Archive for April, 2010

Good Summary Of The KC-X Situation

The Kansas City Star has this lengthy article that describes the whole situation and explains how we got where we are with the KC-X tanker RFP. The article by Cleon Rickle may be found here. Key takeaways are:

“”I am confident Boeing can build the best plane for the Air Force, no matter the competition,” said U.S. Sen. Pat Roberts,of Kansas. “However, I urge the Department of Defense to run a fair competition and avoid coddling EADS to the detriment of American warfighters who have waited eight years for this contest to end and decades for a new tanker.”

“We will offer a modern, more capable tanker in response to the Defense Department’s decision to encourage competition for this major taxpayer investment,” said EADS North America chairman Ralph Crosby, Jr. “Our KC-45 is the only real, flying, low-risk solution that today meets the demanding Air Force air refueling requirements and is actually in production now. ”

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Latest Air Force Air Refueling Studies Shows Gap

The U.S. Air Force and Transportation Command briefed Congress on their recent study of aerial refueling requirements. For the worst scenario it is estimated that the U.S. lacks twenty percent of the required capacity.

One of the reasons is that the KC-135R fleet is getting old. They require substantial depot time which limits the size of the fleet. The study states that at any one time nineteen percent of the aircraft are not available at any one time. This puts pressure on the KC-10 and KC-130 aircraft.

The study reinforces the need for a rapid start and completion of the KC-X program.

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EADS North America adds former U.S. Air Force General to Board

Retired Air Force General Arthur Lichte was named to EADS North America’s board. DefenseNews writes that the former head of the Air Mobility Command (AMC) will join EADS (EADS:P) American subsidiary’s board soon.

The AMC commands the Air Force’s tanker assets and having Gen Lichte will aid the company in preparing not only their proposal but the battlefield as he will certainly carry weight with government officials and Congress.

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Boeing and Lockheed See Struggle Ahead On Earnings

Winning the KC-X contract will certainly help Boeing (BA) out a lot.  Read my analysis from BNET: Government on the recent reported earnings of Boeing and Lockheed Martin (LMT).

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Washington State’s Senators Questioning Air Force Moves

The two Democratic Senators from Washington state, Maria Cantwell and Patty Murray, are raising questions about some recent changes to the KC-X RFP that in their eyes favor EADS North AmericaForexyard.com is reporting that three changes were announced last week that included how the encryption material or “COMSEC” would be treated as well as a clause allowing duty free import of aircraft components.

These two additions especially have attracted the attention of Boeing (BA) supporters as in their view they make it easier for a non-U.S. company to bid.  The Air Force is saying the COMSEC change clarifies how all contracts will treat this important security matter.  Obviously COMSEC material is tightly controlled doubly so when it comes to handling by non-U.S. personnel.

As the contract goes through its process sniping and criticism of every move, change or event will happen from either side’s supporters.  This contract is so large and so important to the two companies that things like this should be expected.

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New Website From EADS North America Stresses A330 Availability

EADS North America has set up a new website, http://www.kc45now.com/index/, that stresses the “Tomorrow’s tanker, ready today” aspect of their program. This is following up on their plan to stress the availability of their aircraft as compared to the newer Boeing (BA) “NewGen” tanker that while is is based on the 767 integrates some 787 avionics into it. This might require some development time.

The A330 is already in production for Italy and the U.K. and will, technically, only require the necessary U.S. Air Force specific equipment integrated onto it.

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U.S. Air Force Continues To Invest In Older Tankers

The current U.S. fleet of aerial tankers consists of a few hundred Cold War era KC-135 aircraft and less then a hundred KC-10 built in the Eighties. The KC-135 is based on the Boeing (BA) 707 airliner but were built as tankers not converted from passenger aircraft. The KC-X program will replace most of the KC-135 if all 400 or more are purchased and built. The initial contract which the proposals are due on is for about 150 aircraft.

Because it will now be several years before the first KC-X flies and a substantial number are available the U.S. Air Force will need to continue to upgrade, maintain and overhaul the existing aircraft. The most modern variant of the KC-135 is the R model. Today ARINC Engineering Services was awarded a contract to upgrade several KC-135R models with new avionics. No value was given for the contract but it will provide modern, digital instruments for the older aircraft. Eventually all KC-135R will receive this upgrade.

Due to the fact that it has taken almost ten years to get to this, the third, attempt to award a contract for a new tanker the KC-135 and KC-10 fleets will fly for several more years beyond what was expected. The continued investment in modernizing these aircraft will help them meet the current set of mission requirements while waiting for the new tankers.

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Analysis: EADS Participating In KC-X Contest

This is an article I wrote at BNET: Government about EADS decision to submit a proposal.

“The decade-long saga to replace the KC-X aerial tanker contract begins a new chapter. The European aerospace giant EADS (EADS: P) and Airbus, its subsidiary, announced that it will definitely submit a contract proposal to the Air Force. The program will replace the aging Cold War KC-135 tankers (pictured).

Boeing (BA) thought it had won the contract for at least 179 new aircraft earlier this year when Northrop Grumman (NOC) who had bid in partnership with EADS withdrew from the bidding. Then, earlier this month, the Pentagon agreed to extend the deadline, at EADS’ request, to allow it time to submit a new bid.”

Read the rest at BNET.

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EADS Believes Established A330 Program Will Offset Possible Cost Disadvantages

In an article at the Seattle Times, Dominic Gates writes that EADS (EADS:P) is planning on offsetting some of their cost disadvantages related to the bigger aircraft and establishing a new production facility with less development. The aircraft they will offer again for the KC-X program is a modified version of the A330 MRTT already planned for Australia, Great Britain, UAE and Saudi Arabia.

The aircraft is a little behind schedule but is in test flights and will deploy the first of five aircraft to Australia this year. The U.K. ones are slated for 2011 and the two oil states will get there aircraft soon after. There will have to be some modifications to the A330 to meet U.S. Air Force needs but they should be minor. EADS feels that Boeing (BA) will have to spend more money to get their 767 based tanker ready as it does incorporate the 787 cockpit and parts of other 767 models. This means that it is not identical to the 767 tankers ordered by Japan and Italy. Japan has received three of their four aircraft while Italy has seen developmental delays and has not received any.

It is expected that the A330 will cost more to manufacture due to its size and the shipping involved to send the components to the U.S. from overseas. The bigger aircraft while capable of carrying more fuel and having a longer range then the 767 will cost more to operate and may require infrastructure investment as it is much larger then the KC-135 tankers being replaced.

Once the proposals are in it will be seen if EADS can do their pricing correctly.

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Boeing Statement On EADS Bid

Boeing (BA) issued a press release last night in response to EADS’ (EADS:P) decision to bid on the contract. In part it reads:

“We are confident in the superior value and capabilities of our NewGen Tanker and intend to present a compelling case for it in our proposal. While we are disappointed in the bid submission delay, we hope for a fair and transparent competition free of any additional changes intended to accommodate a non-U.S. prime contractor.

We also remain deeply concerned about the ability of a heavily subsidized Airbus/EADS to accept levels of financial risk that a commercial company such as Boeing cannot. We regret that these concerns will not be addressed in the bid evaluation, even when the U.S. government has proven in a world court that those subsidies are illegal and directly distort competition between Airbus and Boeing.”

It will be an interesting competition.

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