Top Air Force officials “resign”

Reuters just moved this report:

WASHINGTON (Reuters) – U.S. Air Force Secretary Michael Wynne and Air Force Chief of Staff Michael Moseley intend to resign, a congressional source told Reuters on Thursday.

The resignations come after a series of concerns about recent Air Force matters, including a controversial award of a contract for the Air Force’s elite Thunderbirds flying group and the service’s mistaken shipment of fuses for nuclear missiles to Taiwan in 2006, the source said.

“There has been a lack of accountability that raised concerns,” said the source, who had been informed about the matter.

(Reporting by Andrea Shalal-Esa; editing by John Wallace)

NA KOA Aviation Partners, whose obscure protest in the KC-X tanker competition we reported about Tuesday, tells us that Gen. Moseley’s possible role in the tanker procurement is an element in its protest to the Government Accountability Office (GAO). NA KOA says that it believes Moseley may have had some role in how Boeing came to believe the USAF preferred the KC-767, and this was part of NA-KOA’s protest to the GAO as well as its protest to the USAF KC-X contracting office. NA KOA asked Gates’ office to look into this prospect and when a Freedom of Information Act request was denied, went to the GAO.

In a story moved by Wired, Secretary of Defense Robert Gates is quoted as saying the Air Force chiefs’ preoccupation with a surging Chinese military and a resurgence of Russia was mis-guided considering the active wars at hand. We previously reported, citing an Aviation Week news article, that the KC-30s better capabilities across the Pacific in anticipation of a Chinese conflict was one element of the USAF decision selecting the KC-30 over the KC-767.

NA KOA believes this development will have a direct bearing on the Boeing protest and its own.

Lockheed praises Tanker Decision

In what can only fall into the “wow” category, Lockheed Martin–the USA’s #1 defense contractor–praised the US Air Force for looking beyond the US shores in awarding the KC-X tanker contract to a consortium consisting of Northrop Grumman and France’s EADS, the parent of Airbus.

In a speech, yes, before a European audience, Lockheed’s chairman had this to say:

“The decision by the USAF to purchase Airbus tankers reinforces the openness of U.S. markets and is the most recent example of the growing willingness of the United States to look to global sources of supply for vital equipment.   While our company is not involved in the Tanker program, Lockheed Martin is involved in a number of significant transatlantic programs.”

The full text of the speech may be found here.  A press release may be found here.

The highly unusual nature of one US defense contractor praising a decision like this can’t be considered anything but a blow to Boeing’s long-running campaign about the USAF awarding this contract to a “French” company (notwithstanding that the contract is actually to Northrop Grumman).

Obscure tanker protest may muddy waters

An obscure protest of the USAF tanker award to Northrop Grumman by a two-person company might muddy the waters in the protest by Boeing if allegations contained in the protest prove to have substance. This protest focuses principally on whether the Air Force improperly told Boeing that the service wanted a tanker the size of the KC-767, leading Boeing to decline to provide critical information the small company wanting to offer a “multi-function transport” based on the Boeing 747-8F.

The firm, NA KOA Aviation LLC (pronounced na-ko-a) is registered in Hawaii but operates out of the San Francisco area. On the one hand, information filed by the firm in its protest seems to support the notion that Air Force officials told Boeing unofficially that they wanted a smaller tanker than the Northrop KC-30 or the even larger Boeing 777. On the other hand, NA KOA alleges that this caused Boeing to effectively shut out NA KOA’s proposal to use the 748 in its own tanker proposal through “insider” information obtained by Boeing.

NA KOA has asked the Government Accountability Office to support a split buy between a medium- and a large tanker as a negotiated compromise, or to recommend a recompetition of the entire KC-X program.

NA KOA’s principals are Elizabeth P. Curtis and Paul D. Asmus. Each has around 30 years of experience in aviation. Asmus has filed comments with the US Federal Aviation Administration on safety matters and he once ran for Congress in Washington State in the district that includes Boeing’s Everett factory.

