Boeing tanker ally eyes $5 mln per Airbus plane duty

A Boeing Co ally in Congress urged the Pentagon yesterday to add as much as $5 million per plane to a rival trans-Atlantic team’s bid to supply new US mid-air refuelling aircraft.
Rep. Norm Dicks, a member of the House of Representatives Defense Appropriations subcommittee, floated the figure as part of a renewed push by Boeing’s political backers, aimed at factoring a September interim global trade ruling into the tanker contract battle.
Boeing, the No. 1 US exporter, is vying against a team made up of Northrop Grumman Corp and Europe’s EADS, parent of Airbus, to build 179 tankers for the US Air Force, a potential $50 billion deal.
The competition is a rematch. At stake is the first of three batches of tankers that could cost more than $100 billion over coming decades. Northrop/EADS won the deal in February 2008, only to see it scratched after federal auditors upheld a Boeing challenge tied to Air Force missteps.
Dicks, a Democrat from Washington State, where Boeing does much of its aircraft manufacturing, said the Pentagon’s new draft request for proposal, publicly disclosed Sept. 25, must be changed to “neutralize” advantages allegedly obtained by Airbus through illegal European subsidies.
Among these is $5 billion of “launch aid” for 1000 A-330 aircraft, the model offered to the Air Force by the Northrop/EADS team, Dicks told a news conference that was also addressed by 14 other lawmakers from six states that would benefit from a Boeing win.
“This subsidy has enabled Airbus to finance the development of this aircraft at a significantly lower cost” than would have been the case if it had obtained financing in the commercial marketplace, he said. “Some have estimated as much as $5 million per plane.”
In a follow-up interview with Reuters, Dicks said he was sticking to the $5 million figure as the sum he wants the United States to add to the Northrop/EADS bid as a kind of countervailing duty.
Republican Senator Sam Brownback of Kansas, where Boeing would do final assembly of its tanker, told reporters launch aid allegedly given to Airbus by European governments had contributed to a loss of 19 percent of Boeing’s market share for large commercial aircraft.
Taking the alleged illegal subsidy into account should be a “no-brainer” for the Pentagon as it prepares final bidding rules, he said. A Brownback aide said he understood the final tanker bidding rules may be released in mid-December at the earliest, rather than at the end of this month, the Pentagon’s target.
A Pentagon spokeswoman, asked to comment on the renewed push for factoring in the preliminary WTO decision, emailed a copy of remarks made Sept. 24 by Deputy Defense Secretary William Lynn on the subject.
The Europeans had filed a complaint of their own alleging Boeing had benefited from improper subsidies through Pentagon contracts, Lynn noted at the time.
“We need you need to pursue that process to a conclusion,” Lynn then added.
“That’s going to require a final ruling in each case. It’s going to require completion of the appeals.”
Northrop Grumman fully supports the Defense Department’s position that the commercial aircraft subsidies dispute being addressed by the WTO has no place in the procurement of US defense systems, said Randy Belote, a company spokesperson.
“To pre-emptively force a trade dispute into the tanker procurement process before all outstanding complaints have been fully resolved is a violation of international agreements as well as fundamental WTO rules,” he said.
Boeing said it appreciated the bipartisan efforts for a “fair” tanker competition from lawmakers representing Washington, Kansas, Missouri, Connecticut, Illinois and New York who spoke yesterday.
“We’ve long held the position that government subsidies to Airbus are market-distorting and a violation of WTO rules,” said William Barksdale, a Boeing spokesperson.