THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Decadelong tanker saga draws to a close

But Boeing executive says you can never tell

A KC-135 Stratotanker, made by Boeing Co., refilled a US Air Force B-52 bomber. Boeing is now the sole bidder for a $35 billion refueling tanker program upgrade after Northrop Grumman Corp. left the running on Monday with some consternation. A KC-135 Stratotanker, made by Boeing Co., refilled a US Air Force B-52 bomber. Boeing is now the sole bidder for a $35 billion refueling tanker program upgrade after Northrop Grumman Corp. left the running on Monday with some consternation. (Paul J. Richards/AFP/Getty Images/File 2007)
By Susanna Ray and Andrea Rothman
Bloomberg News / March 10, 2010

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Northrop Grumman Corp.’s decision to forgo bidding on the US Air Force’s $35 billion refueling tanker program, leaving Boeing Co. without a competitor, might not mark the end of a nearly decadelong quest to replace the military’s existing fleet, a Boeing executive said.

“I’ve been working this program for nine years,’’ Jim Albaugh, head of Boeing’s commercial aircraft and former chief of its defense unit, said in a presentation yesterday at a JPMorgan Chase & Co. conference broadcast on the Web. “It’s the longest- running soap opera since ‘Days of Our Lives,’ and I’m not sure we’ve seen the last episode.’’

Northrop, which had partnered with European Aeronautic Defence & Space Co. in a winning bid for the tanker that was overturned in June 2008, announced its decision Monday and said it wouldn’t protest an award of the contract to Boeing.

The move made good on Northrop’s December threat to withdraw unless the government altered some of its requirements.

Los Angeles-based Northrop said at that time that the new draft proposal of bid requirements appeared to favor Boeing’s entry and that the contract would impose “financial burdens.’’

The contest had been restarted three months earlier, in September, after Boeing successfully protested the 2008 award to Northrop.

Northrop and EADS, parent of Boeing rival Airbus SAS, based their tanker proposal on the Toulouse, France-based company’s A330, while Boeing will use its smaller 767 as a platform.

The selection methodology outlined in the Pentagon’s bid request favored Boeing’s smaller aircraft and didn’t recognize the added value from a larger tanker’s increased capability, eliminating “any competitive opportunity,’’ Northrop chief executive Wes Bush said in a statement on Monday.

EADS chief executive Louis Gallois said yesterday that his decision to abandon the $35 billion US tanker bid is final, as some European lawmakers suspected local favoritism.

“I don’t see any opportunity to come back alone or with others,’’ Gallois said at a press conference in Paris. “If Northrop makes the analysis that we cannot win, I don’t think we can say that we will do it alone.’’

The original tanker replacement concept was created in late 2001 by the Senate Appropriations Committee with a proposal to lease and then buy Boeing tankers.

Northrop’s decision to quit will probably lead to a sole-source contract for Boeing, said Representative Jo Bonner, a Republican from Alabama, where Northrop planned to build a plant if it won the project.

The company chose not to protest because “servicemen and women have waited far too long for the tankers that they need and are in our nation’s best interests,’’ Northrop chief financial officer James Palmer said in a separate presentation at the JPMorgan conference.

The tanker project’s future is “really in the hands of the customer right now,’’ Albaugh said yesterday.

Shares of Chicago-based Boeing closed up 55 cents to $67.79 in New York Stock Exchange composite trading, bringing the stock’s gain so far this year to 25 percent, topping a 10 percent increase in the Standard & Poor’s 500 Aerospace & Defense Index. Northrop fell 16 cents to $64.