Boeing says changes to tanker rules won't fly

FARNBOROUGH, U.K. — Top Boeing executives at the big European Air Show insisted Wednesday that they will fight any attempt to change the rules of the controversial Air Force tanker competition in a way that could give points to the bigger rival from Airbus.

And if any changes favoring the larger, A330-based plane are ultimately written into the new bidding process, then Boeing will ask for more time to create a new tanker plan.

Dave Bowman, newly appointed vice president of Boeing Tanker Programs, said in a briefing Wednesday that Boeing will demand that government officials justify any shift in the competition rules.

The implication is that Boeing could protest the draft of a new Request For Proposal (RFP) expected next month, likely stalling the Pentagon's preference for a fresh award by year-end.

"It's hard to see that ([the Air Force] is going to change ... the RFP without a lengthy process" to justify altering the approved specifications that were issued over several years by various military panels, said Bowman.

If the RFP is eventually changed, Boeing Chairman and Chief Executive Jim McNerney said in an interview, "we will take a look at a larger airplane."

But in that case, he added, "it would be very hard to respond ... within this year."

"Part of the decision with the Pentagon and the Air Force would have to be some additional time to develop a business plan," McNerney said.

A bigger tanker offer from Boeing could involve a large version of the 767 or perhaps a very much larger 777. McNerney said his teams are assessing that on a contingency basis.

Last month Government Accountability Office ruled that the tanker-procurement process was flawed and upheld Boeing's protest of the February contract award to Northrop Grumman and EADS, the European parent of Airbus.

The outcome of the reopened competition seems to hinge upon whether the Air Force can change its mind about the capabilities it requires.

The Pentagon's top weapons-procurement official, John Young, who is now in charge of the tanker competition, suggested earlier this month that the Department of Defense will adjust the proposal to allow extra credit for extra capabilities. That adjustment could favor the A330, which can carry more fuel, more equipment and more troops than Boeing's smaller 767 airplane.

Boeing argues that it put forward the 767 as suitable for the tanker mission as originally stated, and it questions the proposed reassessment of the mission now.

In separate interviews both McNerney and his defense-unit chief executive, Jim Albaugh, insisted that their stance against the Northrop-EADS plane should not be seen as protectionist — which is the way it's perceived in Europe.

Albaugh said the perception that Boeing's position is playing the protectionist card could impede his goal of increasing the defense unit's international sales to 20 percent of revenue, from 13 percent, within five years.

McNerney said he had instructed company officials to stay away from any "Buy American" argument.

However, he said he would not call off those politicians who use such arguments to support Boeing.

Boeing's allies in Congress — including Rep. Norm Dicks, D-Bremerton, Rep. Rick Larsen, D-Lake Stevens, and Washington's two U.S. senators, Patty Murray and Maria Cantwell, have elevated the tanker controversy to a hot political issue.

"The legislature has its role, to provide oversight and political perspective," McNerney said. "It's not our role to either incite the riot or to call it off."

The political debate is especially sensitive because presidential candidate John McCain intervened a couple of times in the tanker competition.

When Northrop-EADS felt the process was biased toward Boeing and considered withdrawing, McCain wrote to Pentagon officials asking that they ensure a fair competition.

McCain is now under attack by some of Boeing's Democratic supporters for that stance. Yet McNerney said he's not concerned about the relationship if McCain were to win the presidency.

"We've had a number of discussions with [McCain]. I think he has a balanced view of this [tanker] competition," McNerney said.

"I'd welcome his presidency. I'd welcome Barack Obama's presidency," he said. "Boeing doesn't take a position on that election."

"We're trying to stick to our knitting," he said. "That doesn't mean we won't get dragged into political discussions."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Orders tally hits $55B

Firm plane orders reached $55.2 billion Wednesday at the Farnborough International Airshow, with European manufacturer Airbus ahead of its U.S. rival Boeing with orders for 241 planes worth $36.95 billion at list prices.

On the third day of the show, Boeing used a previously registered, but unidentified, order from Malaysia Airlines for 35 737-800s to boost its show tally to 152 orders worth some $16.79 billion at catalog prices.

Orders for Embraer, the world's third-largest plane maker, and Russian manufacturer Sukhoi rounded out the total.

Airlines usually negotiate discounts to the official list prices for planes, and analysts expect the discounts to have been deeper than usual this time round with soaring oil prices and the credit crunch crimping demand from many quarters.

South Korea's Asiana Airlines kicked off orders Wednesday with a deal for 30 of Airbus's medium capacity, long-range A350 XWB jets for a catalog price of $7.2 billion before discounts. The airline also took an option for 10 more A350 jets.

Fellow Asian carrier Malaysia Airlines announced an order for 35 Boeing 737-800s valued at $2.6 billion at list prices. It also booked purchase rights for 20 more aircraft.

Boeing said the order had already been registered in its books as an unidentified order for several weeks.

The carrier said the purchase would allow it to expand to points that were previously not economically viable.

"This supports our aim toward more agile and fuel-efficient aircraft for our core network in the ASEAN region, including the domestic sector in Malaysia and the fast growing economies of China and India," said the airline's chief financial officer, Tengku Azmil Zahruddin.

He added that the carrier believed it was a good time to buy, noting that airlines often made the mistake of buying in boom times at high prices, only for demand to fall away. Delivery of the aircraft will take place in 2010, when Zahruddin said Malaysia Airlines expected a brighter economic situation.

Boeing also announced that leasing company Aviation Capital Group ordered 15 next-generation Boeing 737-700s worth $934 million at list prices.

The Associated Press