Boeing deal on tanker planes put on hold

The American plane maker Boeing’s unconventional deal to supply air refuelling tankers for the US Air Force has been postponed by the Pentagon while a probe is carried out into the company’s conduct.

Mired in scandal involving the tanker arrangement, the aerospace giant has dismissed two executives and Phil Condit resigned yesterday as chairman and chief executive officer of the company.

Deputy Defence Secretary Paul Wolfowitz announced yesterday there will be “a pause” for the Pentagon’s internal auditor to examine whether the two executives’ actions affected Boeing’s government contract for the planes.

The proposal to lease the tankers is unorthodox because government policy is to buy outright.

Boeing has laid off more than 40,000 workers, mostly in Washington state and Wichita, Kansas, and the tanker deal holds the promise of creating jobs in both locations.

Politicians knew the Air Force did not have the budget to swiftly replace the deteriorating Air Force fleet. The original plan was to lease all 100 of the tankers, which supporters considered an easier sell in Congress because it required less money up front.

Republican Senator John McCain of Arizona and his supporters have denounced the plan as wasteful and questioned company executives’ conduct.

The result was a compromise to lease only 20 planes and buy the rest, a change expected to save billions of dollars. It also prompted a Defence Department investigation into the company’s actions in securing the Pentagon contract despite a cheaper bid from French rival Airbus.

Wolfowitz explained the postponement in a letter to leaders of the House and Senate Armed Services committees.

He said the Pentagon “remains committed to the recapitalisation of our aerial tanker fleet and is appreciative of the compromise that will allow this arrangement to move forward.

“Nonetheless, I believe that it is prudent to reassess this matter before proceeding,” he wrote.

Senate Armed Services Chairman John Warner called the pause “a prudent management step.”

He said the Pentagon should do nothing about the planes until Congress receives results of the internal review, and he said the review should include actions of all Pentagon and Air Force personnel involved in negotiating the lease contract.