Boeing-Airbus tanker war heats up as deadline nears

Boeing Co (BA.N) and EADS (EAD.PA) launched dueling advertising campaigns on Thursday as the companies' bitter battle to capture U.S. refueling aircraft orders valued at up to $50 billion neared another pivotal point.

Boeing and Airbus parent EADS must submit their final proposal revisions, also known as "best and final offers" for 179 new aerial tankers by Feb. 11 after separate meetings with U.S. Air Force officials on Monday, Feb. 7.

Air Force officials say they expect to award a contract to either Boeing or EADS in early 2011, but industry executives and analysts say the losing bidder is likely to file a protest, which could delay procurement of the planes for years.

Industry executives say a contract award could come as early as Feb. 25, although the Air Force decision will be carefully vetted by top Pentagon officials. That could delay the news until early March.

This is the Air Force's third attempt since 2001 to start replacing an aging fleet of KC-135 tankers which are now nearly 50 years old on average.

Boeing on Thursday ran a full-page advertisement in the Washington Post entitled "Stacking the deck against American workers," which said a World Trade Organization report had rejected all but a "fraction" of the European Union's claims that Boeing benefited from illegal subsidies.

Airbus this week said the report found that Boeing received at least $5 billion in illegal subsidies.

In its ad, which pictured a huge stack of $100 dollar bills towering over a far smaller bundle, Boeing said the report was a sweeping victory for the United States and stood in stark contrast to a WTO ruling from last summer which found that Airbus received $20 billion in illegal subsidies.

EADS, for its part, launched a radio attack ad criticizing Boeing's "misleading" ads and highlighting the 48,000 jobs it said it would create and support in the United States if it won the tanker competition.

Richard Aboulafia, aerospace analyst with the Virginia-based Teal Group, said he expected a protracted legal battle, regardless of which company won, and said the only way the U.S. Air Force could actually move toward getting new refueling planes would be to buy planes from both companies.

"There's one way out of here -- a dual buy. It's ugly and it's inefficient and (Defense Secretary Robert) Gates is understandably against it, but it's the only way forward," Aboulafia said. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)

Source: WASHINGTON, 3 Feb 2011 (Reuters) - By Andrea Shalal-Esa

Photo: A KC-135R Stratotanker, from the Air National Guard's 121st Air Refueling Wing, makes a low pass at the 2009 Cleveland National Air Show.


(2.06.2011)