He also has a long history, dating to 1993, of proposing use of commercial airplane derivatives by the Air Force for air mobility solutions involving the Boeing 747-400.

What has unfolded is a story that may have the potential to be significant in the GAO’s assessment of Boeing’s protest. A decision by the GAO is to be issued by June 19.

The crux of NA KOA’s protest, according to Asmus, is who in the Air Force told Boeing what and when about what size airplane the Air Force wanted for the KC-X. Read more

GAO Protests often fail, Boeing concedes

Reuters published this piece late Thursday about Boeing’s concession that protests over government awards often fail.

Boeing, of course, is talking about its protest to the Government Accountability Office over the USAF award to Northrop Grumman for the KC-45A tanker contract.

This isn’t news–Boeing said as much when it filed the protest in March. But as the clock ticks down to the June 19 deadline for the GAO to release its findings, we’ve noticed something else that’s been ratcheting up significantly: the press, politician and labor activity on Boeing’s behalf.

In recent weeks, there have been an increasing number of Op-Ed pieces, actions by state legislatures condemning the award, calling for investigations, and this week alone the launch of a new pro-Boeing website, the issuance of a “white paper” (see our previous item on this one) and the 180 degree about-face by Loren Thompson of the Lexington Institute, who must be dizzy from about-facing so often. (He was for Boeing before he was for Northrop before becoming for Boeing again.) There was even an e-mail blast to Members of Congress that was all about the dastardly EADS (Northrop’s prime sub-contractor and parent of Airbus) and very little about the attributes of the KC-767, signed by about a dozen military types from several branches of the service of various ranks.

We’ve seen this same pattern of activity before. In the weeks leading up to the February 29 tanker award announcement, similar pro-Boeing stuff was coming from similar constituencies with similar messages. We concluded then that Boeing was laying the groundwork with Congress in case the award went against it (which we, and universally all other observers, did not expect). We believe this ratcheting up of activity is in the expectation that Boeing will lose the GAO protest–and this time Boeing expects that as well. (Which means that we, having called it wrong on the award, won’t be surprised if the GAO upholds the protest.)

We understand that the GAO has completed its work, but don’t know this definitively. Watch for even more activity on behalf of Boeing between now and the June 19 deadline for the GAO to announce its decision.

“White Paper” rips Tanker Award

A labor union of technical engineers issued an 11-page “white paper” today ripping the USAF tanker contract award to Northrop Grumman and the KC-30 over the Boeing KC-767. The two page press release summarizes the white paper findings.

The press release focuses entirely on EADS, parent of Airbus and maker of the A330-200 on which Northrop’s offering of the KC-30 is based. Northrop’s identified as a “minority” partner.

(During a conference several months ago, Northrop acknowledged that about 50% of the contract revenues flow to EADs/Airbus. Engines, in this case provided by GE (an American company), typically represent about 20% of the cost of a commercial airliner. This clearly makes Northrop a “minority partner.” But it’s important that although 50% of the revenues may flow to EADS/Airbus, payments to suppliers to EADS/Airbus also flow back to suppliers, with more than 200 based in the US. Northrop says that about 60% of the KC-30 by value is US-sourced.)

The White Paper is replete with errors and misrepresentations and cites “facts” without sourcing them.

