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.

Airbus slightly ahead in YTD orders

Airbus and Boeing have released their orders through May (June 3 for Boeing) and Airbus remains slightly ahead in net orders for the first five months of the year, 435 to 418.

By category, the statistics stack up like this–all data is net orders, allowing for cancellations.

  • A320 family vs. 737: Airbus, 312, Boeing 301
  • Medium twin-aisle: A330P, 62; A350-800, 15 (total 77); 787-8/9: 79; 767, 0.
  • Large twin-aisle: A350-900, 32; A350-1000, 0; 777-All, 36.
  • Very Large Airplane: A380, 3; 747, 2.
  • Cargo: A330-200F, 11; 767, 0.

As you can see, this year is neck-and-neck in all categories.

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.

McNerney Interview

Business Week has this interview with Boeing’s Jim McNerney.

Honoring WWII USAF

The Collings Foundation is a non-profit group that has four restored, flyable World War II aircraft that tour the US to generate remembrances for the members of the USAF who served, and died, in World War II.

The Boeing B-17, North American B-25 Mitchell, Consolidated B-24 bombers and the North American P-51 fighter will be at Seattle’s Boeing Field June 20-22. Ground tours, and flight-rides, are available for donations.

We’ve had the opportunity previously to ride in Collings’ B-24 (and before that, in the Commemorative Air Force’s B-17). These were thrilling experiences that provide the open-air roar of four piston engines. Merely taking a ground tour provides an amazing experience of just how small and cramped these bombers are–at a time when they were considered giants of the skies.

Check out the Collings Foundation website for the full tour schedule. For those of us in Seattle, take advantage of the ground tours, which are $12/adults, $6/children. The flight-rides are considerably more expensive (credit cards accepted) but well worth the trip and the donations are tax deductible.

Photos may be seen here.

Another You Read It Here First

Bloomberg reports today that Airbus cut its A380 sales forecast this year to 20 from 30, but we reported this last week on our Corporate Website.

“No” to A350 aid

Bloomberg News reports that Airbus has asked for US$18 billion in financial aid for development of the A350 XWB. (Holy smokes, the price of things has gone up.) Here’s the report from The Seattle Times.

Boeing, predictably, doesn’t like the idea. Neither do we.

We’ve long been on record that we don’t like corporate welfare, however it’s masked. This includes launch aid, government loans, research & development funding, tax breaks or anything else. This applies to Boeing, Airbus, Bombardier, Embraer, the Chinese, Japanese and Russians.

Airbus says it wants the loans to have a level playing field for the A350 vs. the 787. Two of the three models are actually competitors to the Boeing 777. If one accepts the Airbus rationale at face value, then it’s aid request should be trimmed by two-thirds to in essence cover only the A350-800 (yes, we know the impossibility of segregating out the one model, but you get our point).

But whatever is done, we still don’t like it. Not for the reasons Boeing complains about. We just don’t like corporate welfare, period.