Refueling Dr. Strangelove

The Draft Request for Proposal for Round 3 of the KC-X tanker competition isn’t even out yet and the procurement process is already perverted.

The DRFP is thought to be ready for release tomorrow (September 24). The USAF reportedly has scheduled briefings for Congress at 11 AM EDT.

In what is clearly an orchestrated effort spearheaded by Boeing, the political focus is entirely on the interim report by the World Trade Organization that Airbus benefited from illegal subsidies for its A-series commercial airliners, including the A330-200 on which the Northrop Grumman KC-30 is based.

[youtube=http://www.youtube.com/watch?v=Qs7EikHQGlA]

Washington State and Kansas Members of Congress demand that the US Air Force include language in the DRFP that considers the launch aid–a reported but unconfirmed $5bn for the A330/A340 sister program–in evaluating the KC-X proposals.

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Boeing kicks off tanker campaign

Update, Sept. 17: While looking for something else we came across this old item from Forbes magazine in 2004-5, when Boeing was temporarily led by the late Lew Platt following the fall from grace of former CEO Harry Stonecipher.

Platt, then the chairman and CEO, had this to say about the start of the KC-X competition then. It sounds like what we are hearing today:

Faces In The News
Boeing’s Platt Cheers Airbus, Says CEO Search Narrows
Chris Noon, 06.15.05, 1:49 PM ET

NEW YORK – Doers and doings in business, entertainment and technology:

Boeing (nyse: BA news people ) Chairman Lewis Platt plays hard, but fair. Despite the trans-Atlantic spat over subsidies, Platt doesn’t think Airbus should be frozen out of bidding for U.S. military contracts. “What I’m looking for is a level playing field. Part of that means they should be able to compete for business in the United States,” he was quoted as saying in The Associated Press. EADS, which owns about 80% of Airbus, may be disqualified from bidding on a U.S. Air Force contract for refuelling tankers because of a House of Representatives amendment barring the Pentagon from purchasing goods from any foreign companies receiving government subsidies. Brussels countered Washington’s complaint against Airbus subsidies last month with one of its own.

Aviation Week has a long story on the tanker that explains why cargo capability is desired.

Update, September 16: IAG has a 15 minute podcast with Boeing’s Bill Barksdale on the KC-7A7 program.

Separately, Sen. Patty Murray (D-Boeing/WA) and some 45 Members of Congress call on the USAF to consider the WTO findings in the competition for the KC-X contract, and Murray calls on President Obama to penalize Airbus and the KC-30 tanker for the WTO finding. The Members of Congress say the prospect of awarding the contract to Northrop Grumman (Airbus) would reward illegal action.

Don’t these guys get it? (Obviously not.) When (not if, in conventional wisdom) the WTO also finds Boeing benefited from illegal aid, what the devil will these Members of Congress say then?

As for Murray’s call for Obama to act now, Patty needs to read the WTO rules: Article 23 specifically prohibits premature imposition of penalties. Premature means before the case is over, and the case won’t be over until a final report is issued and any appeals are concluded. We know the EU will appeal and we fully expect the USTR to appeal findings on complaints that weren’t upheld. It will be years before these are completed. In the meantime, it would be illegal under WTO rules for the US to adopt any penalties.

On the one hand, Sen. Murray wants to slam Airbus and Northrop for illegal activities. On the other, she wants to do this before the WTO rules say you can, an action that would be illegal. Sen. Murray can’t have it both ways.

Update, September 15: Flight International reports that Boeing is considering moving its tanker finishing work out of Wichita (KS) in order to lower the price. We can’t help but wonder what US Rep. Todd Tiahrt (R-Boeing/KS) and Sen. Sam Brownback (R-Boeing/KS), two of Boeing’s most hyperbolic tanker supporters, might say about this.

Flight also reports in the same piece that Boeing is going to get very aggressive on pricing, having lost on this point to Northrop Grumman and the Airbus-based KC-30. This is going to be watched very closely by Northrop and EADS, because during the Round 2 USAF debrief, the companies noted that their pricing was shared with Boeing lawyers and they fear this sensitive information will put them at a competitive disadvantage in this round.

We had asked Boeing about this at the time, and Boeing’s tanker team told us the pricing information stopped with the Boeing legal team, precisely because of the proprietary nature of this information. Northrop and EADS aren’t convinced (they haven’t seen any proof on this point one way or the other) and could take action if they come to believe Boeing has an unfair advantage in this round.

Original Post

Boeing is wasting no time kicking off its campaign to win Round 3 of the KC-X tanker competition.

This Reuters story says Boeing won’t get fancy in its proposed KC-777 or KC-767 (marketed, for the moment, under the generic name KC-7A7, until Boeing understands what the US Air Force wants and then decides which tanker to offer). Boeing won’t offer a tanker based on its proposed KC-767 Advanced Tanker, the so-called Frankentanker that was offered in Round 2 as a paper concept combining major components from the 767-200, 767-300 and 767-400.

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WTO rules prevent exclusion of Airbus in tanker bid

Update, Sept. 10: When the WTO Interim Report finding Airbus violated certain rules against certain subsidies under the WTO, Boeing supporters were quick and prolific to jump on leaked reports and briefings and some called for the US Defense Department to exclude the Northrop Grumman/EADS/Airbus bid from the KC-X tanker re-compete.

