(Due to technical difficulties, our update on the Corporate Website was temporarily requiring a password to access this week’s Commentary. This was resolved at 0900 PDT.)
Our Corporate Website has been updated for the week of August 19. Today we talk about–what else, these days–the USAF KC-X program.
With all the talk about the prospect of Boeing offering a tanker based on the 767-400 or 777-200F, we pull together thoughts about this and a table comparing the KC-135, KC-767AT, KC-30, a “KC-764,” a KC-777 and the KC-10.
We also talk about the prospect of Boeing doing a “no-bid” in response to the Amended Draft RFP, or filing a protest against the Final RFP, which is expected this week. And there is more.
Byran Corliss of the business magazine Washington CEO (as in Washington State, not that “other Washington,” as we say here on the West Coast) has a short commentary that is inflammatory to locals but absolutely true. He writes that Boeing doesn’t need the tanker business. (Boeing has acknowledged that, financially, it would be small potatoes, but officials do want the business.) Corliss also comments on the current labor negotiations. Corliss used to cover Boeing for The Everett Herald before joining CEO.
Bloomberg just moved this story, reporting the Italy will fine Boeing for its late KC-767 tanker, following penalties assessed by Japan.
Update, 1145 AM PDT: We’ve been on the phone with reporters this morning discussing the tanker competition and what Boeing might do–the latter in the wake of the Aviation Week story that Boeing is considering adopting a no-bid position following the revised RFP that will give extra credit for extra fuel off-loading capability. We thought we’d recap our thoughts.
Update, 345 PM PDT: The Financial Times is reporting that Boeing is sticking in the competition, at least for now, after its meeting with the USAF. The FT reports that Boeing is continuing dialog with the Air Force to refine the Draft RFP for a final RFP. Here is the story, though a subscription may be required.
Reuters reports that Boeing remains “discouraged,” however, in this story, citing defense analyst Loren Thompson.
Update, 800PM PDT: Business Week has this piece about Boeing staying in the competition, probably plans to ask the USAF to extend the timetable and some discussion about a “KC-777.”
There are numerous reports today that the US Trade Representative may look at the proposed launch aid for the Bombardier CSeries airplane. This one does a good recap.
The CSeries is proposed to carry 110-149 passengers, which directly encroaches on the Boeing 737-600/700 and Airbus A318/A319 series. The USTR doesn’t care about the potential impact on Airbus, of course, but since the USTR filed a complaint against Airbus and the EU about launch aid to Airbus (the case is still pending), it’s only logical that the USTR and Boeing complain about launch aid to the CSeries.
But does Boeing truly care?
There were strong hints at the Farnborough Air Show by Boeing Commercial President Scott Carson that Boeing just might cede the market of 150-seats or below, though Carson declined to confirm to us that that’s specifically what he meant.
Aviation Week reports that Boeing may elect not to re-bid on the KC-X program. The story is here.
Update: 0840AM PDT: Boeing told us the Aviation Week piece is “news to us.” Boeing (and Northrop) meet with the USAF Tuesday (Aug. 12) to review the Draft RFP. If Boeing has anything to say publicly, it won’t be until Wednesday, we’re told.
Update, 945AM PDT: The Pentagon has issued what amounts to a gag order on any statement by the USAF or DOD on the tanker competition. See the report here.
Airbus took a comfortable lead in the orders race year-to-date through July 31 following the Farnborough Air Show, in which is announced a combination of new orders and inked a 100 airplane deal with Dubai Aerospace Enterprises that was announced at the Dubai Air show last November. DAE’s 100-plane order with Boeing, also announced at the Dubai Air Show, was completed in December and was posted to the 2007 order book.
Although 787 sales have stalled, there is a rumor of a pending new order for double-digit airplanes. Airbus in August announced a fourth customer for the A350-1000 that should be inked by year end, if not in August.
