The two civil airliner giants both attended the Farnborough Air Show with Boeing (BA) conducting the first overseas flight of the new 787 and EADS (EADS:P) sending an A380. Both companies announced substantial orders from a variety of airlines and leasing agents while also taking the time to criticize their opposition’s bids for the KC-X new Air Force aerial tanker.

Boeing received an order for sixty 737 aircraft from Mr. Udvar-Hazy’s new leasing company as well as Emirates Airlines needing thirty 777 wide body aircraft. GE’s leasing company also bought forty 737 aircraft and Avalon twelve. Royal Jordanian airline purchased three of the new 787.

EADS got an order from Russia’s Aeroflot for eleven A330. That carrier already operates sixty-four A320 and 10 A330. Hong Kong Air followed with a plan to buy fifteen of the new A350 XWB, the equivalent of the composite 787, and ten A330. The Chilean carrier LAN also bought fifty A320.

All-in-all both companies felt very good about their orders and the future of the airline industry. There are hopes that the world economy is recovering and this will lead to more sales and greater investment in new equipment.

At the same time the two companies sniped at each other about the ongoing U.S. Air Force KC-X aerial tanker contract. Boeing submitted a bid to use their new 767 variant, NewGen Tanker, to replace the aging KC-135 fleet. EADS has based their proposal around the A330 like they did with their last proposal.

Boeing is making clear that they will offered a very competitive price based on their reducing production costs by leaning out their line. Boeing believes that in the end the contest will be decided on price and they plan on having the best price including lifetime operating costs.

EADS agrees that price is important but at the Air Show the CEO, Mr. Gallois, made clear that there won’t be a sacrifice of profit to just win the contract. Due to problems with the A380 and the A400M transport aircraft EADS has some financial issues to face and while it might be attractive to win the contract the company may not really be able to afford to not have some money made on it. The size of the recent commercial orders indicate that the military contract while it would open the European company up to a new market is not critical to their future.

The European Union (EU) has appealed the recent WTO ruling that their aid to EADS amounted to an illegal subsidy. The company and leaders in Europe have also decried the decision by the trade body to delay their ruling on the similar Boeing case. Boeing’s allies in the U.S. have used the WTO decision to say that EADS has an unfair advantage in the KC-X competition as it received the subsidies. EADS and the EU is countering by saying that the U.S. military contracts over the last fifty years to Boeing are the same thing.

The Pentagon has made it quite clear that despite the desires of some in Congress they cannot take the WTO decision into account in their source selection.

It will be a long hot summer at this rate, and when the decision is announced in November the chance of a protest by one of the losers is very high. The contract is a key military one in the next few decades no matter what each company says about it. Winning the contract will give them a leg up on their competitors for the future orders for tankers and aid them in getting more and better commercial contracts.

Boeing (BA) submitted their proposal for the KC-X aerial tanker program a day after rival EADS (EADS:P) did. Today was the day it was formally due, EADS coming in a little early. The Boeing proposal stresses their cost and size benefits over competing EADS with their larger A330 based aircraft. Boeing is basing their bid on a modified 767 airliner with advanced avionics from the yet to enter service 787.

Also U.S. Aerospace and Antonov submitted their competing proposal after losing a bid to delay things sixty days. There total cost is under thirty billion for a contract the Air Force has estimated at $37.5 billion based on an aircraft cost of only $150 million each.

The Air Force plan is to award the contract in four months. The three bids may make the competition’s source selection last longer and may also raise the chance of a protest.

If the U.S. Aerospace / Antonov team wins it might get very interesting.

EADS North America, the American subsidiary of EADS (EADS:P), turned in their proposal for the KC-X aerial tanker today to the U.S. Air Force. This represents their second attempt to win the program and the Air Force’s third try.

EADS North America will base their program on a modified Airbus A330 transport aircraft. As with the previous attempt in 2008 they will assemble the aircraft at a facility in Mobile, AL. Then they will receive the necessary modifications to meet the U.S. requirements. Airbus will also assemble all of their A330 transports at this new facility if EADS does win the contract when it is awarded in November.

Boeing (BA) will also turn in their proposal by tomorrow. A third contended, U.S. Aerospace, has committed to submit a proposal by Friday if the Air Force does not grant their extension request.

