EADS submits tanker bid, WTO report delayed

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Europe’s EADS put in a formal bid yesterday to build a fleet of U.S. Air Force aerial-refueling planes, challenging Boeing Co (BA.N) anew for a politically sensitive deal worth up to $50 billion.

Airbus’s parent company said its proposal, delivered a day before deadline, would prove its tanker’s “unequaled capabilities.”

It is built around the Airbus A330 passenger plane and would be assembled at a new facility in Mobile, Alabama. This would give EADS a major beachhead in the world’s richest market for military contractors. The transatlantic rivals have been locked in a bitter battle for the job, which calls for 179 new planes to start phasing out Boeing-built tankers that average about 50 years old, Reuters reports.
“We feel very good about what we have to offer,” Ralph Crosby, chairman of EADS’ North American arm, told reporters. The EADS bid runs to more than 8,800 pages, spread over 17 volumes.

Chicago-based Boeing, the Pentagon’s second largest supplier by sales, said it would formally deliver its bid to the Air Force on Friday morning. It is to be based on its 767 passenger jet that would be built mainly in Washington state and assembled and militarized in Kansas.

EADS, headquartered in Paris and Munich, suffered a setback within minutes of its bid when the World Trade Organization announced a delay to a trade ruling on alleged improper U.S. federal, state and local subsidies to Boeing.

The Geneva-based body said it was postponing a panel decision on a European Union countersuit to a U.S. complaint over subsidies to Airbus. The U.S. case was partially upheld by the WTO in a decision made public last week.

A WTO panel’s new report had been expected July 16, but now could be delayed until mid-September, European Union officials said.

EADS had hoped the coming report, though meant to be confidential for several months, would take the sting out of Boeing allegations that the A330 being offered to the Air Force was only made possible by illegal subsidies.

The European Union and Airbus criticized the delay.
“The time lag between this case, and the United States’ case against support to Airbus … has constantly increased over the six years this dispute has been running and the gap is now at nearly a year,” the EU’s executive Commission said.
“I think it smells like last week’s fish,” added Allan McArtor, chairman of Airbus’s U.S. unit. Asked about the delay’s likely origin, he said: “The parties on this side of the Atlantic owe you an honest answer.”

A spokeswoman for the Office of the U.S. Trade Representative, Nefeterius McPherson, responded that the United States actually had asked the panel to issue the interim report sooner than July 16, not later.
“However, the WTO panel hearing the EU dispute against the US informed both parties yesterday that the panel itself needed more time to complete its work and that the interim report in that dispute would therefore not likely be issued to the parties until September,” she told Reuters.

The latest bidding is a rerun of a competition won in February 2008 by EADS. It was overturned on appeal from Boeing, which successfully argued that the Air Force had made several errors that could have affected the outcome.

U.S. Defense Secretary Robert Gates expressed confidence that the final outcome would be viewed as fair and transparent.
“My view is that the way that it has been designed is as transparent as possible … So, I think that I am very optimistic that this time we will be able to get on with it,” Gates told reporters at the Pentagon.

Last week, the WTO ruled that Airbus had benefited from a long string of European government subsidies to Boeing’s detriment, including prohibited export aid.

Backed by supporters in Congress, Boeing wants these European subsidies to be taken into account in the tanker contest. So far the Pentagon has declined to link the two subjects.

Airbus Chief Executive Tom Enders said the EU case would show Boeing had received billion of dollars in illegal support.

EADS released a partial supplier list for its bid which included GE (GE.N), Goodrich Corp (GR.N), and Moog Inc(MOGa.N).

But aerospace experts said the list lacked an obvious replacement for the system integrator role that Northrop Grumman Corp (NOC.N) played on the winning team in 2008. Missing, for instance, was L-3 Communications Holdings Inc (LLL.N) and Raytheon Co (RTN.N), two major Pentagon suppliers that had discussed teaming with EADS, according to several people familiar with the matter.



Asked about the lack of a company designated as system integrator, an EADS North America spokesman said: “We’re not providing more specifics on the work share of the individual companies on our U.S. supplier team (which numbers more than 200 companies, by the way) beyond what you saw in the release today.”
“We prefer to leave it to our suppliers to speak for themselves about the individual scope and nature of their involvement,” said the spokesman, James Darcy. “We have, of course, provided detailed information to the Air Force in our proposal, documenting the expertise we have on our industry team in all key functional areas.” (Additional reporting by Juliane von Reppert-Bismarck, Foo Yun Chee, Stephanie Nebehay, Jim Wolf, Phil Stewart; Editing by Gerald E. McCormick and Carol Bishopric)