KC-X Tanker: EADS Faces Uphill Battle?

July 12, 2010 at 6:31 am Leave a comment

Summary
The only real two contenders go head-to-head for a third time. Has EADS’ bid been compromised before evaluations have even begun?
Analysis
With the WTO report DS316 roundly condemning the launch aid afforded to Airbus jets, and in particular the A330-200, EADS’ tanker bid will be argued by some on Capitol Hill as invalid and therefore should not win the contract.
If there were any hope from officials to perhaps hammer out a split buy, that prospect has truly evaporated now that the aerial refuelling tanker contract is a “winner takes all” affair – to that end, it is premature to say that a Boeing win will happen, but ignoring the fact that it is the frontrunner would be equally perilous.
EADS will take comfort from having won the last contest, but will be concerned that the RFP favours Boeing – part of the reason why former partner Northrop Grumman walked away from participating this time around. Pricing alone may not be the sole catalyst to propelling the winning candidate over the finish line.
As has been noted previously, infrastructure costs will weight in heavily on the decision making process. With the WTO deferring its preliminary ruling on the EU case DS353 against the United States (and Boeing), EADS will likely look to the mid-September edict and intimate to the US Air Force that it too should evaluate at the level of aid given to the 767.
That won’t happen given the timescales involved and with the decision to award the contract already delayed, EADS has to be prepared to lose. Winning the contract at a lower build price would inflame passions about erratic pricing whereas losing could avert critical funds that could be better spent on the upcoming A350XWB family as well as the A320 revamp – particularly as the company faces stretched resources on the A400M and A380.
Winning, of course is the gambit to get a facility out in the USA and lessen its dependence on its euro-based costs. Ultimately, many Boeing advocates on Capitol Hill would rather the competition stay on the other side of the Atlantic.
If one thing is certain about the KC-X procurement so far, it’s that the losing party will protest and the saga will be strewn out over many more months. The US Air Force is in for a very long wait to replace the ageing KC-135s, but their own dawdling is a primary reason for the contract being set back so many times.
Published at: http://www.glgroup.com/News/KC-X-Tanker–EADS-Faces-Uphill-Battle–49436.html
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Entry filed under: Aerospace, AirBus, Boeing, Boeing Tanker Bid, EADS. Tags: , , , , , .

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