By Marina Malenic
Government subsidies to Airbus give its parent company, the European Aeronautic Defense and Space Company (EADS), a “significant advantage” over rival Boeing [BA] for a major contract to build aerial refueling tankers for the U.S. Air Force, Boeing’s CEO said yesterday.
“We’re not afraid of global competition,” James McNerney said in response to questions following remarks he made to an audience at the Woodrow Wilson International Center for Scholars in Washington.
“We just want level-playing-field rules applied in a common sense way,” he added.
McNerney was referring to a World Trade Organization ruling last month that found Airbus had benefited from illegal subsidies to develop the A330, the commercial aircraft on which its tanker is based, among other platforms.
“In a fixed-price development competition, that subsidy is a significant advantage,” he said.
McNerney also addressed U.S. global competitiveness in his remarks. President Barack Obama appointed him last month to head up the President’s Export Council, his advisory committee on international trade issues (Defense Daily, March 12).
Despite pressure from Boeing supporters in Congress, Defense Secretary Robert Gates has told lawmakers that the WTO dispute cannot legally be factored into the department’s tanker contract award decision. Furthermore, a WTO countersuit brought by Europe over U.S. support for Boeing is still pending adjudication.
EADS informed the Defense Department just two days earlier of its intent to bid for a contract to build a replacement fleet for the Air Force’s aging KC-135 tanker aircraft (Defense Daily, April 21). Last month, EADS’s partner in two prior rounds of bidding for the contract, Northrop Grumman [NOC], dropped out of the contest. Northrop Grumman alleged that the Pentagon’s latest request for proposals favored rival Boeing’s smaller 767-based tanker over the EADS offering.
EADS last month began lobbying the Pentagon for a 90-day extension to the deadline for bid submissions. Defense Department officials instead granted a 60-day extension–to July 9–pending EADS’ formal notification of intent to compete.
Pentagon officials have estimated the tanker contract to be worth up to $50 billion initially, with more potential work in the future as the Air Force eventually phases out its KC-10 fleet as well. A contract for an initial 179 tankers is expected this summer.