The first in a series.
By Scott Hamilton
Dec. 6, 2021, © Leeham News: The US Air Force began the process this year to procure the KC-Y aerial refueling tanker.
Originally, this was to follow the KC-X (awarded to Boeing in the form of the KC-46A) to replace the McDonnell Douglas KC-10. This has been altered to be a bridge tanker between the KC-X and the KC-Z, an advanced tanker design that is in the conceptual stage.
The KC-Y promises to be a contest between Boeing, for more KC-46 orders, and a partnership between Lockheed Martin and Airbus based on the A330-200 MRTT. MRTT stands for Multi-Role Tanker Transport. The Lockheed Martin plane is called the LMXT, for now.
The KC-X competition was bitter and repetitive. A partnership between Northrop Grumman and Airbus initially won the contract. But Boeing protested how the USAF scored the bake-off. The General Accounting Office upheld the protest. A new competition saw the contract awarded to Boeing.
KC-Y is only in the Request for Information stage and neither Boeing nor Lockheed have submitted filings yet. But already, the surrogate Boeing campaign appears underway.
A state legislator from Kansas published an OpEd urging the Air Force to buy from the “American” Boeing rather than the “European” Airbus. Wichita (KS) has a long history with Boeing. Spirit Aerosystems, once a Boeing facility before being sold, builds 737 fuselages and nose sections for the 787, 777 and 767. The irony, of course, is that Airbus has a major engineering center in Wichita, for which it hired a number of ex-Boeing engineers laid off by some of Boeing’s periodic house-cleanings.
For its part, Lockheed Martin is already touting the LMXT as “Built in America, By Americans, for Americans.” The A330 is produced and assembled in Europe, but it has large percentages of American content. If the KC-X award had remained with Airbus, the company would have built a final assembly line in Mobile (AL) for the KC-45 tanker, as the Airbus version was christened. The location later was selected for the US-assembled A320 family and, later, the US FAL for the A220.
Lockheed hasn’t said yet where the LMXT will be assembled in the US.
Boeing’s partisan, Loren Thompson, returned this month to his long-running complaints about “illegal” subsidies Airbus received in developing the A330—a theme he, Boeing and others emphasized during the KC-X competition. Airbus long ago repaid the subsidies and, in any event, under World Trade Organization rules, military programs are exempt from subsidy challenges. Thompson’s think tank, the Lexington Institute, receives money from Boeing.
Nevertheless, these two columns portend one of the future themes that will almost certainly emerge in the KC-Y contest.
With this as backdrop, LNA interviewed Sean O’Keefe, the former CEO of EADS North America, as it was known during the Northrop Grumman-EADS KC-Y competition. EADS was later renamed Airbus Group. O’Keefe previously was the administrator of NASA. With a background in the industrial and government sectors and inside knowledge of the KC-Y contest,
LNA takes O’Keefe on a trip down memory lane in this first of a series of articles.
O’Keefe became CEO of EADS North America in the fall of 2009. Ralph Crosby, who was CEO from 2002, became chairman. He held various positions at Northrop Grumman from 1981 to 2002, when he joined EADS.
Boeing’s deal to lease 100 KC-767 tankers to the USAF, agreed after 9/11, was canceled due to a scandal during the procurement process and opposition from US Sen. John McCain.
In what became known as Round Two of the procurement effort, Northrop was awarded the contract for the A330-based KC-45 in February 2008. Boeing protested the award over Air Force failures in the process. The GAO upheld the protest and the Pentagon moved to re-run the competition in what became known as Round Three.
O’Keefe already was familiar with the competition. Before joining EADS, he was a vice president at GE Aviation. GE supplied the engines for the KC-45.
“When I walked into EADS in the fall of 2009, the task was to reset the entire profile and recompete the whole program and begin again under a new set of parameters that the defense department devised over that prior year after having overturned the previous award,” O’Keefe recalled. He would be at EADS through the Round Three competition and contract award.
