Airbus’s Parent Gambles on Tanker Contract

The Pentagon’s long-running effort to buy aerial refueling tankers for the Air Force took another twist on Tuesday when a European company decided that instead of walking away, it would compete with Boeing for a contract worth at least $35 billion. Enlarge This Image Agence France-Presse — Getty Images The EADS A330 tanker aircraft. The company’s bid for an aerial tanker contract is seen as a significant gamble. Add to Portfolio Northrop Grumman Corp Go to your Portfolio » European Aeronautic Defense and Space Company, which makes Airbus planes, told Pentagon officials that it would put together a bid for what is likely to be the largest military contract awarded in the next several years. The decision — which came six weeks after EADS’s longtime partner, the Northrop Grumman Corporation, dropped out of the contest — is a significant gamble, one that plays into the European company’s efforts to increase its presence in the American market. Industry officials said EADS had tried to line up another major American partner but decided to go ahead with a bid, with the help of American subcontractors, when it could not. Still, several military analysts said EADS faced an uphill battle, both politically and in trying to win the Pentagon’s shoot-out for the lowest price. “The odds are still stacked against them,” said Richard L. Aboulafia, an aviation analyst at the Teal Group. Northrop Grumman decided last month not to do a joint bid with EADS, saying that the Air Force requirements appeared to favor a smaller plane likely to be offered by Boeing, the only other bidder. At the time, EADS had said it could not handle the complex bid requirements on its own and would reluctantly withdraw. But Pentagon officials agreed to extend the May 10 deadline for submitting bids until July 9, giving EADS time to re-evaluate its decision. Ralph D. Crosby Jr., the chairman of EADS North America, said on Tuesday that the company decided to go forward after getting access to more bidding information. “My simple answer is that we wouldn’t be here if we didn’t think we could win,” Mr. Crosby said. Pentagon officials were willing to give EADS more time out of concern that Boeing could charge a higher price if it were the only bidder. Geoff Morrell, the Pentagon press secretary, said on Tuesday that the department welcomed the competition from EADS and “any company that is interested and qualified to participate.” That statement contrasted with comments last week by Representative Norm Dicks, Democrat of Washington, who is chairman of the House Defense Appropriations subcommittee. Mr. Dicks, a Boeing supporter, told reporters he hoped that EADS would not bid and that no American company would pair up with it as Northrop had. Mr. Dicks’s comments angered French leaders and helped stir up the political tensions that have surrounded the effort since the Pentagon first began trying, in 2001, to replace tankers that date to the Eisenhower era. Pentagon officials have said the current contract would be for 179 planes. But the Pentagon will eventually have to replace several hundred tankers at a cost that could reach $100 billion. And if EADS won the initial contract, the work would enable it to build a manufacturing plant in the United States, where it could further challenge Boeing in the commercial airplane market. EADS’s main political backers are Republicans from Alabama, where the company would build its plant, while Boeing is supported by labor unions and Democratic lawmakers. As a result, Mr. Aboulafia said, EADS would have a better chance to win if the bidding were delayed and the Republicans regained control of the House or the Senate in November. James McAleese, a military consultant in McLean, Va., said the decision could come down to a numerical scoring process focused on which plane would cost less to buy and operate over the next several decades. Analysts said this could also represent a hurdle for EADS, because its larger plane, based on the A330 commercial jet, might cost 10 to 15 percent more to build than Boeing’s tanker, based on its 767 jet. EADS, which also builds helicopters for the Army, emphasized on Tuesday that it had beaten Boeing in five competitions to sell tankers to foreign governments and had delivered several planes similar to those they would offer the Air Force. Boeing, which built most of the tankers now in use, has said it would update tankers based on the 767 with new cockpit controls being installed its 787 Dreamliner jets. The Air Force’s first effort to replace the tankers collapsed in 2004 amid corruption charges involving a proposed leasing deal with Boeing. Northrop Grumman and EADS then won a competition against Boeing, the Chicago-based aerospace giant, in 2008, only to have government auditors block the award after Boeing protested that the evaluation process had been unfair. The companies have waged an almost operatic struggle since then.

 By CHRISTOPHER DREW /The New York Times

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