Update, 500 PM PDT: Innovation Analysis Group has a 24 minute podcast on this development featuring Flight Global defense writer Steve Trimble, TEAL Group aerospace analyst Richard Aboulafia, IAG’s Addison Schonland and us.
EADS North America and Airbus have scheduled a press conference for 2pm EDT today. EADS NA CEO Sean O’Keefe, former EADS-NA CEO Ralph Crosby (who remains in charge of obtaining the KC-X contract) and Airbus Americas Chairman Allan McArtor are scheduled to appear.
Clearly this is the kick-off for the return of EADS to the competition.
Update, 0945AM PDT: Boeing already is on the offense, issuing a statement that the WTO ruling that Airbus, and the A330-200 on which the KC-45 is based, benefited from illegal subsidies should be considered. The Department of Defense has stated repeatedly that the WTO ruling will not be considered.
The WTO Interim Report on the EU case against Boeing is expected to be issued in June, ahead of the extended deadline of July 9 for proposals to be submitted. It is widely anticipated that Boeing will likewise be found to have benefited from illegal subsidies.
We have all along cautioned about focusing on the subsidies issues because we believed both parties will be found to have violated WTO trade rules. The Airbus report is out and the Boeing report is coming. Boeing and its supporters already have said any Boeing violations will “pale” in comparison with launch aid provided Airbus.
Whether it does or doesn’t remains to be seen, but since the underlying thesis of Boeing and its supporters is that any WTO violation should disqualify a company seeking this contract, then any violation by Boeing would disqualify Boeing. This, of course, won’t happen and therefore neither should it happen with respect to EADS (or Northrop before it withdrew).
Furthermore, DOD has reaffirmed over and over that it will not consider the WTO rulings, so all this is for Congress. This makes a sham of the DOD procurement process. The debate should be on the technical and operational merits of the offerings.
The press conference begins:
Sean O’Keefe (SOK), CEO, EADS North America
Ralph Crosby (RC), Chairman, EADS North America
Allan McArtor (AM), Chairman, Airbus Americas
No surprise: EADS announces it will bid for the tanker, and confirms the Reuters report yesterday that for now it is not joining with a US partner.
RC: We’re doing this for a number of reasons. We have a real tanker doing real work. We have notified the DOD we are going to bid. We have the world’s best tanker. We have won five different times against the KC-767. The KC-45 is flying, it exists. This means substantially less risk. The DOD should not be forced through sole source to buy an aircraft that exists only on paper (the KC-767 NewGen). We are creating new jobs at a time when our competitor is sending jobs overseas.
The economic stimulus that is provided by this tanker is bolstered by our commitment to build freighters in Alabama, too.
DOD sought competition and we are encouraged. Competition is the single best acquisition tool to get the best benefit for the US taxpayer.
We have the only tanker in production today that meets the RFP requirements. We have an advanced refueling boom. We have two flying for the Australian Air Force.
Boeing’s New Generation tanker doesn’t exist in any real form.
Our tanker will have demonstrated refueling through the boom and through hose-and-drogue systems. This has been particularly trying for our competitor. Our tanker has been certified by EASA (the European equivalent to the FAA).
There are going to be multiple attempts by our competitor to distract from delivering real tankers for real warfighters.
We are now in a competition where judgments about our workforce in Alabama and other issues don’t matter. It’s about the technical merits to determine the outcome. The rhetoric needs to cool. We need to talk about the task.
SOK: We are a contractor who has a track record of excellence. We are a qualified primate contractor. This is part of Ralph Crosby’s legacy. Every time we competed on a fair, balanced playing field, we have won. Our Lakota team has delivered more than 100 helicopters. Every one is on schedule and on budget. This has been recognized by DOD has a model acquisition. That qualification and criteria to be able to act and perform as a prime contractor would gives DOD and the public to stand behind the proposals we put forward. We can’t do this alone. Our combined industry team makes this possible.
Our US-based industrial team is made up of over 200 suppliers, made up of some of the most-recognized names in America. These form the past-performance track record to be a prime contractor for the KC-X. We support 200,000 American jobs with $11bn spent in the US every year.
Team members include: GE, Cargo AAR, Eaton Aerospace, GKN Aerospace, Goodrich, Hamilton-Sunstrand and Honeywell among others.
We have a flying tanker. It does perform. It is not an animation. It is the only tanker in production.
SOK: About 30 of the 372 requirements in the RFP pertain to classified matters. EADS-NA has the ability to deal with these, to be supplemented by those on the team now.
RC: We wouldn’t be here if we didn’t think we could win. What we see is a competition and an RFP is pretty hard-edged as to what it requires. We obviously believe we can be there. You’d have to ask Northrop why they decided they wouldn’t compete.
RC: There was always a phasing of the work into the Mobile facility. We’re still deciding how this transition will occur. Our own view is that we would modify the fourth aircraft in Mobile and we will stick to that. We know how to do these modifications. The first three potentially will be modified in Spain and flown here.
We are not seeing a major partner in the context that Northrop was. It’s reasonably logical that we would be building our subcontractor team. We are doing the logical thing a prime would do and that is do augment our team.
We couldn’t bid alone before because we had a teaming agreement with Northrop for five years. In 2005 it was early in the gestation of our tanker development. Since then our capacity for demonstrating our skills in design and building a tanker have grown.
SOK: We now have the systems integration capability with the team we assembled we didn’t have five years ago.
SOK: We don’t know what Boeing is going to offer. There is kind of a description. There’s been at least enough commentary offered by the competitors what they may or may not do but the KC-767 NewGen is not an airplane that currently exists.
RC: It doesn’t matter what Boeing thinks. It doesn’t matter what readers think. We are now in a source selection by the US government and it is their call. We’re in it. We’re going to bid. They are going to bid and it is up to the Air Force to decide which tanker is better.
SOK: There is no question about it, the RFP is about replacing the KC-135. We think we will pass all 372 requirements. The prior effort was about an air modernization program. This is very much right down the line here is the criteria you need to pass without going through subjective judgment.
SOK: We are not bidding just to produce more paper. We intend to win. We believe this will be judged on the merits and on the criteria the DOD has laid out. This will positively and will establish EADS North America as an extension of the largest aerospace company in the world.
SOK: Certainly the commentary offered by any member of Congress is their prerogative. As it pertains to any member of our team, they are there as a member of the coalition of the willing.
RC: The answer really boils down to one of price. Our risk is small because our development is advanced. This implies our price for the SDD part of the contract may be lower. Our competitor hasn’t fully defined his airplane, let alone started to build it, their price will be a determinate of what they offer. The risk part of the equation has been assigned to the contractor. The tanker for Australia is virtually identical to what we will offer the Air Force. Based on all data and evidence I have seen, we have a lot less distance to go than our competitor.
SOK: This is a fixed price development contract. This an an area EADS knows how to compete in. [Airbus] delivers 500 aircraft a year on fixed price contracts. We have two [tanker] aircraft flying right now. We have knowns. We’ve been there and done that.