Will it ever end?
This is the question about the interminable KC-X tanker competition.
Unofficial word is now that the USAF is to announce its award in February, after slipping from January, December, November, October and August.
US Sen. Carl Levin announced that he will hold a hearing by February. 1 into the snafu by the USAF over sending Boeing and EADS information about the performance of each other’s tanker. Levin, holding the hearing at the request of Sen. Maria Cantwell (D-Boeing/WA), will try and determine if this is a harmless or fatal error to the procurement process. We have written before that mistakes like this happen and the government has set procedures for handling such errors, but in the highly charged competition, Boeing is taking advantage of the mistake to lay the groundwork for a protest should it lose.
Politico has this interesting article discussing the unexpected split buy for littoral combat ship and how this relates to the KC-X tanker competition. The article is mostly about the Navy’s decision to split the buy for the LCS, but it is worth reading.
Meantime, Airbus and Boeing missed deadlines once again to deliver their tankers to customers. Both said they would deliver their airplanes to the Royal Australian Air Force (RAAF) and Italian Air Force respectively and once again the time came and went.
Airbus missed delivering its KC-30 MRTT—which it boosts as 90% similar to what the USAF wants in the KC-X—because, according to this article, it is writing manuals to meet Australian airworthiness requirements for the refueling boom. The boom, of course, is the first Airbus has ever designed and built.
The KC-30 is now two years late to RAAF.
Boeing, meantime, announced last summer it would deliver the KC-767 to Italy, but there has been no announcement that it has. This airplane is now five years late.
Defense News reports that the Pentagon has been ordered to cut billions of dollars from the budget over the next five years. Wouldn’t that be a kick in the tailpipe if KC-X gets the ax? This is considered unlikely, but we raised our eyebrows over this one when we saw the story.
Given the high-profile reports last month that Boeing is now likely to lose the tanker competition (we have no insight on this one), we’ve been asked by several media what will the impact to Boeing, and more specifically, to Washington State be if EADS wins the KC-X aerial tanker contract. The award is widely expected to be made next month, but the USAF being the USAF, who knows if this timeline will happen?
Our answer has been, there won’t be much of an impact to Boeing or the State.
To be sure, Boeing and the State want to win this contract. Boeing claims there will be an annual benefit to the State of 11,000 direct and indirect jobs and $650m in employment and supplier benefits. ($650m, at 15 airplanes a year, equals about $43m per airplane in supplies and payroll.) Full production wouldn’t kick in until 2015, according to the USAF timetime; aircraft built before then are test airplanes and at a lower rate.
The initial contract for 179 airplanes takes production out to about 2027 at the rate of 15 airplanes a year. Boeing, in a press briefing in advance of the Farnborough Air Show, said it had indications that the USAF would at some stage want to take production to three a month, but a timeline was not revealed to the press if Boeing received one from the Air Force.
With all this as background, why do we feel the impact to Boeing and the State would not be much? Here’s why:
In short, if Boeing loses, it will be a disappointment to the company and the State, but as the cliche goes, when one door closes another opens. Losing the tanker won’t hurt Boeing because there are so many opportunities on the horizon that will require the resources that would be assigned to the tanker, plus a lot more.
Unrelated to the thesis above, but related to the tanker topic in general, Richard Aboulafia and Addison Schonland did a 12 minute podcast on the tanker recently. Aboulafia suggests a dual award to resolve this; he says the WTO has no role in this procurement; and the USAF mistake.