Tanker wars may be back

Northrop-Airbus team wins second round

In a new procurement round, Airbus teamed with Northrop Grumman to offer the A330MRTT in competition with the KC-767. In a stunning move, Northrop won. Boeing discovered improprieties in the USAF handling of the bid process and protested. The Government Accounting Office upheld the protest. This procurement was canceled.

The second round was marked by bitter accusations, charges and counter-charges between Boeing and the Northrop Grumman-Airbus teams.

Boeing, which delivered the last of 803 KC-135s in 1965, nearly 40 years earlier, touted its expertise to Airbus’ inexperience.

The last McDonnell Douglas Corp. KC-10 was delivered in 1987, when MDC  was still an independent company.

Boeing had nothing to do with the KC-10 design, production and delivery—though it did provide long-term aftermarket support following its acquisition of MDC in 1997. Boeing also provided support and updates for the KC-135s.

But at the time of the second round of procurement, Boeing’s track record of designing and delivering new tankers—also based on the 767-200ER—was problematic.

Boeing delivered eight KC-767s to the Italian and Japanese air forces, years late and plagued with technical difficulties. Boeing lost money on this program. The USAF cited risk factors related to the KC-767 as one reason for selecting the A330MRTT.

Technically Acceptable, Lowest Price

In the third round, Airbus and Northrop split, with the former submitting a bid by itself. Boeing won this time under a Technically Acceptable, Lowest Price government requirement.

In other words, the USAF established the requirements that had to be met. Boeing and Airbus then submitted their prices. If the prices were within 1%, then the A330MRTT’s extra capabilities (range, tankage beyond the basic requirement, etc.) would be factored in.

In automobile terms, the USAF wanted a Chevrolet. If Airbus’ Cadillac could be purchased for the same price, then great. If not, the Chevrolet would be “technically acceptable.”

Boeing’s bid was a full 10% below the price offered by Airbus. Boeing won the contract. Airbus was mystified how Boeing’s bid could have been so low.

Airbus’ puzzlement has been borne out. Boeing already has written off nearly $3bn (pre-tax) in development. There have been technical design issues that resulted in multiple delays.

Boeing currently is under contract for 52 of the 179 tankers required in the first tranche of the replacement need.

The USAF, which still has not received its first KC-46A from Boeing, sees a need for 100 more aircraft on a faster timeline than originally outlined.

Returning to the scene

With the Lockheed Martin tie up, Airbus returns to the scene, offering its A330MRTT tanker to the USAF.

This time, Airbus offers a fee-based structure. This is unusual but not unknown.

As noted above, Boeing first offered to lease 100 tankers to the USAF. The UK leases in A330MRTTs when needed.

The Pentagon also uses fee-based tankers on occasion.

Omega Air Refueling offers aerial refueling using converted Boeing 707-320Cs (the KC-707) and McDonnell Douglas DC-10s (KDC-10).

Omega already serves the US Navy and US Marine Corp. V-22 Ospreys and F-35s are among the US service aircraft that Omega has refueled.

Renewed tanker wars?

Will this renew the tanker wars between Airbus and Boeing?

If past is prologue, the answer is yes. Boeing is unlikely to sit idly by and let Airbus attempt to land any part of the hard-fought tanker business after a painful decade-long effort.

(In fairness, if it were just Lockheed Martin making the bid, Boeing would fight ferociously to prevent splitting the contract.)

High stakes

The stakes, as before, are high.

In addition to the obvious contract exclusivity, any deal involving the A330MRTT extends the life of the A330 passenger airliner. Although Airbus officials contend that the A330neo life is just beginning, based on more than 1,000 A330ceos in service with more than 100 customers, the reality is that sales have been slow and the basic A330 design is aging.

The A330neo has a new wing but the Rolls Royce Trent 7000 engines, while advanced over the Trent 700s, GE90 and Pratt & Whitney PW4000s they replace, are nevertheless year 2000-2003 designs. The A330neo is probably good for production well into the next decade. A tanker contract for 100 airplanes would extend the life, further spread production costs and allow Airbus to aggressively price the A330neo against the prospective Boeing NMA and continued competition from the Boeing 787.

Would a contract for 100 MRTTs to resurrect plans for a wide-body production plant in Mobile (AL), a promise that was made with the second and third rounds of tanker bidding? It might, also setting the stage for future production of a passenger wide-body aircraft in the US.

These factors are hardly lost on Boeing.

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