Battle in the skies: EADS and Boeing fight it out for refueling fleet deal | Business| Economy and finance news from a German perspective | DW | 09.07.2010
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Battle in the skies: EADS and Boeing fight it out for refueling fleet deal

European aerospace giant EADS has confirmed it has made a bid for a massive US military contract for tanker refueling aircraft.

Three planes in a blue sky

Who will be king of the clouds?

European aerospace giant EADS has confirmed it has made a bid for a massive US military contract for tanker refueling aircraft. Arch rival Boeing is expected to submit its proposal on Friday.

The European Aeronautic Defense and Space Company (EADS) bid to win the contract to build a new fleet of US Air Force aerial-refueling planes did not come as a surprise. Back in April, the Pentagon announced it was willing to extend the bidding deadline to July 9 in order to allow the Airbus parent company more time to consider submitting an offer.

EADS North America Chairman Ralph Crosby responded at the time by saying the deal, worth up to 39 billion euros ($50 billion), was a "hell of an opportunity" for the company.

An opportunity it has now seized. Speaking to reporters on Thursday, Crosby said the EADS 8000-page proposal would prove its tanker's "unequalled capabilities." He said his company was proud of its offering, which he described as "the only one in this competition that is flying and refueling today."

A plane is refueled mid-flight

Refuelling in mid-flight

A successful EADS bid will see the European giant make a military version of the Airbus A330 commercial passenger plane to replace the Boeing-built fleet, now an average of 50 years-old.

Stiff competition

But Airbus is not in the running alone for the construction of 179 aerial-refueling tankers. Boeing, which is the Pentagon's second largest supplier by sales, is expected to submit an offer based on its 767-passenger jet on Friday.

Earlier, US Aerospace said it was also planning a last-minute bid in collaboration with Russian-Ukrainian manufacturer Antonov. But given the American company's financial woes and the fact that Antonov has yet to confirm its involvement in the project, there is some doubt about the seriousness of the unexpected announcement.

Aviation expert Cord Schellenberg told Deutsche Welle that even if there is a third bid, he doesn't see US Aerospace as a serious contender.

Airbus A380 in the skies

Over-subsidized: Airbus A380

"This is a race between Boeing and Airbus," he said, adding that although there was no clear favorite, there was a good chance that geography would play the deciding hand.

"The US administration has to decide whether they are willing to accept a European manufacturer or not," Schellenberg said, adding that American lobbyists were pushing very hard for home-designed and home-produced tankers.

Born in the U.S.A.

There has been much lament about the potential implications of the lucrative contract falling into European hands, and topping the list is the ever-present issue of Americans losing jobs. EADS however, says that if it wins the bidding war, the aircraft would be assembled at a new facility in Alabama, thereby creating jobs.

Boeing assembly line

Boeing provides plenty of Americans with jobs

As strategic as such a pledge might be, Schellenberg says its not enough for the military minds that want Uncle Sam's stamp everywhere.

"They think they should buy American and not only aircraft produced in the US," Schellenberg said. "They should by designed by and come from an American company as well."

An eye for an eye

Transatlantic rivals, Boeing and Airbus have been locked in a bitter fight for the tanker deal since 2003. That year, the contract was awarded to Boeing but the decision was overturned after the revelation of a conflict of interest. Then in 2008, it went to Airbus but was withdrawn again after the US Government Accountability Office found the offers had been incorrectly analyzed.

With that kind of history, the two companies are watching each other with eagle eyes, waiting to trip one another up whenever the opportunity arises. Last week, the World Trade Organization (WTO) responded to a US complaint over subsidies to Airbus, ruling that state support had helped Airbus get its flagship A380 airborne.

In a tit-for-tat countersuit, the European Union has the WTO looking into allegations of improper US federal, state and local subsidies to Boeing. An interim report on the case had originally been expected by next week but an announcement on Thursday put the date back to mid-September.

EADS, the parent company of Airbus, had been hoping that the report would deflect some of the negative attention focused on it after last week's ruling, and the EU and Airbus criticized the delay.

One Boeing and one Airbus tailfin next to each other

Boeing and Airbus: chalk and cheese

"The time lag between this case and the United States' case against support to Airbus… has constantly increased over the six years this dispute has been running and the gap is now at nearly a year," the EU's executive Commission said.

But Ralph Crosby rejected any talk of the subsidies in the context of the tanker deal.

"We are spending all our time on relatively arcane and inconsequential issues," he told reporters, adding that the only real issue was how well the respective proposals meet the needs of the Pentagon.

"It is the defense acquisition for the remainder of the century," he said.

Cord Schellenberg agrees that it would make sense to forget geographical and political issues and to focus instead on business.

"The question is who is offering the better aircraft at the better price?" he said. "That is what the state should be looking for, especially as this is a tanker and not a war aircraft."

The US Air Force is expected to announce its decision in November.

Author: Tamsin Walker
Editor: John Blau

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