Boeing Spurned On Huge Air Force Contract

Pentagon Taps Northrop Grumman And Its European Partner To Build New Refueling Tankers

(AP)  The Air Force on Friday awarded Northrop Grumman Corp. and a European partner a $35 billion contract to build airborne refueling planes, delivering a major blow to Boeing Co.

The selection of Los Angeles-based Northrop Grumman and European Aeronautic Defence and Space Co., the maker of Airbus planes, came as a surprise to industry and government officials. Air Force officials said the larger size of the Northrop-EADS aircraft helped tip the balance in its favor.

Chicago-based Boeing, which has been supplying refueling tankers to the Air Force for nearly 50 years and had been widely expected to hang onto that monopoly, could protest the decision, though the company said no decision has been made.

The contract to build up to 179 aircraft — the first of three awards worth up to $100 billion over 30 years — opens up a huge new opportunity for Northrop Grumman.

"They don't come along at this scale very often," Northrop Grumman Chairman and CEO Ronald Sugar said. "We do see this as being a very important component of our business for many years to come."

The deal also positions EADS to break into the U.S. military market.

In after-hours trading, shares of Northrop initially surged more than 5 percent before retreating to $78.83, an increase of 22 cents. Boeing's stock price fell $2.64 to $80.15.

The Northrop-EADS refueling tanker, the KC-45A, "will revolutionize our ability to employ tankers and will ensure the Air Force's future ability to provide our nation with truly global vigilance, reach, and power," Air Force Gen. Duncan J. McNab said in a statement.

Air Force officials offered few details about why they choose the Northrop-EADS team over Boeing since they have yet to debrief the two companies. But Air Force Gen. Arthur Lichte said the larger size was key. "More passengers, more cargo, more fuel to offload," he said.

"It will be very hard for Boeing to overturn this decision because the Northrop plane seemed markedly superior" in the eyes of the Air Force, said Loren Thompson, a defense industry analyst with Lexington Institute, a policy think tank. And as the winners of the first award, EADS and Northrop are in a strong position to win two follow-on deals to build hundreds of more planes.

Boeing spokesman Jim Condelles said the company won't make a decision about appealing the award until it is briefed by Air Force officials. Boeing believes it offered the best value and lowest risk, he said.

Stifel, Nicolaus & Co. analyst Troy Lahr said in a research note it was surprising the Northrop-EADS team won given the estimated $35 million per-plane savings offered by Boeing. Lahr estimated the Boeing aircraft would have cost $125 million apiece. "It appears the (Air Force) chose capabilities over cost," Lahr said.

Military officials say the Air Force is long overdue to replace its air-to-air refueling tankers, which allow fighter jets and other aircraft to refuel without landing. The service currently flies 531 Eisenhower-era tankers and another 59 tankers built in the 1980s by McDonnell Douglas, now part of Boeing.

But the new contract has emerged as a major test for the Air Force, which is trying to rebuild a tattered reputation after a procurement scandal in 2003 sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.

The tanker deal is also certain to become a flashpoint in a heated debate over the military's use of foreign contractors since Boeing painted the competition as a fight between an American company and its European rival. Lawmakers whose districts stood to gain jobs from a Boeing win were pressing this point on Friday.

"We should have an American tanker built by an American company with American workers," said Rep. Todd Tiahrt, R-Kan., who represents the district in Wichita where Boeing would have performed much of the tanker work.

In Everett, Wash., a few dozen Boeing workers protested outside a Machinists Union hall holding up signs saying "American workers equal best tankers," and "Our military deserves the best."

The EADS/Northrop Grumman team plans to perform its final assembly work in Mobile, Ala., although the underlying plane would mostly be built in Europe. And it would use General Electric engines built in North Carolina and Ohio. Northrop Grumman, which is based in Los Angeles, estimates a Northrop/EADS win would produce 2,000 new jobs in Mobile and support 25,000 jobs at suppliers nationwide.

"I've never seen anything excite the people of Mobile like this competition," Sen. Jeff Sessions, R-Ala., said. "We're talking about billions of dollars over many years so this is just a huge announcement."

