EADS: Our tankers will cost less

Airbus parent company EADS, which is back in the Air Force tanker competition, aims to win by undercutting Boeing on price.

In another dramatic twist to the long-running tanker saga following last month's withdrawal of its former partner Northrop Grumman, EADS said Tuesday that it will go head-to-head against Boeing as a prime contractor.

The move means Boeing's contender for the refueling tanker, based on the 767, will face an EADS tanker based on the Airbus A330.

The Air Force contract is worth about $40 billion initially, with potential follow-up contracts.

Boeing's plane would be built in Washington, and finishing work would be done in Wichita. Spirit AeroSystems in Wichita would build the tanker's forward fuselage.

"I am confident Boeing can build the best plane for the Air Force, no matter the competition," said Sen. Pat Roberts, R-Kan.

If EADS wins, it will build a large airplane assembly facility in Mobile, Ala., where it will produce not only military tankers but also commercial A330 freighter aircraft.

"We will create tens of thousands of jobs" in the U.S., Ralph Crosby, chairman of EADS North America, said at a Washington, D.C., news conference. "We're making a long-term investment in this economy."

Crosby denigrated Boeing's proposed tanker as "an aircraft that exists only on paper" because Boeing is proposing a new version of the 767 that may differ substantially from the 767 tankers it has already built for the air forces of Italy and Japan.

In contrast, he said, EADS will offer a tanker very similar to the one now in test flights for the Australian Air Force, greatly lowering the risk and the cost of its candidate.

The differentiating factor in the competition "boils down to one of price," Crosby said.

"Our risk is small because our development is advanced, which implies that the part of our bid for the (development) phase of the contract might be lower."

In contrast, Boeing "hasn't even really fully defined their aircraft, much less assembling, testing and so forth," he said.

Price per plane isn't the only cost factor in the competition.

The Air Force also will consider lifetime operating costs, which are expected to be higher if it chooses the larger Airbus plane — both for fuel consumed over the life of the program, and for military construction costs to ensure forward bases can accommodate the bigger jet.

"Only Boeing can produce a tanker that will meet the Air Force's 372 requirements and promise delivery of a combat-ready, safe and survivable tanker that is the most capable for the warfighter, the lowest cost for the taxpayer, and backed by Boeing's proven U.S. work force," Boeing said in a news release.

Sean O'Keefe, former NASA administrator and now chief executive of EADS North America, said that because the Pentagon has laid out a fixed-price development contract, both contenders will have to factor into their bids the risk of mounting costs.

He said Boeing will face greater unknowns in the development process, compared to EADS, which is offering a known quantity.

"A fixed-price development contract is a really sporty proposition if you don't have something in place," he said.

Last month the Pentagon said it would extend the bid process until July 9 to allow EADS time to put together a fresh bid without Northrop.

EADS has scrambled to find another big U.S. partner to help it integrate about 30 U.S. military subsystems that require classified clearance. Norm Dicks, D-Wash., the chairman of the House subcommittee on Defense Appropriations, vocally opposed a renewed EADS bid and advised American defense contractors not to work with the European company.

But on Tuesday, Crosby and O'Keefe said EADS is ready, if necessary, to be the prime contractor without an additional partner. They said EADS has all the necessary clearances and can work with smaller partners if required.

In a strategy that might prove easier to accomplish politically, Crosby said EADS could even add partners after winning the contract.

Senior executives from U.S. suppliers to the A330 program — among them engine supplier GE; major systems suppliers Goodrich, Hamilton Sundstrand and Honeywell; and airframe parts supplier Vought — attended the news conference to show support for the EADS bid.