Airbus supporters were strangely quiet, we thought.

Today, Sen. Richard Shelby (R-Northrop/AL) made public a letter to Ron Kirk, the US Trade Representative, on the issue. The full letter may be found here. A key excerpt:

As we discussed, many press reports are not accurately describing the complete results of the report.  In fact, on every Airbus airplane there was a claim against, the loan mechanism used was ruled legal under the WTO.  It is also my understanding that Reimbursable Launch Investment or “launch aid,” was determined to be an acceptable funding mechanism by the WTO.  Reimbursable Launch Investment was used on the A330-200, the airframe that will be offered for the tanker contract.  The A330-200 was found to have received investment aid within the permissible benchmarks under WTO guidelines – meaning that the funding received was not found to be a prohibited subsidy.  Most importantly, as you stated in our meeting, Boeing was not materially injured by any action taken by Airbus.

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Trying to make sense of WTO ruling

This Reuters report tries to make sense of the conflicting claims by the EU and Americans over who won what in the finding issued Friday by the WTO three judge panel.

Here is a somewhat different version of the Reuters report with additional detail.

Other stories of note:

Bloomberg has this report about the massive amount of aid the US pumped into various industries and how this might affect the Airbus WTO finding.

EurActiv.com provides this European perspective, including a suggestion that negotiations to settle the dispute could begin in March.

Metal Miner, a trade publication that follows the metals industries (of no small importance to airplanes), has this take on the WTO stuff, in the same format of our take below.

Below is our take on the whole matter.

A few days have passed and the initial frenzy over the WTO finding that Airbus benefited from illegal aid has died down. Still, since the finding itself has not been made public and we’re all reacting to leaks and “briefings” of partisan interests, trying to make sense of the finding is challenging at best.

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Former defense official favors split tanker buy

George Talbot of The Mobile Press-Register has an article about John Lehman, a former defense official in the Reagan administration, favoring a split buy for the KC-X program. Read more

And now a word on the tanker

Let’s take a diversion from Boeing’s Soap Opera over the 787 Line 2 and will-they-stay-or-will-they-go.

CNBC has a long piece plus several video clips with Ralph Crosby, the CEO of EADS North America, on the KC-X tanker issue. It’s well worth reading.

Well, we’re almost diverting from the Soap Opera. The Mobile Press-Register has a piece on the irony of Boeing Commercial Airplanes maybe planning to build the 787 in Charleston on a business model that is pretty close to the one Northrop Grumman and EADS plan to use to build the KC-30 tanker.

Boeing KC-7A7 tanker briefing

This is the fourth in a series of reports from the EADS media day and the Paris Air Show. We will be off-line Wednesday while returning to to USA.

Source: Winds of Change. Rendering of the KC-767 and KC-777.


Source: Catch 4 All: Comparisons of KC-777, KC-30, KC-767, KC-135 footprints.

Boeing held a dedicated tanker briefing Tuesday (June 16) to add detail to the announcement Monday by IDS President Jim Albaugh, who said the company’s tanker program has been remained KC-7A7. This designation reflects the ambiguity of what airplane Boeing will offer: a 767-based or a 777-based aircraft.

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KC-777 ready to go?

Update, 6:00PM Paris Time:

By now readers probably have seen the news from the Air Show on this topic: Boeing is prepared to offer either a 777-based tanker or a 767-based tanker, depending on the RFP requirements. Bloomberg News has a good summary of the IDS briefing on this topic. It may be found here. As far as the factual reporting goes, we don’t have anything to add to the Bloomberg piece. There is a full tanker briefing tomorrow, at which the media has been promised more detail.

Barring any more downpours like we had today to further dampen the spirits of aviation, we will be there..

Original Post:

This is the second in a series of articles from the EADS Media Day and the Paris Air show….

There was an interesting buzz at the Aerospace Journalist of the Year Awards dinner on the eve of the launch of the Paris Air Show.

Word was circulating that Boeing will announce at its Integrated Defense Systems briefing at 11 am June 15 that the company is prepared to offer the USAF a tanker based on the 777-200F should the new Draft Request for Proposals outline requirements for a larger medium tanker than Boeing’s previous KC-767-200AT offering.

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Off to the Paris Air Show

We will be attending the EADS Media Day June 13 and the Paris Air Show on Monday and Tuesday. Watch for our reports from each event.

Performance, delays will be factors in KC-X rebid

The US Air Force is gearing up to issue a new request for proposals, perhaps as early as July, for Round 3 of the KC-X aerial refueling tanker competition. Pentagon officials hope to award a contract by year end.

The contest is widely expected to be a rematch of the battle between the Northrop Grumman/EADS/Airbus KC-30 and the Boeing KC-767AT. Although nobody knows what specifications will be in the RFP, the belief is that it will largely reflect the technical requirements of those in the Round Two RFP won by Northrop.

Boeing successfully protested the award, saying the USAF gave extra credit to the larger KC-30 while telling Boeing that it would not—thus prompting Boeing to stick with its KC-767 proposal. Boeing hinted that had it known of the USAF preference for a larger airplane, it might have offered a tanker based on the 777-200F.

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