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There has been some time to digest the Pentagon’s announcement for the re-compete for the aerial tanker program. Predictably, Boeing’s supporters are unhappy. Anything short of a tailor-made RFP guaranteeing a Boeing award won’t make them happy, as their efforts to craft legislation in Congress demonstrates.
Here are a couple of stories that capture the flavor:
Having incorrectly called the competition once–we thought Boeing would win and were stunned when Northrop did–we’re going out on a limb and predict Northrop is the favorite this round. (In this we are not alone, but we weren’t last time, either.) But we have a somewhat different view than the hand-wringers over the revised RFP.
The original RFP contained a delivery timeline sought by the Air Force that was not challenged by Boeing in its protest and which the GAO didn’t address. And this timeline isn’t changed in the new Draft RFP, either. And that is the Air Force wants the “prototypes” (our word) of the KC-45 delivered in 2009.
Northrop already has two KC-30 platforms flying and two more on the way. Granted, these must be converted into tanker configuration. But Boeing doesn’t have a flyable airplane nor is it likely to be able to have the KC-767AT prototype ready next year.
This is because the “AT” is a combination of elements from the 767-200ER, the 767-300ER, the 767-400 and the 777. Deemed a “minor modification” by Boeing–and the “Frankentanker” by Northrop–the process of integrating the parts and producing the airplane most likely will take longer than 2009 once Boeing received a contract, if it did.
Boeing’s track record with the KC-767s for Japan and Italy doesn’t inspire confidence, and these are straight-forward conversions of the 767-200ER.
The delivery timeline outlined in the original RFP also argues now, as it did then, against Boeing offering a tanker based on the 777. This production line is already at capacity of seven a month and with a backlog of 358 at June 30 (the latest data available), that’s slightly more than four years before Boeing could deliver a prototype KC-777, even if 100% of the research and development were done and ready to go into production–which it probably is not.
Let’s remember that the re-compete is about eight points identified by the GAO, but there are other criteria involved. The desired delivery schedule is the main reason we think Northrop has the edge; Northrop has a plane ready to go now; Boeing’s airplane is in the computer.
The Pentagon today re-issued the Request for Proposal for the aerial tanker competition today.
As the press conference begins, here is a running synopsis:
End of conference.
Our immediate take:
Both sides got something in the rebid:
It didn’t take long for Boeing’s advocates to look for bias, according to this CBS News report. They’ve been advocating including the 40 year life cycle but excluding the extra credit, a position we find just plain stupid. If you alter the RFP to allow one, then you need to allow the other.
The question is whether Boeing will protest the changes; officials said at Farnborough that they might because they felt any changes to the RFP should reset the process from scratch.
Here is the Draft RFP, Part 1. 27 pages.
Here is the Draft RFP Part 2. 96 pages.
Here is Northrop’s statement. (No response yet from Boeing.)
Here is a Seattle Times report, quoting a spokesman for US Rep. Norm Dicks (D-Boeing) already whining about the new RFP. No mention of the 40 year life cycle element by Dicks’ office, which he advocated.
Update, 4:10PM PDT: Washington State’s other Boeing advocates are quoted in this article and this one, all complaining about the extra credit for extra fueling capabilities. The hypocrisy is palpable. Some of them are behind legislation in the US House that would all but require an award to Boeing rather than the “fair” competition they advocate, and all seemed to favor changing the RFP to a 40-year life cycle on the assumption that this will guarantee a win for Boeing. Yet they object to the extra credit change. These politicians, and those from Kansas who rival Washington, aren’t remotely interested in competition and all their rhetoric to the contrary is political pablum.
This just in from Boeing:
Boeing has received the amended Request for Proposals (RFP) for the KC-X tanker competition. Given the very narrow window for commenting on this draft, our team is focused on identifying and understanding any changes that may have been made to the original requirements and evaluation criteria. We also need to see how the document addresses the strong concerns the Government Accountability Office identified in sustaining our protest.
Despite the fact that the first competition appropriately addressed the aircraft’s intended mission, until we receive the final RFP it is too early to offer any details about Boeing’s path forward.