  • It claims the KC-30 isn’t as structurally as sound as the KC-767 without backing this claim up.
  • It states (accurately) that currently only 1% of all cargo carried by the Air Mobility Command is carried by tankers but ignores statements and conclusions by the Air Force that a new way of carrying troops and cargo is required for the future, requiring a multi-role tanker-transport.
  • It claims EADS and Northrop “have conceded” the KC-30 is “much more costly” to operate than the KC-767; they’ve done nothing of the kind. They have conceded the KC-30 burns 6% more fuel than the KC-767, a far cry from the 24% cited by a Boeing-paid consultancy.
  • It claims Boeing has delivered 2,000 tankers in 75 years–but ignores the fact that the last Boeing-manufactured tanker, the KC-135, was delivered 42 years ago, and that the last tanker delivered by McDonnell Douglas, now a part of Boeing, was delivered 20 years ago.
  • It correctly notes that the KC-30 is in testing but ignores the fact that the KC-767AT proposed by Boeing for the Air Force is only a “paper” airplane; and the the KC-767 tanker delivered to Japan in February and March was years late and still hasn’t entered service; or that none of the KC-767 tankers ordered by Italy have been delivered and are years late.
  • It correctly notes that Boeing has designed an delivered five generations of aerial refueling booms but the sixth generation proposed to the Air Force is only a paper design. It correctly notes that the EADS boom is in testing.
  • It fairly questions past performance issues with Northrop and EADS but ignores the past performance issues of Boeing, particularly with the Italian and Japanese tanker programs.
  • It charges that 44,000 US jobs will be “exported.” This is the flimsiest claim of all. Boeing has never validated how it asserted the KC-767 will support 44,000 US jobs. Northrop initially claimed 25,000 US jobs will be supported, for a net difference of 19,000 jobs that would be subject to “export.” But Northrop later revised its figure that the KC-30 will support 48,000 jobs and “showed its math.” We’re still skeptical of this figure (how can a plane with less US content than claimed by Boeing for its KC-767 (at 85%) support more jobs?), but Northrop at least has been public about how it claims its number while Boeing refuses to do so.
  • It visits the claim of “illegal” subsidies to Airbus. Until the World Trade Organization rules in this case, perhaps as soon as next month, these are still allegations–as are the claims by the European Union that Boeing also received “illegal” subsidies. This issue is a red herring all around.

The problems with the White Paper go on and on.

About face on the tanker?

In an interesting piece that looks like an about face, Loren Thompson of the Lexington Institute now sounds like Boeing when it comes to the USAF tanker award. Thompson just published this piece on his website challenging the Air Force to answer a bunch of questions that are right out of Boeing’s playbook. Setting aside for the moment that the questions may well be answered in the GAO protest investigation, why Thompson is asking these now is ripe for speculation.

Immediately after the award, Thompson–the beneficiary, apparently, of USAF leaks on the award, didn’t raise these questions and praised the Air Force for an open and transparent process. He’s since been the target of more than a little criticism about receiving Air Force leaks. In fact, on March 18, US Rep. Todd Tiahrt (R-KS), a hyper Boeing supporter (and former Boeing employee), wrote Michael Wynne, secretary of the Air Force, demanding to know how Thompson knew the Air Force was going to award the contract to Northrop (albeit only a half hour or so before the announcement–Editor) and knew the rationale behind the decision before Members of Congress did. (The latter is probably a bigger sin than the award to Northrop, in the view of some Members of Congress. Heaven help those who step on Congressional protocol.)

In the letter, Tiahrt requested that Wynne provide:

  • All documentation briefed or provided to Thompson regarding the KC-X decision;
  • A list of government officials who discussed the tanker decision with Thompson on Feb. 29, the date the award was announced;
  • Northrop’s official bid proposal;
  • Boeing’s official bid proposal;
  • Any appropriate data to the competition and award.

More: We can’t help but speculate–and that’s all it is–that with this kind of heat on leaks to Thompson, perhaps his sources, and his answers, have dried up on this issue and what we’re seeing now is a bit of frustration emerging.

We’ll remind readers that although we did not support Boeing’s filing of a protest, once it was filed we agreed that it needed to be vigorously pursued and that all of Boeing’s questions needed to be answered. These include the same questions Thompson raises. Only by addressing the questions thoroughly can the integrity of the USAF process be affirmed or disallowed (for the lack of a better term). Also reminding readers, our position was and is that if the GAO affirms the USAF decision, Boeing and its supporters should respect this decision. If the GAO upholds Boeing’s protest and recommends a re-run of the competition, the USAF Northrop and its supporters should likewise respect this conclusion (the USAF is not legally bound by a GAO recommendation, it should be noted).

