Leeham News and Analysis
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Leeham News and Analysis
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- AIN Media Group Agrees to Acquire Leeham News & Analysis June 17, 2025
- Five for Five: Air India crash points to systemic problems at Boeing that CEO Ortberg must fix June 15, 2025
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:
EADS statement on WTO affect on KC-X competition
From Guy Hicks, VP of corporate communications at EADS North America:
“The Obama Administration and Department of Defense have opposed every attempt to use the ongoing WTO commercial trade dispute to derail the KC-X competition. The only beneficiary of such a noncompetitive action would be the Boeing Company. Everyone else—the warfighter, the taxpayer and 48,000 Americans who stand ready to build the KC-45—would lose. Read more
Airbus responds to WTO public release of final subsidies report
The 1,038 page Final Report by a three-member panel of the World Trade Organization on the US complaint about illegal subsidies to Airbus was made public today.
Findings and Conclusions: 5 pages, PDF. These are difficult to grasp when taken in isolation of reading the entire report, which at this posting we’ve not done.
Home Page to the Report in segments and the entirety.
The Interim Report was issued in September and the Final Report in March, but these were supposed to be confidential. Riddled with leaks to Airbus and Boeing partisans and promoted in the press as wins and losses by both sides, the public report is the first opportunity to read it for one’s self and draw conclusions.
At 1,038 pages this is going to take a while.
In a pre-release, embargoed press briefing, Airbus and its parent EADS said the appeals by the US and European Union are expected on points each side believes were in error.
Airbus made the point that this panel report has not been adopted by the WTO as fact and therefore any claims by Boeing that this is the final, and actionable, conclusion is misleading. The panel report may be appealed (and will be), after which the WTO appeals panel must decide on these appeals. After this process is done, the WTO itself must accept or reject the report.
“More has been costing more”
With the Pentagon’s announcement this week that a major push has begun to wring costs out of the defense budget, will this macro approach trickle down to one of the largest defense procurements in decades–the KC-X tanker recapitalization?
Remember when Defense awarded Northrop Grumman the KC-X contract in 2008? A key, if not the key, to winning was, “More, more, more.”
Now Ashton Carter, the top procurer in DOD, says “more has been costing more.”
Given one advantage Boeing has over EADS in the current KC-X competition–life cycle and MilCon costs–will “more, more, more” cost EADS the contract?
Dictionary and the KC-45
We love clever ads.
Here is the PDF. KC-X_Dictionary
Below the jump is EADS’ ad that appeared yesterday.
Weak Euro helps Airbus vs. Boeing
The weak Euro at its present level could help Airbus lower the cost (mostly in Euros) and therefore the price (entirely in dollars) by as much as 10%, according to Charles Armitage, an aerospace consultant based in London.
Check out this story in Aviation Week.
This is bad news for Boeing generally and for the KC-X competition specifically. This could put pressure on Boeing Commercial Airplane prices.
Let’s talk about the planes
Update, June 4: Reuters has this recap from Jim McNerney’s appearance at an investors’ conference in which he says EADS could win the tanker competition on price–a key point of our column below.
Original Post:
Note: this is a very long column.
In a previous post, we lamented that the debate over the KC-X procurement seemed to be about everything BUT the attributes of the planes offered by Boeing (the KC-767 NewGen) and EADS (the KC-45, based on the Airbus A330-200).
The public relations campaign and the shrill political posturing has been about the WTO trade dispute between the US (Boeing) and the EU (Airbus) over illegal subsidies to both companies and whether these should be included in the Pentagon’s evaluation; about jobs; about extending the deadline to submit bids so EADS can do so; and about freezing Obama administration appointments in a particularly snitty move by an EADS Senator.
None of these has anything to do with how the USAF evaluates the plane. The USAF evaluates the equipment on the merits of performance, capabilities, life cycle costs, military construction costs (MilCon) and a bunch of technical requirements, 372 in all.
If the airplanes’ costs come within 1% of each other, another 93 discretionary criteria will be scored, including exceeding capabilities.
Will WTO vote really matter?
Update, 0815 AM PDT: Boeing just responded to email questions posed last week, mainly dealing with WTO issues but also with the airplane. Here is the exchange.
Q. How can Boeing and its supporters be pursuing legislation in Congress that amounts to self-help, which is illegal under WTO rules?
A. I think this question is best answered by the sponsors of the legislation.
Q. If the Northrop mark-up of 10%-15% is correct and even if you take into account the WTO findings on Airbus @ $5m per plane (which would be illegal under WTO rules, but supposing this is done anyway), the elimination of NOC seems to more than make up for any such penalty, what is Boeing’s reaction to this math?
A. We won’t have a reaction to any hypothetical pricing scenarios. The U.S. Air Force will evaluate price in this competition.
Q. Do you agree that a WTO finding against Boeing would likewise have to be assessed by USAF and added back into Boeing’s cost?
A. You might want to engage the USTR concerning potential “findings” in the future.
Q. Please update Boeing’s previously stated, generalized concern about the fixed price aspect of the contract. Is this a continuing concern and how much of a concern is it to the company? How much affect does this have on the ability to submit “a financially responsible proposal”?
A. We stated previously that stable, clear requirements and mature technologies are critical to a successful fixed-price development acquisition. The current acquisition approach will be successful if (government and industry in partnership) adhere to these parameters. Boeing is committed to working with this contracting approach in partnership with the customer as the process moves forward.
Q. Please comment on the risk factors to Boeing of having a developmental airplane derived from the troubled Italian tanker platform, and how much uncertainty this adds to creating a financially responsible proposal.
A. I’m not sure why you’ve focused solely on the Italian KC-767…especially since we’ve delivered all four KC-767Js to our Japan customer and they’re flying real missions in operational squadrons. That said, we have mitigated tremendous risk through our international tanker programs and strongly believe we can limit risk in our U.S. Air Force offering.
Original Post:
The US House of Representatives last week voted to direct the USAF to take into consideration the WTO finding that Airbus illegally benefited from improper subsidies during the development of a family of airplanes.
This includes the A330-200 on which the EADS KC-45 is based. EADS plans to bid this airplane in the USAF KC-X competition.
The US Senate must go along. We don’t know at this point if this is something the President must sign or not.
Never mind that this action is completely illegal to the very WTO rules Boeing, the US Trade Representative and the Congressional supports seem to cherish.
But does it really matter? The answer may surprise everyone, but it may very well not matter. EADS still could offer an airplane that will be Boeing on price.
Here’s why.
So’s your old man
More mirthful back-and-forth between Boeing and EADS.
Boeing today fired off a rebuttal ad to the EADS “Get Real” ad published right after it got back into the KC-X tanker competition.
Boeing also posted this message on its website:
Hoisted on own petard?
Update, May 19: With all the references in Comments about the GAO ruling, we are linking the 150+ page report here, courtesy of Sgt. Mac: GAO KC-X 2008 Protest
Update, May 17, 4:30PM PDT: Reuters has this story that Boeing will bid for the tanker “despite concerns.”
Original Post:
We had been planning to write a column about whether Boeing may be in danger of being hoisted on its own petard when two news items appeared Friday (May 14) that accelerated this column.
The first appeared in Army Times/Defense News (sister publications), quoting an unidentified Boeing executive as saying Boeing might night bid on the KC-X because officials feared it could not win the contest because EADS would be able to undercut the price due to subsidies at Airbus. (This also would explain the question we raised in our post, Why aren’t they talking about the airplane?)
The second story appeared in The Seattle Post-Intelligencer refuting the Defense News piece.