40-billion-dollar US Air Force contract

[GUNNER]

40-billion-dollar US Air Force contract

BERLIN, July 12, 2010 (AFP) - European aerospace giant Airbus has cut its prices in a bid to win a fight with US rival Boeing for a 40-billion-dollar US Air Force contract, a German business daily reported on Monday.

Airbus has cut the proposed cost for the contract to build 179 aerial refuelling tankers by at least 10 percent from the level in a previous offer in 2008, the Financial Times Deutschland (FTD) reported, citing industry sources.

Last week, the two competitors submitted their offers to Washington, setting the stage for a high-stakes transatlantic trade scrap.

It will be the third time the contract has been awarded.

In 2003, Boeing won the deal, but the decision was overturned after a conflict of interest emerged between the Pentagon and the aircraft manufacturer.

Five years later, Airbus won a second call for proposals in a joint bid with US firm Northrop Grumman but again the decision was annulled when the US Government
Accountability Office found the offers were incorrectly analysed.

Northrop Grumman subsequently withdrew from the race triggering uproar in Europe with French President Nicolas Sarkozy and German Chancellor Angela Merkel accusing Washington of bias in favour of the all-American Boeing plane.

The Air Force is expected to make its decision by November 12.

The project, worth an estimated 35-40 billion dollars (27.7-31.5 billion euros), is seen as crucial for bolstering US air power and will be a financial boon for the winning firm.

The FTD said that the deal could be worth as much as 100 billion dollars when follow-up contracts were taken into account.

 

[Patriot]

Airbus will never win this contact and it will go to Boeing.

 

[GUNNER]

Transatlantic rivals fight for contract 'of the century'

US aerospace giant Boeing on Friday submitted its bid for a 40-billion-dollar US Air Force contract, joining battle with its bitter rival Airbus.

Boeing hand-delivered its 8 000-page proposal to build 179 aerial refueling tankers to an Air Force base in Ohio on Friday, setting the stage for a high-stakes transatlantic trade scrap.

The project - worth an estimated 35-40 billion dollars (about R26.5-billion) - is seen as crucial for bolstering US air power and will likely provide a financial jackpot for the winning firm.

"There are not too many 35-billion-dollar contracts out there," said aerospace analyst Peter Arment of Gleacher and Company "This is at a minimum a multi-decade opportunity."

The new planes will replace older Boeing Stratotankers that date back to the 1950s.

With the stakes high, both companies have traded allegations of unfair competition in the near decade-long fight to win the contract.

The political implications have not been lost on the Pentagon's civilian leaders, or Congress, which broadly backs the domestic bid.

The governors of eight states which stand to gain from a Boeing victory on Friday called for its bid to be accepted by the Pentagon.

Lawmakers have called for Airbus's government subsidies to be factored into it proposal.

Boeing on Friday emphasized its "American-made" tanker would "satisfy all 372 mandatory Air Force requirements and be capable, survivable, and combat-ready at the lowest cost to the taxpayer."

Airbus submitted its proposal on Thursday, stressing its tanker would be more practical because it is based on an already existing plane.

Boeing shot back that its plane would be based on the 767 commercial airplane.

"We are honored to support our US Air Force customer and submit this proposal to meet the critical mission needs of this nation," said Dennis Muilenburg, the head of Boeing Defense, Space and Security.

Although the details of the bid were not made public, Boeing's plane is expected to be smaller and less costly to operate than that of Airbus.

Boeing claimed the plane would be "more cost-effective to own and operate than the larger and heavier Airbus A330 tanker," and would "save American taxpayers more than 10 billion dollars in fuel costs alone over its 40-year service life because it burns 24 percent less fuel."


Hoping to snare the contract "of the century," executives from Airbus's parent firm EADS submitted their 8,819-page bidding document ahead of the Friday deadline.

The European firm is proposing a military version of its A330 commercial passenger airliner, the KC-45.

EADS said if it won the contract, a new aircraft manufacturing facility in Mobile, Alabama would help create 48,000 US jobs.

Boeing said its bid would create "approximately 50,000 total US jobs."

A third company, US Aerospace, put up a last-minute bid in partnership with the Russian-Ukrainian manufacturer Antonov.

In a statement US Aerospace said the offer was worth "150 million dollars per plane, with a total bid package of 29.55 billion dollars including research and development costs."

But its ability to meet US military requirements remains uncertain, given its serious financial difficulties.

The Air Force is expected to make its decision by November 12.

It will be the third time the Defense Department has awarded the contract.

In 2003, Boeing won the lucrative deal, but the decision was overturned after a conflict of interest between the Pentagon and the aircraft manufacturer was revealed.

A senior purchasing manager at the Department of Defense had been negotiating her employment with Boeing at the time of the bid. The Air Force official was later convicted of criminal conspiracy.

Airbus won a second call for proposals in a joint bid with US firm Northrop Grumman in 2008.

Again, the decision was annulled when the US Government Accountability Office found the offers were incorrectly analyzed.

Northrop-Airbus subsequently withdrew from the race triggering an uproar in Europe, with French President Nicolas Sarkozy and German Chancellor Angela Merkel accusing Washington of bias in favor of the all-American Boeing plane.