[oldpilot954]

Aw heck -- maybe the Airbus will have a built in white-flag.
I remember once before when Boeing lost a military bid for a large transport. Lockheed brought a C-5 and Boeing brought a 747. Somehow I think Boeing still won that competition. You will notice, in this case, that the Boeing was cheaper but also less capable. I think Boeing bet price against performance and lost their bet. Airbus is a great airframe and NG will do a good job on modifying it. Parts are not a big deal on large aircraft as long as the engineering drawings come with the sale. If a large aircraft gets badly bent we salvage usuable parts and scrap it. The engines are US made and the tanking equipment will be US made. Other items could be fabricated in a pinch. Boeing would have sent some major components overseas for fabrication anyway just like the current airliners. I do hate to see the US with only one large civilian aircraft manufacturer. If Boeing goes bankrupt, the USA is out of the big-airplane business.

[myviews2606]

RowdyTexan2 and lovegetpeace you are totally right there! I could not believe what I read. So much for boosting the economy. I believe any military equipment should be made by US company as US cares for their own security. Why other countries in Europe would buy OLD U.S equipment to boost their military equipment? Because they know U.S. quality! What is wrong with the decision makers these days! They know Europe hates Americans. They would reach for any possibility to destroy U.S: it''s super power, economy, and military power. Prove American''s wrong - that''s what they want. I hope U.S Air Force won''t play this game.

[dylanxxv]

DYLANXXV must be a republican. or person that has not had a good job! how do you know they have never done an honest days work.if not for the unions of this country the workers would be making 25$ a week if they were lucky.please move to china and get you a good job!!!!!!!!!!!!

Posted by aheadace at 09:21 AM : Mar 03, 2008


Democrat...I own my own company...
Unions at one time served a purpose...All they do now is artificially inflate prices of goods made because of wages that are ridiculous...Look at some of the the workers at ford and chevy...70.00 an hour? come on...Quality? Yea right...Quality went down hill years ago...Can the employer just fire the unproductive workers? NO...Why? The union won''t let them...

[dylanxxv]

DYLANXXV must be a republican. or person that has not had a good job! how do you know they have never done an honest days work.if not for the unions of this country the workers would be making 25$ a week if they were lucky.please move to china and get you a good job!!!!!!!!!!!!

Posted by aheadace at 09:21 AM : Mar 03, 2008


Democrat...I own my own company...
Unions at one time served a purpose...All they do now is artificially inflate prices of goods made because of wages that are ridiculous...Look at some of the the workers at ford and chevy...70.00 an hour? come on...Quality? Yea right...Quality went down hill years ago...Can the employer just fire the unproductive workers? NO...Why? The union won''t let them...

[dylanxxv]

DYLANXXV must be a republican. or person that has not had a good job! how do you know they have never done an honest days work.if not for the unions of this country the workers would be making 25$ a week if they were lucky.please move to china and get you a good job!!!!!!!!!!!!

Posted by aheadace at 09:21 AM : Mar 03, 2008


Democrat...I own my own company...
Unions at one time served a purpose...All they do now is artificially inflate prices of goods made because of wages that are ridiculous...Look at some of the the workers at ford and chevy...70.00 an hour? come on...Quality? Yea right...Quality went down hill years ago...Can the employer just fire the unproductive workers? NO...Why? The union won''t let them...

[tacyr1242]

Why do we need all this expensive air hardware when we know that box cutters were the only weapons used to bring down 4 747s in 2001 and the Air Force was AWOL in preventing that tragedy?

This is less about what the Air Force wants or needs and more about the military industrial complex. Boeing, Northrup-Grumman, Lockheed-Martin, GE, and the rest want and need profits and war is the means to that end.

Are we a war-making nation? Is that our purpose? I thought we were pro-life and Christian. Is military hardware what Jesus would buy?

[tacyr1242]

Why do we need all this expensive air hardware when we know that box cutters were the only weapons used to bring down 4 747s in 2001 and the Air Force was AWOL in preventing that tragedy?

This is less about what the Air Force wants or needs and more about the military industrial complex. Boeing, Northrup-Grumman, Lockheed-Martin, GE, and the rest want and need profits and war is the means to that end.

Are we a war-making nation? Is that our purpose? I thought we were pro-life and Christian. Is military hardware what Jesus would buy?

[tacyr1242]

Why do we need all this expensive air hardware when we know that box cutters were the only weapons used to bring down 4 747s in 2001 and the Air Force was AWOL in preventing that tragedy?

