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Sunday
Mar022008

EADS Lands $35bn US Defense Deal

EADS, the European defense company, scored a stunning victory in its campaign to penetrate the US defense market on Friday by winning a $35bn (£17.6bn) contract to supply the US air force with refuelling tankers.

EADS and Northrop Grumman, its US partner, beat Boeing in a competition that could ultimately be worth more than $100bn.

The winning team will initially supply 179 air-to-air refuelling tankers using a modified version of the Airbus A330 passenger jet.

But the air force may select the same aircraft to replace its entire fleet of about 600 tankers over the coming decades.

Louis Gallois, EADS chief executive, told the Financial Times that it was “just great” to beat Boeing, saying: “I think it is the best contract I have won in my life.” Ronald Sugar, Northrop’s chief executive, said he was “delighted”.

The decision is a huge blow to Chicago-based Boeing. Congress cancelled its original deal to supply tankers in 2003 following a procurement scandal that sent a Boeing executive and air force procurement official to prison.

“Obviously we are very disappointed,” Boeing said in a statement. “Once we have reviewed the details behind the award, we will make a decision concerning our possible options.” Shares in Boeing fell 3.7 per cent in after-hours trade, while shares in Northrop rose 5.6 per cent.

Most analysts, before the decision, expected the losing bidder to protest.

Politicians from the state of Washington and Kansas, where Boeing would have built the tanker, lashed out at the air force decision.

“We are shocked that the air force tapped a European company and its foreign workers to provide a tanker to our American military,” said Patty Murray, a Democratic senator from Washington. “At a time when our economy is hurting, this decision to outsource our tankers is a blow to the American aerospace industry, American workers and America’s military.”

General Michael Moseley, air force chief of staff, this week warned that a protest would force the air force to continue using 44-year-old planes.

“From the warfighters’ point of view we need to get on with this,” said General Arthur Lichte, commander of the US Air Mobility Command

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