EADS Strains To Conceal The True Nature Of Its Tanker Bid

Last week, U.S. aerospace giant Boeing and its European counterpart, EADS, submitted proposals to supply the Air Force’s next-generation aerial-refueling tanker. The service plans to buy 179 modified commercial transports in the first phase of a multi-decade program that eventually will replace all 509 tankers in the aerial-refueling fleet. Nine out of ten tankers in the current fleet are KC-135 jets similar to the old Boeing 707 airliner that were built during the Eisenhower and Kennedy administrations. Tankers are essential to extending the reach of the joint force into remote places like Afghanistan, but with many of them now exceeding 50 years of age it is not clear how long they can be operated safely. Replacement thus is an urgent priority — especially given the fact that it will take decades to replace the entire fleet.

However, the operational need for new tankers has been eclipsed by controversy surrounding how the tanker competition is being run. The World Trade Organization recently ruled that the Airbus unit of EADS has received illegal subsidies throughout its history that have enabled it to compete unfairly with U.S. producers of commercial transports. The biggest recipient of these illegal subsidies was the Airbus A330 transport — the same plane EADS now proposes to use as its platform for a future Air Force tanker. Having seen both of its domestic rivals forced out of the commercial-transport business and its own global market share cut in half by competition from Airbus, Boeing and its backers are incensed that EADS is being allowed to bid. The Air Force says it needs EADS in the bidding to get the benefits of competition, and it is refusing to factor Airbus subsidies into its evaluation — even though the past predatory behavior of Airbus is a key reason why it must go abroad to find a second competitor.

Congress is not so detached from the economic consequences of letting EADS bid. In fact, it probably will refuse to fund a tanker built by EADS, given what the World Trade Organization has said about the European company’s unfair trading practices. EADS has elected to bid anyway, but its only hope of prevailing is to tap the same subsidies that the trade organization condemned since its plane typically sells for $50 million more than the competing Boeing 767 and burns over a ton more fuel per flight hour. This puts a big burden on the company’s hired guns in America to somehow obscure what it is doing. So last week EADS North America chairman Ralph Crosby told Christopher Drew of the New York Timesthat Boeing supporters were “wasting their time trying to derail a process because their airplane is inferior.” Crosby’s number two at EADS, former NASA chief Sean O’Keefe, said EADS could price its tanker competitively because it would assemble the plane in Alabama, where costs are lower than at Boeing’s domestic sites.

These comments are typical of the disingenuous arguments that EADS agents in America have propounded throughout the tanker debate. Crosby’s description of the Boeing plane as inferior is specious, since both companies must satisfy 372 mandatory performance requirements to compete. Once they do so, the outcome is based mainly on whose price is lower. But by attacking the quality of the Boeing product, such comments obscure the fact that the only way the oversized Airbus plane can compete on price is to tap the same illegal subsidies the WTO has condemned — subsidies that have destroyed many thousands of U.S. jobs. O’Keefe appears to be doing the same thing, arguing that costs are lower in Alabama when in fact no aircraft plant even exists there on which to make such a comparison. The real way EADS plans to hold down costs is to do much of the work on its plane in Europe, in plants that have been heavily subsidized by European governments. In other words, the EADS tanker strategy is to get U.S. taxpayers to buy illegally subsidized planes that hurt American workers by trying to confuse policymakers as to the true nature of the European bid.