As reported last week U.S. Aerospace and Antonov intend to submit a proposal to the Air Force for the KC-X aerial tanker. Because the actual proposals are due this week supposedly the new team will ask for a sixty day delay to accommodate them. The deadline has already been moved once from June to July to allow EADS (EADS:P) and its team to bid.

The current schedule is for a contract award in November and this new extension would probably push that into 2011 due to the time it will take to evaluate a third bid. U.S. Aerospace did say that they will submit this week if no extension is granted.

A third proposal will make the contest more interesting especially as the Antonov will be very price competitive.

Here is an article I wrote at our sister site, Defense Procurement News, about the WTO subsidies report and the KC-X contract.

Earlier this year in responding to questions about the delay to the submissions of proposals to July due to the accommodation for EADS (EADS:P) the Air Force said the contract will start in mid-November. Now word is coming out that the award won’t be made until “late November”. Critics have seized on this changes as a delay due to the decision to allow EADS to bid.

Technically this is a delay of several weeks from the original schedule. The chances though of the Air Force meeting that were low as it was very aggressive. It only gave them four months to review proposals and conduct the award. Even if they assumed the new proposals were similar to the last ones in 2008 that amount of time to conduct a source selection for a contract of this size may have been a little unrealistic.

This decision will spur EADS’ opponents and Boeing (BA) supporters to further their current war of words.

In a sign that they are ramping up work on their bid for the new KC-X aerial tanker program EADS (EADS:P) announced that they are moving their proposal preparation team to new offices in Mobile, AL. If the European defense giant does win the contract they will assemble the A330 aircraft at that city and then apply the specific military modifications there or at another facility.

Reportedly EADS will concentrate about 100 workers in Mobile. They are currently based in Arlington, VA where the EADS North America headquarters is and Melbourne, FL. The Melbourne site was most likely established when EADS was working with Northorp Grumman (NOC) on their last attempt in 2008. Northrop has an aircraft modification facility there used to support the E-8 JSTARS program.

The Defense Department and Air Force expect to received proposals in July and award in the Fall. The Boeing (BA) team and their “NewGen Tanker“ is considered the only other potential offer.

The Secretary of Defense Robert Gates made clear that the Defense Department and the Air Force want some competition for the KC-X aerial tanker program. This is going to have to include EADS (EADS:P) against Boeing (BA) due to the requirements of the program. Gates stressed disappointment with those in Congress attempting to prevent U.S. companies working with EADS on their bid.

If there is going to be any competition for the third attempt to buy a replacement for the aging KC-135 aircraft it will have to include EADS. The only other potentially viable contender would be a Russian aircraft either based on the Ilyushin IL-78 Midas system or perhaps on the IL-96 wide body airliner. Having a Russian competitor would make the contest even more difficult then just one with EADS.

EADS (EADS:P) had decided to go it alone with their own bid for the KC-X aerial tanker after former partner Northrop Grumman (NOC) decided the requirements favored Boeing (BA) too much. All that meant is that EADS would prime the contract but would probably find other companies, including U.S. ones, to sub for them. It is now being said by EADS that they have found at least one U.S. defense contractor to do “sensitive equipment”. The company is unidentified at this point.

This only makes sense as it allows Airbus to deliver a A330 aircraft or tanker to a U.S. facility to do the integration of the military equipment such as radios and defensive equipment. EADS is planning to do this with Lockheed Martin (LMT) on the Army’s new attempt at buying an Armed Reconnaissance Helicopter (ARH) and should do this for KC-X. Lockheed planned the same thing with Augusta Westland on the failed VH-71 program. By using an American company to do this sort of work it helps with security and technology transfer issues. It is also the reason that EADS North America exists.

The House of Representatives in their vote on the 2011 Defense Authorization Bill added an amendment sponsored by Washington and Kansas members to force the Pentagon to consider the WTO ruling on illegal subsidies when it comes time to consider EADS’ (EADS:P) bid. The Pentagon has made it clear in the past that their contracting and acquisition laws and regulations do not allow them to factor that into their cost evaluations. This language if it is in the final version of the bill when it is passed after Conference will supposedly make them do that.

One question though is the Air Force plans to receive bids on July and announce a decision in the late Fall. There is a good chance that the source selection if it follows that schedule will be complete before the bill makes it out of Congress. While the Authorization Act often is done before the Appropriations one it is often not complete by 30 September as it should be. The Pentagon could also argue to ignore the language setting up some sort of court fight. EADS could also adjust their prices to take into account the effect of the WTO ruling.