Of course, a compromise can always be worked out by doubling the procurement and splitting the contract. As we wrote last week on our Corporate site, we believe there are missions for which the KC-767 is better suited than the KC-30 and vice versa. Furthermore, replacing 500 old KC-135s at the current proposed rate of 12-18 a year is ridiculously low. The US is spending something like $1 billion a day in Iraq (which Iraqi oil production was supposed to pay for, it might be remembered, according to Vice President Cheney); doubling the tanker production equals a month-and-a-half of expense of the Iraq war–spread out over many years it would take to produce the tankers. It’s a good investment.

New, Wednesday, 700 AM PDT: James Wallace at The Seattle Post-Intelligencer interviewed Thompson–here’s his report.

Speaking of aerial tankers, has a nice photo here.

White House threatens veto on KC-45A curbs

The White House threatened to veto a House of Representatives bill that includes, among other provisions objected to by the White House, provisions that would undo the USAF KC-45A tanker award to Northrop Grumman, according to this Reuters report.

It’s a lengthy article and the references to the tanker controversy are minimal, but it’s significant that there appears to be White House support for Northrop’s contract. This may explain what is widely perceived to be a Boeing strategy to delay the contract through protests (and appeals, if its protest is denied by the GAO) and political tactics with Congress until after the next president takes office–on the assumption the next president will be a Democrat. Both Hillary Clinton and Barack Obama, the Democrats, have questioned the contract (though Obama is more temperate in his comments than Clinton). John McCain, the Republican, is no fan of Boeing and blocked the 2004 contract to Boeing after discovering improprieties.

Airbus worth “less than zero”

This Bloomberg report quotes Lehman Brothers’ aerospace analyst as concluding there is no value attributable to Airbus reflected in the share price of parent EADS. The value of EADS’ non-Airbus business make up all the share price. Morgan Stanley analysts come to essentially the same conclusion, according to Bloomberg.

EADS’ ex-lobbyist quits McCain campaign

It generated a lot of headlines at the time of the USAF aerial tanker contract award to Northrop Grumman when it was revealed that a campaign adviser to Republican presidential candidate US Sen. John McCain one time had EADS as a client.

EADS, of course, is partnered with Northrop to offer the KC-30 tanker to the USAF. EADS is parent of Boeing’s arch-enemy, Airbus, and the KC-30 is based on the commercial A330-200 which essentially put Boeing’s 767 commercial airliner out of business. Boeing’s KC-767 is based on the commercial 767-200, with parts from the 767-300 and 767-400.

After Boeing lost the tanker award, critics of the decision blamed McCain for the loss, a position we find preposterous, but that’s neither here nor there. When it was discovered that a top McCain adviser was once a lobbyist for EADS, the conspiracy theorists really went to town.

We thought that the entire round of accusations was poppycock, and still do. (Disclosure: although we’re defending McCain on this one, we have no connection to his campaign and aren’t even for him; we liked Ron Paul in the primary and Barack Obama in the general.)

But with the McCain campaign adopting its own rules on ethics, conflicts of interest and lobbyists, the former EADS lobbyist quit the campaign.

A wire service story on the action may be found here.

Government R&D for A350 wing

The Financial Times reported today (May 15) that the UK government will help fund the research and development for the composite wing for the Airbus A350.

An excerpt:

Aerospace groups are joining forces with the government and regional development agencies to fund research and development aimed at strengthening the UK’s leading position in the manufacture of wings for commercial jets.

They are planning to invest £103m ($200m) in a three-year programme to develop and manufacture wings out of carbon-fibre composites, rather than aluminium. The R&D programme will be led by Airbus, the European aircraft maker, which has its wing design and manufacturing operations in the UK at sites near Bristol and in north Wales.

The full story may be found here, but it’s Subscription Required.

Our immediate thought, of course, was about that old bugaboo, government “subsidies” and the entire WTO/EU/USTR/Boeing/Airbus/USAF tanker series of fights.

This will only add fuel to the fire of the complainers over Airbus “subsidies.”

The Airbus response, of course, will be that Boeing gets plenty of R&D and “subsidy” support from NASA and the US Department of Defense.