Air Force Tanker Contract Goes to European Firm

The Air Force announced that the European company EADS and its junior partner, the U.S. weapons-maker Northrop-Grumman, will build the next generation of air-refueling tanker aircraft, dealing a major blow to Boeing Co. It's the first such significant military contract awarded to a largely foreign bidder.

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SCOTT SIMON, host:

This is WEEKEND EDITION from NPR News. I'm Scott Simon.

Coming up the efforts to rebuild Afghanistan reviewed.

But first, (unintelligible) the American Military will soon start flying French designed airplanes.

Last night, the Pentagon announced it will award the European company EADS and it's junior partner, the American weapons maker, Northrop Grumman the contract to build the next generation of air refuelers. Maybe more significant is who didn't get the $40 billion contract, Boeing, the U.S. aircraft manufacturer.

As NPR's Guy Raz reports, the decision is sending shockwaves through Congress and the defense industry.

GUY RAZ: Defense contracts don't usually get much attention beyond the obscure world of geeky trade journals, but in the case of the new Air Force tanker, last night's announcement by Air Force Secretary Michael Wynne was a little like the Oscars.

Secretary MICHAEL WYNNE (U.S. Air Force): Ladies and gentlemen, we are please to announce that the development and procurement of up to 179 new KC45A tanker aircraft is awarded to Northrop Grumman Corporation.

RAZ: It's not just that the deal is potentially worth more than $150 billion over its 40-year lifetime, and it's not just that Boeing was the favorite, victory for European aircraft maker EADS is the equivalent to the Giants winning the Super Bowl over the undefeated Patriots. It's that big.

Mr. LAUREN THOMPSON (Defense Analyst, Lexington Institute): The fact that they won and won decisively is a total shock.

RAZ: This is defense analyst Lauren Thompson of the Lexington Institute. Never before, he points out, has the U.S. military ever handed out such a significant and lucrative and sensitive contract to a largely foreign bidder. Never before has the Air Force flown anything other than American planes. And never before has EADS ever managed to sell its Airbus planes to the U.S. government.

Mr. THOMPSON: This is a huge breakthrough for Airbus and its parent EADS. Not only has it broken into the largest military aircraft market in the world, but it is not establishing a presence in the home market of Boeing.

RAZ: When it decided to bid for the deal, EADS partnered with Northrop Grumman back in 2006 and attempt to give the Airbus an American face. It worked and while EADS will build components for the tanker in France, they'll be assembled at a plant in Mobile, Alabama.

The champagne corks going to be going out tonight?

Mr. RANDY BELOTE (Vice President, Corporate and Internal Communications, Northrop Grumman Corporation): Absolutely.

RAZ: This is Randy Belote from Northrop Grumman. Northrop does all the talking on behalf of EADS, which has carefully avoided any press interviews in the United States.

Mr. BELOTE: We've got now to start to build the facility and transition, you know, the productions of those aircraft here into the United States.

RAZ: The Air Force picked the Airbus over Boeing's 767 because it's bigger, it flies farther, and can carry more fuel and cargo, but still, Air Force officials who made the announcement last night, like General Arthur Lichte, seemed a bit sensitive when asked whether the plane they were buying was foreign.

General ARTHUR LICHTE (Air Mobility Command Commander, U.S. Air Force): This is an American tanker. It's flown by American Airman. It has a big American flag on the tail, and every day, it will be out there saving American lives.

RAZ: But Boeing, which declined to comment, will almost certainly protest the decision. Instead, Boeing's press office put forth labor union officials to denounce the Air Force's decision.

Mr. PAUL SHEARON (Secretary-Treasurer, IFPTE): These are U.S. tax dollars that are being spent, and it's like a stimulus package for the European economy.

RAZ: This is Paul Shearon with the Engineer's union, IFPTE.

Mr. SHEARON: The airplane's going to be manufactured in France and as far as the U.S. manufacturer, it's simply a front company that's going to be used to call it an American airplane.

RAZ: It's true that most of the plane's components will come from abroad, but by 2012 most of the Airbus tanker will be built in Alabama. And with less restrictive labor laws than in France and a further weakening dollar, EADS is likely to make a tidy sum.

Guy Raz, NPR News, the Pentagon.

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