EADS says not fooling about tanker boycott threat

WASHINGTON (Reuters) Friday December 11, 2009 - Airbus parent EADS (Paris:EAD.PA - News) is sticking to plans to boycott a potential $50 billion competition to build a U.S. Air Force refueling fleet absent major changes in the way the winner would be picked.
"This is not a negotiating ploy," Sean O'Keefe, chief executive of EADS' North America unit, told reporters at a briefing on Friday.
EADS has joined Northrop Grumman Corp (NYSE:NOC - News) to compete against Boeing Co (NYSE:BA - News) for a rematch to build an initial 179 aircraft that refuel others in flight.
Northrop, which would be the team's prime contractor, said on December 1 it had concluded that a draft request for proposals (RFP) issued by the Air Force favored a smaller tanker of a type Boeing could offer based on its 767 wide-body model.
Northrop Chief Executive Ron Sugar denied the company was trying to dictate requirements for the Air Force, as some Boeing supporters have suggested, but said there should be no mistaking the team's resolve.
"Nobody should make a mistake. We cannot bid based on this current RFP," Sugar told Reuters in a telephone interview.
He said there was "constructive engagement" on the part of the Air Force with Northrop, and its concerns, but he declined to predict if the Air Force would make sufficient changes that would allow the companies to compete after all.
Guy Hicks, an EADS North America spokesman, said: "The value of added capability offered above the minimum requirement -- including greater range, fuel offload and transport capacity -- must be included and fairly weighted in the final request for proposal."
The Northrop-EADS is offering an Airbus A330-200 wide-body derivative.
The contract could be worth $25 billion to $50 billion over time, a senior U.S. military officer said in relaunching the competition September 24.
The contract is due to be awarded by the end of June.
EADS "HEARTENED"
The potential bidders met separately on Tuesday at Wright Patterson Air Force Base in Dayton, Ohio, with government officials weighing possible changes to draft bidding rules released in late September.
"We're heartened" by the discussions under way, O'Keefe said. "We couldn't ask for a more thoughtful and forward-leaning response."
He said he understood the government was now aiming to release a final request for proposal in the middle of next month.
A Boeing spokesman, William Barksdale, said the Boeing team met Air Force officials for several hours "to voice both observations and concerns" about how tanker proposals would be judged.
"We were also told our input would be shared with senior Air Force leadership as they move forward to releasing the final RFP in January 2010," Barksdale said in a blog posting.
The government is weighing comments received during the review process, said Cheryl Irwin, a Defense Department spokeswoman.
"When those deliberations are complete regarding both the comments received and what RFP changes will be made, it will issue the final RFP," she said in an emailed statement.
The Northrop-EADs team won a contract to build 179 tankers for the Air Force in February 2008, only to have it scrapped after U.S. auditors upheld a Boeing protest tied to Air Force missteps in evaluating the bids.
Air Force General Duncan McNabb, head of the U.S. Transportation Command, told reporters on Wednesday that he was satisfied with the draft RFP.
"From the requirements standpoint, I feel very good about it," he said. "My take is that everything we need in the new tanker is reflected" in the draft issued in September.
The new aircraft would replace KC-135 tankers with an average age of about 50 years.
The plan calls for delivery of the new tankers to start in 2015, with the first ones to be operational in 2017.
Two successive competitions would take place in decades to come to complete a fleet renewal expected to cost more than $100 billion for up to 600 new tankers. (Editing by Steve Orlofsky and Ted Kerr)