This is less about what the Air Force wants or needs and more about the military industrial complex. Boeing, Northrup-Grumman, Lockheed-Martin, GE, and the rest want and need profits and war is the means to that end.

Are we a war-making nation? Is that our purpose? I thought we were pro-life and Christian. Is military hardware what Jesus would buy?

[tacyr1242]

Why do we need all this expensive air hardware when we know that box cutters were the only weapons used to bring down 4 747s in 2001 and the Air Force was AWOL in preventing that tragedy?

This is less about what the Air Force wants or needs and more about the military industrial complex. Boeing, Northrup-Grumman, Lockheed-Martin, GE, and the rest want and need profits and war is the means to that end.

Are we a war-making nation? Is that our purpose? I thought we were pro-life and Christian. Is military hardware what Jesus would buy?

[inventagod]

Pentagoons would rather fly Beemers than Fords, huh?
It figgers...

[jowand]

God slumped and said to himself,"WANNA BET! and a tear fell as he looked at Mars and saw the red dust covering all he had made for them?"
Posted by ToolMangler at 05:36 PM : Mar 02, 2008

Nanoo! Nanoo!

[jowand]

People act as if war is permanent and are preparing for it. Stop the idiocy. cancel the tankers and other weapons of war before we are forced back to the stone-age. (If we even survive long enough) Posted by ToolMangler at 04:39 PM : Mar 02, 2008

It is, just read your history books for the last 200 years.

[standlee5]

Boeing''s one of the few good companies left that actually pay a living wage so the taxpayers don''t have to support the employees with food stamps and EITC windfalls. They, match 401k funds, provide health insurance and don''t take advantage of their employees. Vote the bums out come November.

[standlee5]

The govt. chooses Airbus over Boeing for Air Force contract. Well, now isn''t that just great. Vote every one of the bums out of office.

[wardoglrs]

Here is the answer to the problem

http://www.ideachannel.tv/

[toolmangler-2009]

Begin Part (2)
Now the planet is so parched that nothing can grow. Billions have already died and now they have only a few hundred left to propagate the species. Then they all boarded the only means of escape and rocketed into the skies hoping against hope that the third Planet might be able to provide a place to live. They all vowed with one voice to "Never destroy their world again".

God slumped and said to himself,"WANNA BET! and a tear fell as he looked at Mars and saw the red dust covering all he had made for them?"

[toolmangler-2009]

I have a fable for you;
Once upon a time there was a planet that had a thriving civilation. the inhabitants
were very intelligent but somewhat short sighted. The industrial moguls were a bit on the greedy side and only looked at the bottom line and not very far into the future. The peoples of this world worked hard and learned everything they could about the world around them. As they advanced, their need for power grew exponentially and they searched the entire planet
for more resources of energy but one day, they realized that the reserves were exhausted and
they became frantic because no more liquid energy could be found. At this same time, the planet was racked by devastating events like droughts, earthquakes, extreme temperature changes and all forms of illnesses. Water was in such short supply that individuals were being killed and the water recovered from their bodies was sold by robber barons and other gangs. You might ask what happened to the water and receive this answer. "the energy companies pumped it into the ground to take the place of the liquid fuels they were extracting so that the
surface of the world would not crash into the gaping holes left when the world was sucked dry."
End Part (1)

[dylanxxv]

WaaaaWaaaaWaaaaaaaaaa...Boeing lost...Big freakin deal...That means those overpaid workers now have to find a job and actually do an honest days work at a reasonable wage...No more sucking on the taxpayersTIT...Unions suck...

[toolmangler-2009]

This world is facing a crisis of nation crushing importance. The Oil still in the ground is quickly coming to an end, Here we are, building larger and larger fuel guzzling aircraft built for the sole purpose of refueling many other aircraft built for only one purpose which is killing each other at an ever-increasing rate. This is the sheerest stupidity on a mammoth scale. People act as if war is permanent and are preparing for it. Stop the idiocy. cancel the tankers and other weapons of war before we are forced back to the stone-age. (If we even survive long enough)

[quatermass2]

The stuck-pig-like squeals about "jobs" demonstrate all-to-well the corporate welfare mentality. No one seems to be arguing that Boeing had the better AIRCRAFT, because, simply, they didn''t.