Leeham News and Analysis
There's more to real news than a news release.
EADS: decision within days on tanker
Update, March 29: Airbus CEO Tom Enders now says a decision will be made in two-three weeks.
Original Post:
Geneva, Switzerland: EADS will decide within days whether to pursue a bid on the KC-X tanker program, this column has learned.
The Pentagon has yet to officially decide whether to grant a 90 day extension so EADS can be fully briefed on what is necessary to make a bid, something that Northrop Grumman had previously done as the prime contractor. EADS needs to be brought up to speed on everything Northrop learned during the previous effort to bid on the tanker.
Day 2 from Geneva
The second day at the Aircraft Finance and Commercial Aviation Conference in Geneva, Switzerland, covered a lot of ground but the most interesting for our readers is the skepticism over the prospect of re-engining the Boeing 737 and Airbus A320 families.
Potential buyers are anything but convinced this is the way to go. They look at the unknown capital cost, the new costs associated with maintenance, inventory and other factors, and have yet to be convinced that the net-net fuel savings will be sufficiently large to offset the added costs.
Report from Geneva
Here are our thoughts and observations from Day 1 of the Aircraft Finance conference in Geneva, Switzerland:
- The mood here among the 300+ attendees in generally upbeat. There is a general sense that the airline industry has seen its worst and recovery is on the way. A leading indicator is the improvement in the cargo market, which is showing substantial gains year-over-year. Passenger traffic is up but premium traffic, while also showing gains, has a long way to go to recover. Even the notoriously pessimistic IATA was upbeat.
- Aircraft financing for new airplanes is available but expensive. Aircraft financing for used aircraft is much less available.
- The Airbus A319 and Boeing 737-700 cannot effectively compete with the Bombardier CSeries, even if re-engined, is some of the talk here. We were on a panel with James Billing of Boeing and Richard Aboulafia of The Teal Group. Billing prudently avoided being dragged into the discussion over the CSeries, sticking with market forecasts for the single-aisle segment; Aboulafia termed the CSeries a “niche” aircraft. We suggested that Airbus and Boeing could and should “crush” the CSeries by pricing the A319RE and 737-700RE as part of a family offering in airplane campaigns with the A320/321 and 737-800/900 by offering prices on the smaller models Bombardier couldn’t hope to match with the CSeries. Boeing’s Billing and Randy Tinseth, who was in the audience, figuratively ran for the hills on this suggestion—anti-trust regulators would be all over the company on this scenario. An Airbus official in the audience caught us afterward and merely suggested this wouldn’t be a good idea. The genesis of this is that Airbus introduced the A318 to kill the McDonnell Douglas MD-95 and Boeing priced the 737-600 at a reputed $16.7m to undercut MDC’s launch customer sale to SAS. The MD-95 never recovered from the two actions; the A318 and 737-600 proved to be sales dogs.
- There is a growing belief that the Open Rotor engine will not be a successful solution for A320/737 replacement airplanes and the second generation GTF and Leap-X engines will be.
Air India’s 787 penalty payment, 787 vs A330 efficiency
This article from India has an interesting reference to the penalties paid to Air India by Boeing (and what the airline originally wanted) for the delays of the 27 787s on order.
The article also notes that Air India’s analysis is that the 787 is 17% more fuel efficient than the A330.
More bizarre twists in the tanker saga
Update, 10:00AM PDT: Defense News has this item that adds more to this increasingly goofy story. A firm named World Aviation Maintenance Co. from Omaha, Neb., is identified as the US company involved in this story–but Google does not provide any “hits” on this firm and neither does the anywho.com web-based telephone directory.
Original Post:
George Talbot of The Mobile Press-Register has this bizarre twist in the KC-X tanker saga: a Russian official with United Aircraft Corp. says he doesn’t know what the California attorney purporting to represent UAC is talking about when it comes to the report last week that UAC will enter the tanker contest. Yet the attorney provided documents to Talbot backing up his claim. Read the story here.
A little irreverence
We came across a news item that in the wake of the weird new Russia’s United Aircraft Co. will bid for the KC-X that just seems to call for a moment of irreverence.
