EADS submits tanker bid; Boeing to follow

Update, 2:30 PM:

  • Here are three PDF slides of information from the press conference, comparing the KC-45 with the KC-767 NewGen: KC-45 slides 7-08-10.
  • Boeing does not plan a press conference with its tanker submission tomorrow-just a press release and a note on its Tanker Blog. We will create a separate posting for this information tomorrow.
  • Addison Schonland has an 11-minute podcast with Airbus Americas Chairman Allan McArtor.

Original Post:

EADS will submit its bid today for the KC-X tanker competition. Boeing’s bid will be filed tomorrow, when they are due.

(Detour:) This just moved from Bloomberg: The release of the WTO’s Interim Report on the EU complaint about “illegal” subsidies to Boeing has been pushed from July 16 to September.We cannot help but be skeptical about this. Every time this report was due, with timing happening to coincide with a key date in the KC-X tanker competition, the WTO mysteriously postponed its release date. Call us conspiratorial, but it seems that multiple “coincidences” are at work here. The announcement came from the US Trade Representative’s Office. Hmmm…..

Here is the Airbus statement concerning the delay:

“We are surprised and disappointed by the last minute announcement of yet another delay by the Boeing subsidies panel,” said Thomas Enders, Airbus CEO.

“We are, however, not surprised by the apparent difficulties the WTO is faced with.  We have said time and again that the complexity, interconnectedness and industrial significance of the Boeing and Airbus cases would strain the capabilities of the WTO.

“Since these cases were filed, the world has changed. In aviation, the previous duopoly marketplace is increasingly being populated by government-sponsored players, leaving Boeing and Airbus as those that, by any objective measure, benefit least from government support.

The ongoing struggle of the WTO to address the world as it was in 2004 (the date the cases were filed) raises the question whether it can succeed in its basic mission to create a climate for a negotiated settlement on the basis of fair market rules in the interest of both the industry and the employees on both sides of the Atlantic.

“Another delay is a disappointment. But we are looking forward to the Boeing subsidies panel report. It will eventually come, and it will show: Boeing has received billions of dollars in WTO illegal subsidies.

“The importance of this report is greater, however, than a simple vindication of the obvious fact that Boeing aircraft such as the B787 would not exist without government subsidies.

“When the two WTO reports are published, those nations whose industries are building the aviation technologies of tomorrow can consider the WTO’s views on the past to craft new market rules that efficiently guarantee fair trade, a level playing field and continuous technology investment.”

Here is today’s press conference with EADS in a running posting:

Airbus Chairman Allan McArtor (“AM”)

EADS North America CEO Sean O’Keefe (“SO”)

EADS North America Chairman Ralph Crosby (“RC”)

RC:

  • This is a big day for us (with submission of bid). We delivered two copies of 8,000+ page proposal to Wright Patterson AFB. 440 pounds of submissions.
  • It is a fully compliant proposal that satisfies all 372 requirements to qualify for KC-X.
  • This is a task that is much more straight forward than in the past. For better or worse, this RFP is much more prescriptive than in the past.
  • We feel very good about what we have to offer. The KC-45 is nearly identical to what we are delivering to RAAF (Australia) and this adds a great deal to how one assesses one’s own risk, where fixed price is a major share of the offering.
  • There is a capability assessment (IFARA). We know what this airplane is and how it performs. This adds a great deal to our sense of comfort.
  • There has been a lot of diversionary stuff going on in this town (Washington DC) that has nothing to do with what is rigidly prescribed by the USAF. There has been a lot of discourse on the question whether we are replicating what we are offering to RAAF. We have been taking time to talk about what our system can do rather than what the other guy can’t do.
  • We have 650 flight hours on our two tankers. The other guy doesn’t have a tanker flying that represents what they will offer the AF. We have boom contacts, passed fuel, etc.
  • We support 48,000 jobs in the US. We create economic benefit. We have not done a great job of highlighting that we have committed to building A330-200 freighters in Mobile if we get the tanker contract, and we see the potential to making the total number of jobs three times the 48,000 jobs.
  • Considering the unfortunate circumstances of the Gulf oil spill, this kind of economic impact in Mobile and the Gulf coast is all the more important.
  • We have offered a real value proposition.
  • What matters is what the proposal asks for, not issues raised in the other discourse. AF is asking for primarily a refueling tanker. The rest is a bonus. The KC-45 is larger, more efficient and a set of capabilities is more than the competition and the best value.

SO:

  • O’Keefe is talking but sound quality is virtually non-existent for his mike.
  • Our intent is to put together a proposal to win. It has every intention of being successful.
  • We are expected (by USAF) on the first day to perform.
  • This is not a proposal just to put one in and see what happens.

