US Air Force awards planes deal

The US Air Force awarded Northrop Grumman Corp. and a European partner a $35bn US (€45.7bn) contract to build airborne refuelling planes, delivering a major blow to rival Boeing.

The US Air Force awarded Northrop Grumman Corp. and a European partner a $35bn US (€22.4bn) contract to build airborne refuelling planes, delivering a major blow to rival Boeing.

The selection of Los Angeles-based Northrop Grumman and European Aeronautic Defence and Space Co., the maker of Airbus planes, came as a surprise to industry and government officials.

Air Force officials said the larger size of the Northrop-EADS aircraft helped tip the balance in its favour.

US-based Boeing, which has been supplying refuelling tankers to the Air Force for nearly 50 years and had been widely expected to hang onto that monopoly, could protest the decision, though the company said no decision has been made.

The contract to build up to 179 aircraft – the first of three awards worth up to $100bn (€65.9bn) over 30 years – opens up a huge new opportunity for Northrop Grumman.

“They don’t come along at this scale very often,” said Northrop Grumman Chairman and CEO Ronald Sugar.

“We do see this as being a very important component of our business for many years to come.”

The deal also positions EADS to break into the US military market.

The Northrop-EADS refuelling tanker, the KC-45A, “will revolutionise our ability to employ tankers and will ensure the Air Force’s future ability to provide our nation with truly global vigilance, reach, and power,” Air Force Gen Duncan J McNabb said in a statement.

Air Force officials offered few details about why they choose the Northrop-EADS team over Boeing since they have yet to debrief the two companies.

But Air Force Gen Arthur Lichte said the larger size was key.

“More passengers, more cargo, more fuel to offload,” he said.

“It will be very hard for Boeing to overturn this decision because the Northrop plane seemed markedly superior” in the eyes of the Air Force, said Loren Thompson, a defence industry analyst with Lexington Institute, a policy think tank.

As the winners of the first award, EADS and Northrop are in a strong position to win two follow-on deals to build hundreds of more planes.

Boeing spokesman Jim Condelles said the company won’t make a decision about appealing the award until it is briefed by Air Force officials. Boeing believes it offered the best value and lowest risk, he said.