Let’s recall that as a youth, we learned that to clean the gunk that built up on automobile battery terminals, you could use Coca Cola. (What this does to your insides, one can only imagine.) Then there are the numerous reports that too many hamburgers and hot dogs, sweeteners and such can cause cancer.
Now here’s the irreverent news item. It seems that, according to this report, aviation can use apricots to strip the paint off airplanes.
We’ll have to stick with ice cream….
Configuration details on KC-767 emerge
As the world waits to see whether EADS will join with a new partner and pursue a KC-X bid after all, we’ve obtained some new information about the configuration for the Boeing KC-767.
Boeing’s press announcement and illustrations that it will offer the KC-767 left unanswered some questions, so we posed several to Bill Barksdale, Boeing’s tanker spokesman. Below is the email exchange.
EADS may bid for tanker after all
Update, Mar. 19, 230PM PDT: Just when you thought this couldn’t get any weirder, Russia announced it plans to submit a bid to the KC-X, according to The Wall Street Journal:
By PETER SANDERS
In another twist to the ongoing saga to replace the Air Force’s aging fleet of aerial refueling tankers, United Aircraft Corp. of Russia is planning to bid on the $40 billion contract, according to a person familiar with its plans.
United Aircraft, an aerospace consortium owned by the Russian government, will seek to offer a tanker version of its Ilyushin Il-96 wide-body jetliner, dubbed the Il-98, this person said. The planes would be largely built in Russia, and assembled in the U.S., this person says. United Aircraft will partner with a “small U.S. defense contractor,” which will be renamed United Aircraft Corp. America Inc., this person said, declining to name that contractor.
Update, Mar. 19, 600AM PDT:
DOD says it might extend the deadline for submitting a bid so EADS can do so if it wants. Here is one story.
Update, Mar. 17, 900AM PDT:
This AP story cites EADS ambitions in the US, but buried toward the bottom is a new statement from EADS CEO Louis Gallois and EADS North America Sean O’Keefe about the prospect of EADS submitted a bid for the KC-X. Here is the excerpt:
Earlier this month, EADS pulled out of bidding for the Pentagon refueling tanker contract, saying a smaller plane offered by rival Boeing Co. appeared to be the front-runner. EADS, which had partnered with Northrop Grumman for the 179-tanker order, has criticized the contract as anticompetitive.
“The U.S. Air Force will not have the most modern, most capable airplane,” Gallois said. “It’ll be the first time the British, the Australians have a better airplane than the Americans.”
Gallois said it’s unlikely that EADS will submit a new bid for the tanker contract.
Instead, EADS will move to make other deals in the U.S. Building its presence here through acquisitions may bolster its case when bidding for national defense contracts, but “that would not be the objective,” said Sean O’Keefe, CEO of EADS North America.
But: comments added in our Comment section after the above posting suggest that EADS is still considering a bid if the deadline to do so is extended, and DOD might.
Won’t this ever go away?
Update, Mar. 16, 830AM PDT:
Airbus received EASA certification for the A330MRTT. Here’s an excerpt from the Bloomberg story that moved just a short time ago:
Airbus Tanker Gets Civil Certification From European Regulator
By Andrea Rothman
March 17 (Bloomberg) — European Aeronautic, Defence and Space Co.’s Airbus unit won civil certification for a military tanker version of its A330, putting the plane a step closer to maturity before it enters service in Australia by year-end.
Certification from the commercial aviation regulator, European Air Safety Agency, means handling qualities of the plane and on-board systems correspond to civil certifications, which are more stringent than military requirements. Besides refueling other planes in mid-flight, the A330 tanker could carry as many as 300 troops.
EASA’s approval is the first civil certification ever extended to a tanker and transport aircraft developed in Europe.
Update, March 15, 300PM PDT:
Richard Aboulafia has a particularly entertaining commentary in his latest monthly newsletter.
He also has a more prosaic but thoughtful commentary here.
Update, March 15, 900AM PDT:
This news report out of Europe updates the situation, in typical military fashion: Hurry up and Wait.
Original Post:
Information is coming out late today (March 12) that EADS may try and bid for the KC-X tanker contract after all. The Pentagon may extend the deadline for bidding to accommodate EADS, George Talbot of The Mobile Press-Register tells us. He will be posting his own story at www.al.com shortly.
Here are the stories: