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Effort to Add EADS Subsidies Consideration to Defense Authorization Bill Fails

Senator Murray (D-WA) and Senator Brownback (R-KS) attempted to attach an amendment to the Senate’s 2011 Defense Authorization Bill today that would force the Defense Department and U.S. Air Force to take into account the World Trade Organization (WTO) ruling on subsidies to EADS (EADS:P) by European governments. Due to the fact that the bill did not win enough votes to advance mainly due to the attempt by the Democratic leadership to add the repeal of “Don’t Ask/Don’t Tell” policy on gays in the military the amendment wasn’t considered.

The two whose states stand to gain several thousand jobs if Boeing (BA) wins the KC-X contract will have to wait for this bill to be re-considered or add the amendment to another one. Certainly there are Senators from Alabama and other Southern states who favor EADS who might try to work against the amendment.

Currently the U.S. military cannot consider these kind of trade disputes and rulings in their source selection which is why the attempt was made to add the rule.

This continues to show that the fight for this contract will continue in Congress, the media and across the internet.

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EADS Discussing Teaming With U.S. Defense Contractors

Reports are starting to emerge that EADS (EADS:P) and its subsidiary, EADS-North America, are discussing teaming arrangements with other defense contractors to support bidding on the KC-X RFP. The deadline has now been extended until July by the Department of Defense. Supposedly L-3 Communications (L3) is considered the front runner for this work. There is still no definite confirmation that EADS will launch a bid after previous partner Northrop Grumman (NOC) decided not to participate in this the third round of bidding for the Air Force’s new aerial tanker.

Supposedly EADS talked to Raytheon (RTN) and BAE Systems (BAE:L) about this contract. Both of these companies reportedly expressed little interest. BAE Systems is already a partner in EADS as a whole and would stand to gain some work if the A330 made by Airbus is selected by the Air Force. Raytheon has not led an effort to make a large aircraft like this but obviously has strong system integration and engineering experience. L-3 does work on aircraft and purchased Raytheon’s aircraft integration unit several years ago.

If EADS is going to bid teaming with another large, preferably American, contractor makes the most sense. They will help work with the customer using their experience with the U.S. military. That is why the original plan with Nothrop made so much sense.

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Reports of Other Bidders for KC-X Emerge?

Over the weekend it was reported that the Russian state owned aircraft company, United Aircraft, might be interested in bidding on the KC-X proposal. With Northrop now planning on not participating with EADS only Boeing was left as a confirmed bidder. Russia was about the only other country that had the capability to submit a proposal as they have already made tankers for themselves, India and other users. The thought though of Il-76 based tankers fueling F-22 is sort of hard to imagine. Documents provided to the Seattle Times show that United Aircraft would team with a World Aviation Maintenance to form a new company to bid. The proposal would be based on the Il-96 airliner rather then the older transport tanker already in service.

At the same time there are reports that EADS may submit a bid with themselves as the prime. Earlier this month the company said that it was not confident of being able to do this. EADS-North America could certainly be used as a prime contractor. The time needed for the company to prepare a proposal of this magnitude is why there is talk of extending the deadline three months.

It would be good for the U.S. Defense Department and Air Force to have some form of competition in the latest attempt to award this contract. Whether the Russian or EADS based bids would be viable is another matter. It is going to be difficult though to award what amounts to a sole-source contract with the mood in Congress of many Northrop and EADS supporters.

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CONG. John Murtha (D-PA) Dies, Backed Split Tanker Buy

Congressman John Murtha (D-PA) a senior Democratic Representative and the Chair of the Defense Appropriations Subcommittee died yesterday from surgery complications. Murtha had at one time pushed the idea of awarding KC-X contracts to both Boeing (BA) and the Northrop Grumman (NOC) and EADS (EADS:P) teams as a way to rapidly replace the aging KC-135 aircraft. He eventually gave up on the idea.

The rationale for the split buy is that it builds the aircraft quicker while also removing the uncertainty of a protest over a single award. The U.S. Air Force and Department of Defense have made it clear that they do not want to do this due to the increased logistical cost associated with operating two different aircraft. The systems might complement each other with the bigger, longer range KC-30 being based further back in the U.S. and its more permanent bases overseas with the KC-767 flying forward and supporting operations in-and-around South West Asia.

The dual award would also mean that Northrop and EADS will be guaranteed work so their threat not to participate in the latest round would not need to be carried out. That is why organizations like the Aerospace Alliance representing Mississippi, Alabama and Florida support they idea. Some work in Mobile, AL is better then none.

The chances of a split buy are fairly remote but there are still those who want it.

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Alabama And Mississippi To Unite For Aerospace Lobbying, KC-X

The Governors of Alabama and Mississippi, Bob Riley and Haley Barbour, have launched an effort to establish a non-profit organization to lobby for aerospace in the Gulf Coast area. The two Republicans hope that Florida and Louisiana will join their efforts to “create a world-class aerospace, space and aviation corridor from Panama City, Fla., to Louisiana.” Those four state already have a great deal invested in support to NASA. The hope is that the organization will help gain more contracts and investment in the area for aerospace. Their first target is the KC-X tanker contract which will be assembled in Mobile, AL if Northrop-Grumman and EADS win.

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