Boeing Wins $35 Billion Tanker Contract Over EADS

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RENEE MONTAGNE, host:

The Pentagon made a big money announcement yesterday. It involves an extended battle to replace the Air Force's aging fleet of tankers that refuel aircraft in midair. Those tankers allow U.S. warplanes to fly long distances to places like Iraq and Afghanistan.

Mr. WILLIAM LYNN (Deputy Secretary of Defense): I think what we can tell you is Boeing was a clear winner.

MONTAGNE: That's Deputy Defense Secretary William Lynn announcing that the American company Boeing beat out the European-based EADS to build the tankers. NPR's Debbie Elliott reports.

DEBBIE ELLIOTT: It's a contract worth at least $35 billion. And the competition has been fierce, political, and prolonged. Analysts had speculated that EADS was favored, so yesterday's announcement was welcome news for Boeing. Dennis Muilenburg is president and CEO of Boeing Defense, Space & Security.

Mr. DENNIS MUILENBURG (President and CEO, Boeing Defense, Space & Security): We've had more than 60 years of experience developing, manufacturing and supporting tankers for America's war fighters. And we are ready to build the KC 46A tanker now.

ELLIOTT: Boeings tanker is based on its 767 commercial jet, and will be made in Wichita, Kansas and Everett, Washington. Elected officials from those states had pressed hard for Boeing, painting the competition as a referendum on American jobs.

Giddy Washington state Congress members and union leaders shared a group hug in Seattle yesterday when they gathered to hear the Pentagons decision.

(Soundbite of talking) (Soundbite of laughter)

ELLIOTT: Democratic Senator Maria Cantwell says tens of thousands of longstanding aerospace jobs will now remain in the northwest.

Senator MARIA CANTWELL (Democrat, Washington): Continuing Americas, Americas industrial base in aviation and the importance of that industrial base to us and our national security.

ELLIOTT: Military analyst Loren Thompson with the Lexington Institute says the award also seals Boeings market position.

Dr. LOREN THOMPSON (Analyst, Lexington Institute): It keeps its main airliner rival, EADS, out of Boeings home market.

ELLIOTT: Boeings victory is a blow for the Gulf Coast. EADS planned to assemble its tankers at a closed air force base in Mobile, Alabama. A celebration there was cut short even before Pentagon officials appeared on a giant television screen.

Mr. SETH HAMMETT (Director, Alabama Development Office): Would someone please turn down the volume?

ELLIOTT: Seth Hammett, Director of the Alabama Development Office, told the crowd of state and local officials the news was not what theyd hoped. Mobile Mayor Sam Jones was shocked.

Mayor SAM JONES (Republican, Alabama): This is something weve been working with since 2004, so its difficult to get past this. But, you know, we will.

ELLIOTT: Mobile also had its hopes dashed back in 2008, when the Pentagon cancelled a tanker contract awarded to EADS and Northrop Grumman after Boeing challenged it. Northrop later dropped out of the competition.

Back in 2004, a deal with Boeing collapsed amid an ethics scandal. Meanwhile, U.S. pilots have been flying aerial refueling tankers that date back to the Eisenhower era.

Air Force Secretary Michael Donley wants this third attempt to build the planes to be the last.

Secretary MICHAEL DONLEY (U.S. Air Force): We hope that all parties will respect the decision and allow this important procurement to proceed unimpeded. The war fighter deserves nothing less.

ELLIOTT: Any decision on a challenge is premature, says David Oliver, CEO of EADS North America Defense.

Mr. DAVID OLIVER (CEO, EADS North America Defense): We believe it would be irresponsible to say immediately were going to protest without seeing what the Air Force did.

ELLIOTT: The firm will get a debriefing from the Pentagon in the days ahead. Oliver says it appears Boeing won in what amounted to a price shootout.

Debbie Elliott, NPR News.

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