Northrop and EADS Win Tanker Deal

Air Force Tanker deal goes to EADS/Northrup Gruman

In a surprising reversal for the Boeing Company, the Pentagon on Friday awarded a multibillion-dollar contract for refueling tankers to a partnership between Northrop Grumman and EADS, the European parent of Airbus.

The deal, which puts a critical United States military contract into the hands of foreigners, at least in part, calls for spending up to $40 billion on the first phase of a multidecade program to replace the nation’s aging aerial tanker fleet, which dates back to the Kennedy and Eisenhower era. The fleet, which now numbers about 535 refitted Boeing 707’s and DC-10’s is one of the largest but oldest fleets of jets in the world. Yet the tanker planes are essential to keeping Air Force and allied fighter jets, bombers, cargo planes and other military aircraft in the air when on critical missions far from airports where they can land to refuel.

And replacing these tankers — essentially flying gas stations that offload their fuel in mid-air — has been the Air Force’s top priority since 1996, when the government first proposed acquiring new planes. Eventually, the contract is expected to be valued at $100 billion, as the Air Force spends the next several decades acquiring new tankers at a rate of about 15 a year. It is expected that nearly 400 new refueling planes will be needed.

Yet for more than a decade the Air Force’s effort to modernize the fleet has been thwarted by global politics, Washington scandals and an aggressive attack by Senator John McCain, now the presumptive Republican nominee for president.

In the end, the scandal lead to the departure of Phil Condit, the chief executive of Boeing, the resignation of James G. Roche, the secretary of the Air Force, and the imprisonment of two Boeing executives, one of whom was the former Pentagon acquisition official that had worked on the program. Another Air Force acquisition officer who was working on the program later committed suicide.

The Air Force, short on cash and wanting to acquire the planes as fast as possible, proposed an arrangement to Congress in late 2001 under which the Pentagon would lease the Boeing 767s in a multiyear sole-source contract that would keep Boeing’s aging 767 production line alive.

But just as the Air Force was about to sign that deal, it came under sharp attack from Senator McCain, a former pilot and a member of the Senate Armed Services Committee. Mr. McCain denounced the deal as a sweetheart arrangement between Boeing and the Air Force that would shortchange the taxpayer and that was arranged with insufficient scrutiny and oversight.

In the ensuring firestorm, embarrassing e-mail messages were made public in which the Air Force secretary, Mr. Roche, said “Go Boeing!” and called opponents of the deal “animals.” Soon afterward, it was reported that the Air Force’s No. 2 weapons buyer, Darleen A. Druyun, had been promised jobs for herself, her daughter and son-in-law in return for steering the tanker contract and billions of dollars of other Air Force business to Boeing. Soon after joining Boeing at a $250,000-a-year post, Ms. Druyun and Michael Sears, Boeing’s former chief financial officer, pleaded guilty in the scandal and received prison terms.

The weight of the scandal caused the Boeing deal to collapse in 2004 and opened the door to competition from the arch-rival European Aeronautic Defense and Space Company, which teamed up with Northrop to promote use of Airbus planes as Air Force tankers.

The Northrop-EADS bid was a bold one that mixed business and Washington lobbying with trans-Atlantic politics. EADS lined up a politically powerful group of senators from Alabama and Mississippi with promises that much of the tanker would be built in their states.

In Paris, at the annual air shows, Airbus officials and Southern politicians proudly displayed the proposed European tanker offering and made the argument that if the United States wants to sell its weapons to European countries, it should also open its doors to foreign suppliers. Politicking reached the highest levels — even Chancellor Angela Merkel of Germany brought up the tanker bid in a White House meeting with President Bush.

Each side spent millions of dollars to sharpen its proposal, hire lobbyists and former generals to argue their case and wage extensive advertising efforts in Washington and at military gatherings in advance the announcement.

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I expect there will be loud screams in Chicago this afternoon at Boeing Headquarters at this news, I am sure they thought they had this deal sewn up. Bottom line is this is the best deal for the Air Force thus the American taxpayers. The planes will be assembled in Mobile, Alabama and many American companies will be providing parts, engines etc. We live in a global economy Boeing has no room to complain the new Dream Liners are being built in China shipped to South Carolina then on to Washington State for final assembly same concept they just werem;t the low bidder on this deal, but we as a nation win.

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