Q&A

  • RC: The Pentagon and SecDef himself have given direction to proceed down this path. Barring extraordinary effort to bring to bear things that are not relevant to the criteria, it will be a fair competition. If the merits of the case are as described in RFP, I believe it will be adhered to. The issues that matter were described in Draft RFP and Final RFP. You haven’t seen us disrupt the process politically. We have proceeded down the path as described in RFP.
  • SO: The SecDef and Pentagon have consistently chosen not to deviate from the RFP despite pressure from Congress.
  • RC: We find ourselves in the odd position of defending the Administration in what they said they are going to do, while other people try to bring in extraneous issues.
  • RC: When price and value intersects, we have won every time (on previous competitions).
  • AM: Boeing’s arguments that military procurements can ignore WTO Article 23 prohibiting use of ruling is “BS”. Article 23 prohibits it, period.
  • RC: The WTO ruling isn’t prescriptive.
  • AM: There isn’t a WTO ruling anyway, there is just a panel report right now.
  • RC: USAF has said it has no intent to consider it.
  • RC: We will have a more cost-efficient production at 7-8 airplanes a month with the A330 than Boeing will when producing tankers (at the rate of 1.25 a month).
  • SO: There are a lot of elements that go into the costs of an airplane. The first one is are there development costs? We have developed the tanker; it is flying today. We have a finite range of development costs and can quantify what these known costs are. I don’t know our competitors can say the same thing. They have to determine the scope of the risk they will assume to develop an aircraft that doesn’t exist. This is a big variable.
  • AM: WTO delay in issuing its report is very disappointing. There is now a two month delay. I have to ask you what your perception would be on this coincidence that on the 16th, the eve of the Farnborough Air Show, where Boeing will unveil its most subsidized airplane ever, the WTO report on Boeing’s illegal subsidies is delayed. The process smells like last week’s fish. You deserve a more detailed and honest answer. I am not saying the WTO is at fault at all but somehow the process has gotten off track.
  • RC: This is crucial. This is the defense acquisition for some time to come. There is nowhere near a dire a need in other acquisitions as this is for tankers. There is no way to under-value this from a US perspective, or from an EADS North America perspective, and its 200 suppliers.

Press conference ends.

19 Comments on “EADS submits tanker bid; Boeing to follow

  1. EADS has hopes for the next WTO report to be against Boeing. But, they said they will submit their bid today, and Boeing submit theirs tomorrow.

    Will either Boeing or EADS, or both, finally reveil more details about the airplanes they are offering for the KC-X?

  2. Hopefully, the Boeing mensas will make sure the paperwork is complete and delivered on time. several years ago, BA was required to send me their response by a certain date according to SEC regs for shareholder proposals. The date was on a saturday. But they failed to note that fed-ex did NOT normally deliver on saturday, so I got the documents on Monday. Long story short, Boeing had to move its proxy publishing date by 2 days to meet the SEC requirements, or else they would not have been able to publish their response or rebuttal to my proposal.

    but think of the money they saved by using the regular delivery service 😉

  3. Doubtless my opinion will come in for criticism, but it appears Boeing has plenty to fear in terms of a capable flying aircraft that is almost ready off shelf, whereas EADS concerns revolve around a political agenda that protects an encumbent supplier with an as yet unproven design.

  4. An interesting question for me is who have EADS selected for their bid. They have specifically not revealed the main company. I wonder when they will do that.

    • EATON (actuators, pumps, valves, nozzles and other aerial refueling equipment)

      • GE Aviation (engines and systems)

      • Goodrich Corporation (various aircraft systems)

      • Hamilton Sundstrand (generators, turbines and related systems)

      • Honeywell (communications and navigation systems and other aircraft components)

      • Moog Inc. (flight control systems)

      • Parker Aerospace (aerial refueling receptacles, hydraulic system equipment, fluid conveyance products and fuel components)

      • Rockwell Collins (electronics)

      • Triumph Aerostructures – Vought Aircraft Division (wing structures)

  5. Uhhh UK air . . .”An interesting question for me is who have EADS selected for their bid. They have specifically not revealed the main company. I wonder when they will do that.”

    The ‘ main’ airframe company for EADS is also known as . . . Airbus.

  6. I must admit to be very disappointed by the attached presentation. They simply recyclyed a couple of old slides from the last contest. A 7,000 ft runway requirement? That isn’t even in this contest, why on earth is EADS citing this requirement as a major advantage? And why are they citing old IFARA mission effectiveness numbers and other irrelevant data from the last contest. Hopefully, Boeing will be a little more forthcomming with some information, I’m not sure I’d count on it but in terms of selling the aircraft both manufactures have taken a mum’s the word stand so far.

    • “A 7,000 ft runway requirement? That isn’t even in this contest, why on earth is EADS citing this requirement as a major advantage?”

      Did you read the classified RFP?

      Using a 7,000 ft runway is a big advantage in case your standard 10,000 ft runway got problems on one end of the runway. So USAF can still operate the runway unlimited from the next taxiway entrance.

