Tanker Wars: It’s Over!

European aerospace giant EADS did American taxpayers and warfighters a big favor today by deciding not to protest its recent loss of the Air Force’s tanker competition. As EADS North America Chairman Ralph D. Crosby put it in a press release, “We will not take any action that could further delay the already overdue replacement of the Air Force’s aging tanker fleet.” EADS appears to have been beaten by Boeing mainly on price, which left little procedural grounds for challenging the outcome. Protests of competitive awards are typically sustained when government evaluators mis-apply selection criteria.

This appears to mark the end of a ten-year saga to select the Air Force’s next aerial-refueling system. No other weapons competition in modern times has generated as much controversy, or left as many political casualties in its wake. Time will tell whether the long delay in making the award ends up having adverse consequences for warfighters. With many tankers in the fleet today approaching 50 years of age, there is a real danger some planes will become unsafe to fly before replacements are built (the Air Force plans to buy 15 tankers per year to modernize a 500-plane fleet). However, Crosby convincingly argued in today’s press release that the government has saved billions of dollars by holding a competition, and that is yet another reason to be grateful about how EADS has conducted itself in the tanker saga.

Some Europeans will undoubtedly conclude from the tanker outcome that America’s military marketplace — by far the biggest in the world — isn’t really open to foreign suppliers. However, the European entry in the tanker competition was hobbled from the start by its large size, which meant it would cost more to build and operate. The fact it could carry more fuel than the Boeing entry was important, but the way the Air Force conducts refueling operations made it hard to prove a larger plane could be more economical. Nonetheless, BAE Systems looks likely to be the only European supplier that will ever break into the top ranks of Pentagon contractors, and its operations are so thoroughly rooted in the domestic economy that it is usually treated like it isn’t a foreign firm at all (most of the parent company’s revenues come from the U.S. market).

For Boeing, the hard-won tanker victory is a threefold success. First, it wins a $35 billion contract that could eventually grow to $100 billion as the entire tanker fleet is replaced. Second, it preserves a fifty-year franchise as the sole supplier of aerial-refueling tankers to the U.S. Air Force. And third, it keeps its main rival in the airliner business from setting up commercial production in Boeing’s home market. The latter concern helps explain why Boeing bid so aggressively for a program that is likely to represent less than five percent of the company’s aircraft production volume over the coming decades. The entire Boeing team deserves to be congratulated for working hard and winning fairly. Now that Boeing employees know their victory is assured, they should take a moment to savor the fact that Boeing is still the greatest aerospace enterprise in history.