Boeing wins 35-billion dollar tanker contract (1st Lead)

Feb 25, 2011, 9:00 GMT

Washington - The Pentagon announced Thursday Boeing Co has won the 35-billion dollar tanker contract, defeating rival European Aeronautic Defence and Space Co for the lucrative deal to supply the next generation of Air Force refuellers.

The contract to build 179 KC-Xs is one of the largest in the Pentagon's history and could be lengthened to reach 100 billion dollars. Boeing is scheduled to deliver the first 18 aircraft by 2017.

The Pentagon hopes the award will bring an end to the long and problematic saga to begin replacing its fleet of 1950s era KC-135 tankers, which provide fuel to aircraft in mid-flight to extend the range of military operations.

Boeing and EADS have been in a fierce competition for years to win the contract, sparring publicly and with expensive advertising. Both companies touted their planes as superior and the best deal for the military.

The Pentagon has twice failed in its 10-year effort to award the contract for the KC-X. A leasing programme with Boeing collapsed amid scandal in 2004.

The Pentagon awarded the contract to an EADS-Northrop Grumman partnership in 2008. But a congressional oversight agency partially upheld a Boeing protest, ruling that errors had occurred in the Air Force's evaluation of the proposals, effectively requiring the Pentagon to hold a new competition.

But Thursday's award might not be the end of the long running battle. Defence procurement analysts have said they expect the losing company to lodge a protest with the Government Accountability Office, the investigative arm of Congress.

EADS, the parent company of France-headquartered Airbus, based its proposal on the A330, while Boeing used its 767 and will build the planes at plants in Everett, Washington and Wichita, Kansas.

The competition had shaped up along political lines as well, with Democrats mostly supporting Boeing, arguing an award to EADS would ship badly needed US jobs overseas.

EADS, with the support of southern Republicans, said it would assemble the planes in Mobile, Alabama and create 48,000 jobs.

EADS has said its larger plane has more capacity and is already in flight, while Chicago-headquartered Boeing asserted its version was more fuel efficient and would save taxpayers billions of dollars over the life of the programme.