      “And why are they citing old IFARA mission effectiveness numbers and other irrelevant data from the last contest.”

      Both competitors still offer a B767 and an A330-200. So I expect that the results have to be quite the same. Boeing may offer a B767-300 to increase amount of pallets or a 767-400 to increase the amount of fuel but even a -300 will have problems using a 10,000 ft runway with a boom attached.

      “[…] but in terms of selling the aircraft both manufactures have taken a mum’s the word stand so far.”

      I can’t say that for EADS: http://a330mrtt.com/MRTTSolution/Transport.aspx
      Here are Boeing’s facts: http://www.unitedstatestanker.com/facts

    • That horse will still take another hundred lashes before it is dead 😉

      EADS/Airbus has learned that “fairness” is a less well known concept
      ( to put it politely) in US politics ( or the commercial side of it, at that) .

      • And Boeing has learned that “fairness” is not a very well learned concept in EADS home countries of France and Germany either. To put it mildly there has been more than enough protectionism on both sides for either set of governments to say EADS or for that matter Boeing in the French case don’t even bother to submit a bid for a military contract. In the case of Boeing though, given the much larger size of the US market they would be more than happy for France and Germany to keep their unfair rules in place if it meant EADS was locked out of the US market.

        This fact still doesn’t excuse EADS for putting together such a lousy sales pitch. As the challenger, who quite honestly is struggling to climb a very steep hill on this one I really expected a better sales pitch than simply changing the logo from Northrop to EADS on the last set of powerpoint slides leftover from the 2008 contest. Northrop withdrew to a large extent because they expected this contest to be a repeat of the last one, it wasn’t and when they couldn’t change it to look like the last round Northrop withdrew. Why is EADS still playing NG’s old playbook when NG recongnized that simply selling the KC-45 as the plane that won the 2008 contest wasn’t going to work.

  7. To: John on July 9, 2010 at 2:35 am

    IMHO you are missing the point of contention
    entirely.
    Nobody questions that certain markets are to
    varying degrees protected.
    The contention is that the US is pushing for “open”
    markets all over the world running to the WTO for
    the smallest perceived injustice while working from
    an advantaged often monopolistic position while it is not willing to accept open market competition on home turf stooping to absolutely low measures to unfairly tilt the playing field towards their national contenders. The same methods they would instantly litigate against if it would have been the other way round.
    The Tanker Deal imho is a retelling of the orwellian more equal pigs story in the real world.

  8. UWE,

    I don’t really agree with that statement. You are puting the entire responability for compliance with free trade principles on the US side. The simple truth is that during the cold war the US supported free trade more for political reasons than economic reasons. The original purpose of GATT was to lock European Nations and Japan into the US defense alliance. In other words you can get rich by allying with us or you can just get weapons from the Soviets and remain poor. Well this situation hasn’t existed for 20 years the US simply has no compelling reason to open up its markets anymore without recipricoil activity on the other side.

    In other words the responsibily for free trade is born as much by Germany, France, Japan and China as it is by the US. Your conclusion that because in the wake of WWII the US became the leading advocate for free trade it is now and forever more supposed to open up its markets without regards to its own interest or the behavior of other nations is wrong.

    Prior to WWII France was largely considered to be the least interventionist and most open of all European countries. The word lassaiz faire economics was in fact developed to describe the French policy of letting private business take the leading role in economic development. France followed this policy pretty much with the exception of Napolean the III’s reign. After WWII though, 300 years of French history did not stop France from becoming the most protectionist and state driven economy in Western Europe. Why should the last 50 years of US history bind the US to opening its markets without reciprosity just because other nations have developed an expectation that the US should behave this way?

    A common definition of fairness is the, “ability to make judgments free from discrimination or dishonesty” Well you are saying that the US is bound to live by this standard but Europe is not. I’m sorry but you are simply WRONG. Fairness applies equally to both sides. If you can’t accept this there is no point in even having a conversatioin about fairness! Please don’t use the do as we expect but not as we do arguement in the future, its not very effective.

    • Your historic excursion goes about the same path that I would see it.

      There would have been no lament from outside if the US had handed
      out that RFP into a more limited market scope “home turf”.
      But once made available to international bidders on an equal footing
      leaving out all “home applicants preferred” language the US imho is
      obliged to stay true to this framework.
      The rabid jingoism we see unleashed here is completely uncalled for
      especially due to the fact that the US is (in objective fact imho) seen
      as a fair trade proponent by mouth only.

      • That’s the key point you made Uwe and something I have been arguing here for some time.

        By the way, I never go to company blogs because there is nothing but propaganda there but I clicked on the Boeing link in this post…. headline news – ‘WTO Rules All Airbus Launch Aid Illegal’. Ohh Lord… I should have known better 🙂

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