing on a handful of
    the complaints out of more than 100 that they shotgunned at the AF. IMHO of that handful, only in one of them did the GAO NOT have to contort themselves into odd positions to rationalize it OR make a finding that was not in direct conflict with previous GAO rulings. That ‘one complaint’ had nothing to do with tanker size. I base that opinion on my detailed review of the RFP, Boeing’s redacted protest(s), the AF’s redacted post-hearing submittal to the GAO and my own acquisition experience. If someone has better or new info, please bring it.

    2. To head off any idea that the GAO’s findings were any kind of ‘last word’ in the matter, it is worth restating for the uninitiated, that the AF was NOT obliged to follow GAO’s findings. Can there be ANY doubt that the DoD decided to address the concerns raised by the GAO report BECAUSE of the highly politicized atmosphere created by Boeing?

    3. ‘Cost’ was and will be where any MilCon factors come into play. It was and is part of the total equation.

    4. The designation of KC-45 was given to the NG aircraft by the DoD. It has not been rescinded, and in fact it will be remarkble if actually ever is rescinded. I can think of only one time in the modern era where, outside of changing a mission (F-18 to F/A-18) or type designation (ex: P-51 becoming F-51) where a designation was rescinded, and that was for standardization purposes (F-110 to F-4). I’ve not thought about this before: does anyone have any other examples?

    It troubles me not that somone apparently does not like the use of the designation ‘KC-45’. But it is particularly amusing to read NG is “not allowed to call the KC-30 the KC-45” just after visiting the topmost link in the right column of this blog.

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