Sad EADS
February 25, 2011
The European Aeronautic Defence and Space Company (EADS) has missed out on a massive contract to supply aerial refueling tankers to the US Air Force. After years of tough negotiations, aircraft manufacturer Boeing of the United States won the Pentagon contract worth over $30 billion (21 billion euros).
"We're disappointed and perplexed," EADS head Louis Gallois said in a telephone press conference on Friday. "We wonder about the reasons why we lost. I think that the US Air Force said yesterday that it was about price."
Gallois said the setback would not end EADS' ambitions to win business in the United States.
"We will find other opportunities," he said. "We have other prospects with the Pentagon, notably helicopters, and we can develop other activities in the United States, in security, services, defense."
The decision ends a fiercely contested competition that began nearly a decade ago. It was the third effort since 2001 to start replacing 50-year-old Boeing-made KC-135 Stratotankers, which were built before man first stepped on the moon.
Boeing must now deliver 18 aircraft by 2017. The contract is expected to grow to 179 tankers.
The planes, effectively flying filling stations, will give US aircraft global reach and allow Washington to project military power well beyond its borders.
Big surprise
The decision came as a surprise: Most analysts predicted EADS would land the contract.
Teal Group's Richard Aboulafia called the decision "a major surprise" and said if it holds, Boeing will have succeeded in blocking EADS's biggest defense initiative.
The contest has sparked trans-Atlantic tensions and clashes among US lawmakers eager to bring high-paying aerospace jobs to their states.
Air Force Secretary Michael Donley said both firms met 372 mandatory requirements, but Boeing's bid was more than one percent lower - at a time when defense budgets are under increasing pressure.
The initial $3.5 billion fixed-price contract, Donley added, would pay for the design, development and delivery of 18 planes by 2017, but could be worth over $30 billion in coming years.
Boeing proposed the NewGen Tanker, based on its long-haul, wide-body 767 commercial aircraft. The tanker will be built at a plant in Everett, Washington, and militarized in Wichita, Kansas.
If EADS had won, its France-based Airbus unit would have assembled the tanker aircraft at a new plant in Mobile, Alabama. The defeat dealt a blow to supporters in the US Gulf Coast states that are struggling to recover from last year's BP oil spill disaster.
Boeing's shares rose 3.9 percent, but shares in EADS were down 1.8 percent following the announcement.
Author: Natalia Dannenberg (AFP, Reuters)
Editor: John Blau