The Air Force was instructed to do was to reset the requirements of the Round Three competition to be one that set a baseline standard of the range, refueling capability, offload capacity, using the existing KC-135 fleet as being the baseline.
“If anybody could meet that standard and exceed it, then good for you, but they weren’t going to pay for the excess,” O’Keefe said. “It was a fixed price contract arrangement for both the development as well as the production of aircraft. The Air Force determination was, ‘We’re not going to pay a dime more for more capacity than what we’re asking for in the requirement.’”
O’Keefe said that it was clear that when the USAF released made the cost decision, it essentially meant that EADS had a dilemma.
“What we were offering at the time was a modified A330 that was substantially bigger than the KC-135 and had not only a lot more capacity, it had more range, and more potential cargo capacity you could actually attach to it. That’s what attracted the Air Force.”
The Air Force said in awarding the contract to Northrop that these features were why the KC-45 was selected. In addition to the strategic air refueling capability, the KC-45 offered a strategic airlift capability that can be employed at all kinds of other times when it’s not consumed and otherwise occupied with doing aerial refueling.
But none of that would matter in Round Three.
“The first decision we had to make was whether or not we would find some way to reduce the capacity and advantages of what an A330 configured as a refueler. That got to be an engineering challenge to say, ‘How do we make this thing less capable than what it already is?’”
Still, the 767 tanker Boeing would offer was only a paper concept. (The KC-767 ordered by Japan and Italy had so many technical problems, Boeing dumped the design for a new one. Airbus already was under contract and development for the MRTT with a few NATO countries.
The fixed price requirement, the decision to favor the lowest price over capability and other factors gave pause to Northrop and EADS. The determination from Northrop Grumman was, “That’s it. We’re throwing in the towel because this was just not going to work. We don’t have a chance. There’s no way to do this,” O’Keefe recalled.
Over at EADS, however, officials weren’t willing to throw in the towel.
“We knew it was a longer shot on this competition. But it was also viewed as prospectively an opportunity if you got to the right kind of combination of things we had going for us,” O’Keefe said. The first was an aircraft that was largely developed and tested. “Therefore, the development cost are related costs were going to be significantly less than what it would be for the competition. “The 767 had never been through a tanker development program, so it was going to be something more. In fact, that’s exactly the way the bids came out as the proposals were evaluated. It was significantly less for the development cost for the A330/KC-45 offering that we made relative to what Boeing proposed.”
The big difference was in the fixed price production that was involved. “We did a very aggressive scrub in order to figure out exactly how to reduce the price that we would offer for production aircraft at full rate and reduced it a little. It went down by 10% to 15% of the margin for the full-rate production levels.”
The Round Two competition also was a learning experience for EADS. But the decision also rested in part on the potential of the A320 program. This will be examined in Part 2.
Canada last week ruled out Boeing as a bidder for its new jet fighter procurement. Although the Defence department didn’t explicitly say so, media reports indicated Boeing was disqualified because of its 2017 trade complaint against the Bombardier C Series. After the complaint was filed, the financially struggling Bombardier sold 50.1% of the C Series program to Airbus for US$1. Even then, Bombardier couldn’t fulfill its remaining financial obligations. Airbus bought out BBD’s remaining shares and now owns 75% of the program. Canada inserted clauses into future procurements that disqualified companies that took actions detrimental to Canada’s aerospace interests. This was widely called the “Boeing amendment.” Boeing previously was disqualified from bidding on Canada’s aerial tanker replacement.
Why did Boeing file the trade complaint against the C Series? This is fully explained in my new book, Air Wars, The Global Combat Between Airbus and Boeing. It’s available at Amazon. This is just one of the scores of behind-the-scenes stories about the often bitter competition between Airbus and Boeing.
Rated 4.5 stars at Amazon and Good Reads, Air Wars has been called a worthy successor to 1982’s The Sporty Game, the definitive history at the time of the competition between Boeing, McDonnell Douglas, and Airbus.