Posted on: Saturday, May 24, 2003

Boeing wins $16 billion contract for tankers

By Matthew Daly
Associated Press

WASHINGTON — The Boeing Co., struggling financially since the Sept. 11 attacks, won a $16 billion contract from the Air Force yesterday to lease 100 modified 767 jetliners for use as refueling tankers.

The deal is a major windfall for Boeing, but critics call it little more than corporate welfare. The cost of leasing the planes, which does not include a $4 billion purchase option at the end of the six-year lease, is far higher than the cost of buying the planes outright, opponents complain.

"It's a lousy deal for the Air Force and for the American taxpayer," said Sen. John McCain, R-Ariz.

Pentagon officials contend the lease deal, which still must be approved by Congress, allows the Air Force to begin replacing its aging the KC-135E tanker fleet three years earlier than planned and requires less upfront costs than a straight purchase.

With an average age of more than 43 years, the current tanker fleet is the Air Force's oldest combat weapons system. The new planes will carry 20 percent more jet fuel than the current fleet and can be refueled in flight themselves, Air Force officials say.

"People don't think of tankers as being that essential in our national security, but they should," said Sen. Pat Roberts, R-Kan., chairman of the Senate Intelligence Committee. "Without tankers and refueling, something like Iraq would not be possible, and the war on terrorism and our national security would be in danger."

The contentious deal has been delayed repeatedly as McCain and other critics questioned the price. Each plane is expected to cost $138 million, including $7 million in leasing fees. That price is significantly lower than Boeing's earlier estimates.

Congressional supporters of the leasing deal have maintained pressure on the Pentagon for more than a year.

Sen. Maria Cantwell, D-Wash., said the deal would be a major boon for her state's depressed economy. Washington has a 7.3 percent unemployment rate, one of the highest in the country.

"It's a big victory for our state's economy and will deliver a sustained boost for Boeing's production lines and its workers at a time when they need it most," Cantwell said.

Sen. Patty Murray, a fellow Washington Democrat, called the deal a victory for all sides.

"The taxpayers win. Boeing wins. The Air Force wins. And most importantly, the people who fly these planes and the soldiers who rely on them win," Murray said.

The lease plan allows the Air Force to get 67 tankers in the next six years, as opposed to one in an earlier plan to buy the aircraft, said Edward "Pete" Aldridge, the Pentagon's chief of weapons acquisition.