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  • A Tanker Clue
    Posted by Bill Sweetman 4:30 PM on Feb 03, 2011

    Want to know the outcome of the USAF's tanker decision? There's a big clue over at the Forbes website.

    Uberconsultant to defense companies Dr Loren Thompson issues what is little less than a Jeremiad against Airbus, and the European governments who have been its primary bankers throughout much of its development. It is government subsidy on a massive scale, Thompson charges, which will allow Airbus to undercut Boeing's price on the tanker deal with a larger aircraft, and win the contract. And, Thompson predicts, the result will be another furious political battle:

    Having declared in his State of the Union speech that waning competitiveness has brought America to a new “Sputnik moment,” the President will be asked to award the biggest military hardware contract ever to a foreign country — mainly because it was able to leverage illegal trade subsidies to underbid its U.S. rival. That should provoke quite a political storm on Capitol Hill, where members have already alleged that predatory business practices by Airbus have cost the U.S. aerospace industry many tens of thousands of jobs.
    I don't buy outright Thompson's argument that the claimed $20 billion in subsidies - which is a lot of money, but is spread over 40 years for a company that had $85 billion in sales in 2010 and scored a single order for $15.6 billion a couple of weeks ago - is what allows Airbus to undercut Boeing today.

    It would be worth seeing the mechanism by which remaining government support in the form of launch aid would allow Airbus to sign a money-losing tanker contract, or an explanation for why Airbus would want to spend that money locking up the military tanker market, which compared with the core commercial business is like a Cessna 150 alongside an A380.

    But that's a little beside the point.

    What Thompson, and some on Capitol Hill, are advocating is a retroactive change in the tanker competition rules, to throw out any decision in favor of Airbus. Such a decision would subordinate the Pentagon's judgment to that of Congress, delay the program and increase its costs, and force the USAF to buy its second-choice aircraft. It's hard to consider an action that would be more damaging to European-US defense trade interests.

    One final observation:  Thompson's clients usually keep him well informed, and he's saying bluntly that "the Air Force is planning to award the $35 billion tanker contract to its European rival". The piece in Forbes reads a lot like what doctrine writers call "shaping the battlespace".

    In the fall of 2001, with the Joint Strike Fighter source selection in its final weeks, it was Boeing's advocates who started to call for a teaming arrangement, rather than winner-take-all. It seems like the same message is coming across now.

    Updated:  One reason why Airbus may be able to undercut Boeing's prices. And, I would suggest, a more plausible one than subsidies over the past 40 years, given that the Airbus tanker resembles the A330 much more than the Boeing tanker resembles any commercial product. Ironically, those of us who were around the story in 2003 will recall how the A330 was going to be squashed like a bug by the miraculous 7E7...

    Given that Thompson's case (and doubtless the argument in Congress this year) rests on the fact that Airbus is charging the same or less than Boeing for a bigger airplane, this is more than just a theoretical issue.

    Tags: ar99, wellington, tankers, boeing, airbus, Wellington

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