The Ramifications of the Tanker Contract Are Only Now Coming To Light

The New York Times points out the obvious: this was a political decision, not an acquisitions decision.

There has been yet another setback in the Air Force’s long, agonizing process to replace its fleet of Eisenhower-era aerial refueling planes. Northrop Grumman and its European partner, the European Aeronautic Defense and Space Company, dropped out of the competition this month, charging that the new contract specifications are tilted against their much larger Airbus A330 in favor of Boeing’s 767.

That leaves the Pentagon with only one bid — hardly a recipe to get the best tanker fleet at the best cost.

From a capabilities standpoint, we could see advantages in both planes. The Pentagon says that between the two rounds of bidding, it developed a more precise idea of what it needed. But its repeated flip-flops feed suspicions that politics and lobbying are what mattered most. Boeing’s Capitol Hill supporters — mainly from Washington State — built a case around stars, stripes and American jobs and, by implication, against a consortium that had, gasp, a European partner.

For American taxpayers and their armed forces to get the best possible tanker fleet — or other military equipment — for the money, qualified European partners must be permitted to compete fairly. For the record, the Airbus tankers would have been assembled in Alabama. The nation’s European allies are now understandably charging protectionism. This could cause problems down the road for the American defense industry, the biggest military exporter in the world.

And European partners are weighing and measuring possible action.

Nicolas Sarkozy and Angela Merkel yesterday presented a united Franco-German front against Washington's handling of a $50bn military tender, saying they would discuss "possible implications" with European partners.

"The chancellor and the president of the Republic, together with the European Commission and the European partners concerned, will examine the implications of future developments in this affair," a joint statement said.

It comes just days after France and the UK issued a similarly forthright joint statement on a visit to London by Mr Sarkozy, the French president.

The growing campaign is likely to exacerbate further trade relations with the US, already stretched by a proposed European clampdown on hedge funds.

European countries were outraged last week after EADS, the Franco-German aerospace and defence group, decided to pull out of the tender for 179 air refuelling tankers for the US Air Force, alleging foul play.

It was one of the world's biggest defence contracts on offer, with a potential value of up to $100bn (€72.7bn, £65.7bn). EADS and Northrup Grumman, its US partner, won the contract in 2008 but their victory was successfully challenged by Boeing, the US rival, and the tender was relaunched. The group and Northrup said that revised tender rules favoured Boeing, now the sole bidder in the race.

People close to both governments said the statement had been issued to show that feelings were still running high in Europe.

So Air Berlin cancels $1.7 billion of orders from Boeing. Are we really supposed to believe this is all about economics, and not the first round of fallout?

Air Berlin canceled $1.7 billion worth of firm orders for Boeing Co's 787 Dreamliner aircraft amid uncertainty over whether it will increase long-haul flights.

Air Berlin, Germany's second-biggest airline after Lufthansa , said on Tuesday that it has cut its order to 15 planes from 25. It also reduced the number of options for further 787 aircraft to five from 10, it said.

"We will continue to fly long-haul, but the bulk of our business is medium-haul," a spokesman for the company said. He did not comment on whether Air Berlin will increase the number of its long-haul flights in the future.

Apparently "built in Alabama" isn't "made in America" if it's a European company. Someone better tell Mercedes.

By: Brant