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This article was Originally Published on May 01, 2002 in Volume: 1  Issue: 2

Boeing Given Nod on Tanker Lease

The U.S. Air Force last month notified Congress that it intended to enter into negotiations with Being to lease 100 767 derivative aircraft to replace the oldest of an aging fleet of KC-135 tankers.

By Dan Cook

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Citing four reasons for their decision, the U.S. Air Force last month notified Congress that it intended to enter into negotiations with Boeing to lease 100 767 derivative aircraft to replace the oldest of an aging fleet of KC-135 tankers and rejecting a competing KC-330 tanker design submitted by the European Aerospace and Defense and Space Co.'s (EADS) Airbus division.

According to the Air Force statement released March 28, the results of its request for information from the two airframe manufacturers "have clearly demonstrated that only the Boeing Corp. can currently meet the requirements" of the FY02 Appropriations Act. Therefore, the Commercial Derivative Air Refueling Aircraft (CDARA) team will proceed to negotiate a lease with Boeing and develop a deal. The results will be reported back to Congress in the summer of 2002."

The statement said the Airbus proposal "presents a higher-risk technical approach and a less preferred financial arrangement." It cited as reasons for the Air Force decision the opinion that EADS lacks relevant tanker experience and needs to develop an air refueling boom and operator station, making their approach a significantly higher risk; that a comparison of the net present values of the aircraft recommended by Boeing and EADS establishes Boeing as the preferred financial option; and that the size difference of the EADS-proposed KC-330 results in an 81 percent larger ground footprint compared to the KC-135E it would replace, whereas the Boeing 767 is only 29 percent larger.

"The KC-330 increase in size does not bring with it a commensurate increase in available air refueling offload," the statement said.

Finally, it added, the EADS aircraft would demand a greater infrastructure investment and dramatically limits the aircraft's ability to operate effectively in worldwide deployment.

"Representatives from EADS will receive a detailed debrief on the results of our analysis," the statement concluded. "The [Air Force] encourages EADS to continue their air refueling boom and other tanker developmental efforts in order to ensure a vibrant and fully competitive global defense industrial base well into the future."

In 2001 Congress had authorized the Air Force to negotiate a multibillion-dollar, 10-year lease with Boeing as a first step toward replacing the service's KC-135s, based on Boeing commercial 707 passenger aircraft. Some of the tankers are now more than 40 years old.

"The KC-135 fleet is the backbone of our nation's global reach," Air Force Secretary James G. Roche wrote in a letter to Sen. Patty Murray, D-WA, last Dec. 7. "But with an average age of over 41 years, coupled with the increasing expense required to maintain them, it is readily apparent that we must start replacing these critical assets. I strongly endorse beginning to upgrade this critical warfighting capability with new Boeing 767 tanker aircraft."

 However, when EADS officials complained about the sole-source deal, the Air Force issued a "request for information" asking both Boeing and Airbus to describe the type of tanker aircraft they would be able to provide [MAT, Vol. 1, No. 1, page 52].

The Air Force's fleet of tankers, AWACS and RC-135 intelligence aircraft all are based on the B-707 airframe. Replacement of this aging fleet could be a cash cow for both manufacturers.

"We are pleased to learn that the U.S. Air Force has selected Boeing to move forward in their tanker-lease program," said Jerry Daniels, president and chief executive officer of Boeing Military Aircraft and Missile Systems, in a statement issued after the Air Force announcement.

"While this is just one step in a three-step process, it is a very significant step.

"The selection validates the fact that the 767 tanker is the most capable, most affordable and lowest risk solution to fill the Air Force's urgent need to replace its aging tanker fleet," he added. "We have a lot of work to do, and we look forward to the next step, completing our negotiations with the Air Force. We know we have to meet their tough business and technical expectations and are confident we can develop a program that provides the best value for the Air Force and the taxpayer."

Once that is completed, Daniels added, the final step is appropriate Congressional authority to finalize the lease arrangement.

U.S. Rep. Norm Dicks, D-WA, said he has urged the Air Force to proceed quickly to negotiate the terms of the lease for Boeing 767 tankers. Dicks serves as a senior member of that House Appropriations Committee and is a member of the Defense, Interior and Military Construction subcommittees.

"Our current fleet of KC-135 tankers is more than 40 years old and it is clearly in our best interests to replace them as quickly as possible," Dicks said.

The Air Force announcement "reaffirms what we had said throughout the legislative processâ??that only Boeing can meet the Air Forces' high standards for air tankers; there is no other tanker manufacturer," said Sen. Murray following th Air Force decision. "This is good news for the men and women in uniform, and the men and women who build American planes. I sincerely hope that the advocates for foreign plane manufacturers will finally acknowledge that only Boeing can meet the tanker needs of the Air Force.

"Further, I hope that Boeing's critics will cease their attacks on the Boeing Co. and the thousands of hard-working American men and women who build the best airplanes in the world," Murray added. Murray said she led an effort in Congress to replace outdated tanker aircraft with Boeing tankers. While benefiting the Air Force, this will also provide jobs for thousands residentsâ??and Murray constituents and votersâ??in the state of Washington.

"For months, Sen. [Maria] Cantwell [D-WA], and I have worked with the Air Force and other Northwest delegation members to convince our Senate colleagues to approve this measure," said Murray following the passage of the appropriations bill in late 2001. "It is critically important for our men and women in uniform who deserve the best equipment we can provide them, as they carry out their dangerous missions."

Cantwell, whose constituents also will benefit from the estimated 2,400 direct and 5,500 indirect hires the lease will provide, said she applauds Murray's leadership in working with Sen. Daniel K. Inouye, D-HI, and Sen. Ted Stevens, R-AK, to guide this proposal through the appropriations process.

"This is a huge economic win for our state," Cantwell said. "This contract will put Boeing workers on the production line at a time when the state's economy needs it most. At the contract's peak, the production of 767s would increase by 50 percent from current levels."

Gregory H. Bradford, president of EADS, Inc., told The Washington Post on March 29 that Airbus officials knew all along that "being in the game and certainly winning some of the first 100 tankers was a long shot." The fact that the Air Force is now on record as encouraging Airbus to remain in the tanker business and continue bidding on contracts, Bradford said, is a victory for the company. At press time he had not responded to MAT's requests for information about future EADS strategy to enter the U.S. military market.



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