US KC-X TANKER – A WHIFF OF PROTECTIONISM PERHAPS?
By Howard Wheeldon, Senior Strategist at BGC Partners
25 Feb 11. As has always been the case the views that I express in these commentaries are totally independent. To that end I have never had any particular axe to grind on which of either Boeing or EADS would eventually win the much delayed KC-X tanker award. Nevertheless, following twelve wasted years that have forced USAF to continue operating tanker costly and inefficient refuelling planes that date from the mid to late 1950’s and that has in recent years exposed just how bad the operation of defence procurement is in the US we may to some extent at least be satisfied that the KC-X tanker award process moved a step forward last night. However, that it should be Boeing rather than EADS that won the revised tanker award came as a huge surprise not only to me but to some of the most highly respected defense analysts in the US.
Now comes the hard bit – what do I really think of the revised KC-X tanker award decision? The answer is not a lot! My take is this: if the decision on the KC-X tanker award that USAF announced in Washington DC last night had been taken purely on the grounds of technology and capability of what each individual plane offered then I and others would have thought that EADS would have been the most likely to win. As we now know that was not to be. However, if the award was to be placed on the basis of price or ‘buy America’ despite the recognised intention of EADS to create a completely new plant at Mobile, Alabama and create 48,000 new jobs then it would probably have been foolish not to have imagined that Boeing would most likely have romped home by a mile. None of this would be to suggest that the KC-46A tanker offering from Boeing based on the successful 767 airframe plus a package of well defined US flight refuelling technology is not the great airplane that it is rightly recognised by many to be. Far from it but then so too is the EADS offering that is based on the equally successful Airbus A330 airframe and that just happens in terms of design and technology to be a generation in front of its competitor. It was this reason that we had always assumed had occasioned USAF to make the original KC-X tanker award to the EADS Northrop Grumman combination three years ago.
Given that EADS had previously been awarded the tanker contract and yet with, as far as we know, few if any changes made to either airplane offering in the revised second competition it does seem somewhat strange that USAF in its infinite wisdom has changed its mind again deciding now that the Boeing offering was a ‘clear winner’. Thus we are bound to be led to some pretty obvious conclusions:
Firstly that this time it may have been price that may well have been much reduced by Boeing over the aspects of overall mission capability, available technology, cost of operation and full consideration for through life that led USAF to turn full circle on the award process.
Secondly, even if I might like to think this reasoning unlikely, it seems that we may need to question whether ‘buy America’ politics may just have been allowed to shroud or slant this decision. Of course, back in February 2008 it was not a Democrat sitting in the Oval office it was a Republican.
Thirdly would be to consider the vexing issue of state politics and jobs. First thing to say on this is that USAF is I believe legally required to ignore any impact of US based jobs and effect on the US defence industrial base of any decision. So that is that then! However, the Boeing KC-46A tanker aircraft will be built at the already existing Washington state facility and that since 1978 has produced no less than one thousand 767 commercial airplanes. One may sense then that Congressional politics played a very big hand in the decision that USAF made. Meanwhile we should note that had EADS been successful in winning the KC-X tanker award th