Boeing remains committed to providing the most capable tanker to the warfighter and the best value for the American taxpayer.
No comment on whether Boeing will protest the DRFP.
Steve Trimble of Flight Global has a series of short items in his blog. Rather than linking each one, here’s the link to his home page–select the individual tanker items as you will.
We’re back from a week of travel where we had no access to the Internet and one of the first things we saw was the news report about “Alabamians to Build American Tankers” and their radio ads blasting Boeing for its original scandal in the tanker program and connecting it to the re-compete for the USAF aerial tanker.
There is no getting around the fact that the competition is where it is today because of improprieties of the 2001-2004 tanker award. But Boeing’s Jim McNerney, in one of his early acts as the new CEO, stepped up and authorized a fine of more than $600 million to settle this scandal and the Lockheed Martin trade secret theft case, and declined to take the tax deduction that was permissible because it wasn’t the right thing to do. These two actions are one reason we continue to have great respect and regard for McNerney’s leadership.
Thus, with Boeing having settled this matter, it should not be an “issue” in this competition, factual history notwithstanding.
We’ve often been critical of Boeing’s PR, advertising and political lobbying campaign over the tanker competition. We’ve thought that the campaign was ill-advised and sometimes distorted and had no place in the competition. We’ve also repeated called on Boeing and Northrop Grumman to tone down the rhetoric or ideally stop altogether. This “Alabamians to Build American Tankers” is a new low in this entire competition.
The pro-Boeing site Tanker War Blogs has a good synopsis and has some information about who’s behind this trash.
Airbus had its press briefing, rescheduled from Monday, much to the puzzlement and speculation of observers and rivals (or, perhaps, that should be in the singular).
The speculation was rife: Airbus’ super-salesman John Leahy had a big order up his sleeve for announcement. British Airways would announce an A350-1000 order. Cathay Pacific Airways would order the A380 and A350.
Alas, it was none of these. CEO Thomas Enders started the briefing saying that he thought it be more productive for Airbus to recap the week, with orders to talk about, than to start the week with nothing to say. And that’s what it was.
Airbus ended the week with 247 firm orders plus commitments for nine airplanes. One hundred of the orders, however, are left over from the Dubai Air Show–the contract was signed at Farnborough, but these can’t truly be considered a part of this air show.
The breakdown is 128 A320s (70 from Dubai); 11 A330s; 98 A350s (30 from Dubai); and 10 A380s, though four of these were ordered instead of the carrier taking four test airplanes, so this is only a net gain of six.
The A350 program has now sold 472 firm orders, a rate Leahy and the statistics say is faster than the Boeing 787.
This tally is also Airbus’ second best Farnborough Air Show, following the one two years ago when 280 orders were announced.
Other highlights from the Airbus conference:
Tom Williams, EVP-Head of Programs, called Bombardier’s launch of the CSeries a “brave thing.” He believes the plane will be seen as an interim plane, bypassed by the next generation of single-aisle aircraft, serving a niche market that he believes is much smaller than Bombardier forecasts; that it will be an orphan aircraft, without a family to buy “up” to; and it will enter the low-end of the Boeing and Airbus markets.
Airbus’ end-of-show brief was a very useful wrap; Boeing might want to follow suit at future shows. This timing by default gives Airbus the headlines as the show wraps.
Other stuff, mostly whimsical:
Flightblogger reported a few days ago from Farnborough that an unidentified manufacturer has approached Pratt & Whitney inquiring about P&W’s new geared turbo fan engine for a wide body airplane.
We had the opportunity to ask the obvious question of the obvious people.
John Leahy, the COO-customers for Airbus, said definitively, “No,” it wasn’t Airbus.
That sort of narrows the field, doesn’t it? But no admissions across the tarmac at the Farnborough Air Show.
Scott Carson, the president of Boeing Commercial Airplanes, gave us one of his patented, almost mischievous Scott Carson smiles and said, “No comment.” We asked, Will you deny this?
Still smiling, Carson replied, “You’re tenacious.”