EADS submits tanker bid as Boeing readies Everett for win

Airbus parent company EADS submitted its proposal for the U.S. Air Force aerial-refueling tanker to the Pentagon Thursday, a day ahead of the deadline, and Boeing is expected to submit its proposal Friday.

Both sides are preparing for a win.

European Aeronautic Defence & Space said it will move its tanker-program headquarters from Virginia to Mobile, Ala., on Monday.

Meanwhile in Everett, Boeing is cutting a corner off the world's largest building by volume, and is shifting production of its 767 tanker candidate to a new, lean assembly line it hopes will lower the cost of the plane.

In a news conference Thursday, EADS leaders declared confidence in their ability to win the $40 billion contract on the merits of their A330 airplane.

But when asked about political opposition to their bid in Congress — heightened by publication last week of a World Trade Organization (WTO) panel ruling that the A330 benefited from illegal government subsidies — their frustration was palpable.

"We spend all our time talking about a bunch of crap which has no relevance to whether you are going to get airplanes that can fly for 50 years and adjust themselves to a changing environment with substantially greater capabilities," said Ralph Crosby, chairman of EADS North America.

Laying out his grounds for confidence, Crosby said the EADS airplane is "in most regards identical to the aircraft we have developed for the Royal Australian Air Force, of which two are flying." In contrast, he asserted, Boeing "doesn't have anything flying that represents what they will offer."

Boeing vehemently disagrees.

On a tour late last month of the new assembly bay where the 767 tanker would be built, Elizabeth Lund, vice president of the 767 program, said that while the eight Boeing 767 tankers built for the Italian and Japanese Air Forces don't meet all the U.S. Air Force requirements, neither do the Australian EADS tankers.

"Neither tanker meets the exact spec," Lund said. "They have significant changes they need to make."

The foreign 767 tankers use different 767 models than the one Boeing will submit Friday, but that work will help smooth development of the U.S. tanker.

"We've learned a lot from building the Italian and Japanese tankers," Lund said.

The terms defined by the Pentagon are widely seen as bringing the competition down to one of best price, given that both tankers will meet the required capabilities.

On that score, Crosby said Airbus has the advantage because the A330, still a great commercial success as an airliner, will have a much higher production rate than the 767.

The Boeing plane is being replaced commercially by the 787 Dreamliner. If Boeing wins the contest, the 767 will essentially become a tanker plane exclusively, produced at a rate of about 15 aircraft a year.

Crosby said Airbus will produce seven or eight A330s every month. EADS will assemble the tankers in Mobile, Ala., along with perhaps twice as many A330 commercial freighter aircraft, for up to a total 45 wide-body airplanes a year.

That would be a very significant production rate for an Airbus facility in the U.S. Last year, Boeing delivered a total of 109 wide-body jets out of Everett.

Crosby said the high build rate on the A330 will allow efficiencies and cost savings throughout the supply chain, whereas all Boeing's development costs will go to producing a much smaller number of planes, raising the unit price.

The prospect that the larger Airbus plane could beat the Boeing jet on price has riled local politicians.

U.S. Sen. Patty Murray, D-Wash., and others believe the illegal government launch aid highlighted by the WTO panel could contribute to an Airbus price advantage.

The panel concluded that if Airbus had not received that aid, "the development of the ... A330-200 could not have been launched when it was without significantly higher costs."

Boeing's supporters in Congress are lobbying to have the impact of those subsidies weighed in the tanker competition.

But Allan McArtor, chairman of Airbus Americas, said it is expressly forbidden in the WTO treaty for the U.S. to take unilateral punitive action before the trade group's lengthy appeals and remediation process are exhausted.

And McArtor rejected as "patently inaccurate" the suggestion in Congress that the WTO trade rules don't apply to a U.S. military-procurement process.

The WTO process "is very, very clear," McArtor said. "You cannot use the results of a WTO finding to do anything, whether sanctions or anything, other than through the authority of the WTO."

Though the competition won't be decided until November, Boeing is preparing the ground in Everett for a 767 win.

The 767 is currently built in one of the six large assembly bays on the south end of the Everett plant. That bay will be vacated by January so that Boeing can put in a temporary "surge line" for the 787 Dreamliner, one that will be used until the second line in Charleston, S.C., gets up to speed.

Workers are furiously transforming a smaller bay at the back of the building.

This summer they will cut a new door so the 767s can exit out the back. And to allow room for the airplane to be towed around the building to Paine Field, Boeing will cut 30 feet into the building and round off the northwest corner.

(It'll still be the largest building in the world by volume.)

Boeing is taking the opportunity of the move to transform the production process from the old style of assembly, where airplanes are parked in slant positions, to a new lean line with two nose-to-tail assembly positions and all parts delivered just in time to the side of the airplane.

That will reduce the number of days needed to build the airplanes and will reduce costs — which will be crucial for low tanker pricing.

"We have some aggressive cost targets in place," said Lund. "We'll leverage that in our tanker proposal."

If Boeing wins, the majority of the direct tanker work will be in the Puget Sound region.

Final assembly in Everett will include incorporating, from the get-go, the changes to the commercial-airplane structure needed by the military.

The engineering design work will be done in Seattle and those engineers will work closely with their Boeing counterparts in Wichita, Kan., who will design refueling and other military systems.

Lund said design of the first tanker could begin in February, with the first Air Force delivery scheduled in 2013.

Murray will lead a rally of support Friday morning in Everett as Boeing submits its bid.

And Gov. Chris Gregoire will join the governors of Connecticut, Kansas, Illinois, Iowa, Maine, Missouri, Oregon and Utah in a teleconference to express their support for Boeing.

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