Tags: EADS | Boeing | U.S. | Tanker

EADS Duels Boeing for $50 Billion U.S. Tanker

Tuesday, 20 Apr 2010 01:17 PM

 

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Airbus parent EADS braved awkward financial odds and a growing storm in Congress by challenging Boeing for a military refueling plane deal worth up to $50 billion, sources said Tuesday.

The decision to re-enter the contest after seeing an earlier victory quashed on appeal, reported by Reuters on Monday, ends a phony war over its ambitions that saw the support of potential allies waver and critics advise the European firm to keep out.

A source familiar with the matter said EADS had informed the Pentagon earlier Tuesday that it would compete for the aerial tanker contract.

EADS North America confirmed it would make an announcement.

An EADS decision to bid is certain to trigger a politically charged campaign over jobs and transatlantic competition ahead of Congressional elections in November, with a final decision on the choice of plane due shortly before Americans vote.

Boeing and Airbus are locked in a row over civil subsidies.

Norm Dicks, chairman of the House of Representatives Defense Appropriations panel, said last week he hoped EADS would not launch a bid.

Monday Republican Senator Jeff Sessions accused Dicks, a Democratic congressman from the big Boeing state of Washington, of trying to intimidate EADS' would-be partners.

"There are going to be a large number of obstacles that will be faced," said Howard Wheeldon, senior strategist at BGC Partners in London.

The Pentagon has given EADS until May 10 to signal whether it plans to bid for the work and July 10 to file a full bid.

Sources close to the matter, who were not authorized to speak publicly, told Reuters Monday that EADS would bid alone for the contract after failing to secure a key supplier.

EADS will still be backed by a big team of suppliers including engine maker General Electric, Honeywell International and Rockwell Collins to name a few, said the sources, who asked not to be named.

But the team will not include, at least for now, a U.S. company that would have done classified work on the A330-based tanker and helped to manage the huge program, they said.

Analysts said EADS faces a tough battle by offering the A330 against the smaller 767 plane being offered by Boeing.

"I think there is next to no chance that EADS can win the tanker competition as it stands today," said Macquarie Securities analyst Rob Stallard.

"The request for proposals (RFP) clearly favors the 767, and Boeing has put significant political capital into securing this win. What EADS can get out of the competition is the goodwill of the Department of Defense" he added.

Boeing was not available to comment.

EADS won a previous competition against Boeing in 2008 in a bidding team led by Northrop Grumman, which would have converted Airbus jets and crammed them with combat electronics.

The award was later overturned on appeal from Boeing. Northrop last month pulled out of a rematch, saying revised rules favored Boeing — a charge both Boeing and buyers deny.

In a dash to stay in the race, EADS held talks with L-3 and Raytheon, as well as others, over the possibility of their supporting a bid to be led this time by EADS itself.

But the European company was forced into yet another rethink when front-runner L-3 cooled on the deal.

© 2014 Thomson/Reuters. All rights reserved.

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