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The Honolulu Advertiser
Posted on: Saturday, March 1, 2008

Pentagon snubs Boeing, awards $40B contract to European rival

By Dana Hedgpeth
Washington Post

WASHINGTON — The Pentagon yesterday passed over Boeing's bid for a $40 billion deal to build a fleet of refueling tankers for the Air Force, instead choosing a team that includes Boeing's European rival Airbus and dealing a severe blow to the U.S. aviation giant.

The team of Northrop Grumman and European Aeronautic Defence and Space (EADS), Airbus's parent company, will build a fleet of refueling tankers for the Air Force under the Defense Department's most important, expensive and controversial contract since a 2004 procurement scandal that sent officials from Boeing and the Air Force to prison.

For EADS, Boeing's rival in the commercial aviation industry, winning means getting a foot in the door toward making more U.S. military aircraft. For Boeing, losing means that its 767 line will probably be shut down at some point as commercial sales for the plane decline.

"It is a stunning upset in which the underdog won," said Loren Thompson, a defense analyst with the Lexington Institute. "Everybody expected Boeing to win. Boeing has been doing this for half a century, and it was simply assumed they knew what the Air Force wanted better than other companies.

"This is not a political decision and not a verdict on whether Boeing or Northrop are likable," he said. "It is an analytical assessment of who had the better proposal. The Northrop proposal was either better or equal in every regard."

The design of the KC-45 tankers, which will refuel military aircraft in flight, will be based on the Airbus A330 passenger airliner. They will replace the Air Force's fleet of Boeing KC-135s, a design based on Boeing's 707.

Gen. Arthur Lichte, commander of the Air Mobility Command, said the Northrop-EADS plane was chosen because it could carry "more passengers, more cargo, more medical patients, could offload more fuel and had more flexibility, more dependability and more availability."

"Obviously we are very disappointed with this outcome," William Barksdale, Boeing's spokesman for the tanker project, said in a written statement. "We believe that we offered the Air Force the best value and lowest risk tanker for its mission."

Sen. Patty Murray, D-Wash., whose state is home to Boeing's largest plant, said: "We are outraged that this decision taps European Airbus and its foreign workers to provide a tanker to our American military. This is a blow to the American aerospace industry, American workers and America 's men and women in uniform."