Will European EADS come back into the ring without its US industrial partner?
09:26 GMT, March 22, 2010 defpro.com | Late last week some eyebrow-raising news again opened the door of the US tanker competition that seemed to have been slammed shut with Northrop Grumman’s decision to not submit a bid with its European partner, EADS, due to the allegedly unfair terms of the request for proposal (RfP). Despite Northrop’s concerns, EADS announced on Friday that it is currently considering filing its own “responsive proposal” to the RfP following the US Defense Department’s (DoD) announcement to possibly extend the deadline for the submission of proposals.
As Pentagon spokesman Bryan Whitman confirmed, “The Defense Department is considering European Aeronautic Defence and Space Co.’s request for 90 days beyond the May 10 deadline to prepare its bid” for the $35 billion tender. Whitman did not specify how long the extension might last, but emphasised that such extensions weren’t unusual for requests for proposals.
EADS understands the Defense Department’s willingness to extend the deadline as a “sign that the DoD seeks competition.” However, the European company maintains its concerns that the terms of the RfP favour a smaller aircraft with fewer capabilities than the A330-based MRTT solution could provide to the Air Force. Although, according to EADS, a “significant extension to the period within which to prepare and submit a proposal [...] is essential, it is only one factor in making a decision for EADS to compete. In the end, the company will only submit a proposal if there is a fair chance to win, after evaluating all relevant factors.”
The Russian intermezzo
Conveniently, during US Secretary of State Hillary Clinton’s visit to Moscow on Friday, John Kirkland, a lawyer representing Russia’s United Aircraft Corporation (UAC), said that the state-owned aerospace group planned to participate in the competition and would jointly prepare a bid with a US partner. An undisclosed source further specified that the group would enter the race with a version of its Ilyushin Il-96, which is the same size as the B-767 but allegedly is less costly to operate. However, various experts have judged the Il-96 to be inferior to Western competitors and only a small number of these aircraft have so far been manufactured.
It is questionable how promising such an offer would be since, according to the source, the aircraft reportedly would be built in Russia and assembled in the southeast region of the US. For the same reason, the Northrop-EADS tanker has been criticised by Boeing and other opponents for not being a 100 per cent US solution. Nevertheless, Kirkland told reporters on Friday that UAC would “announce a joint venture on Monday with an American company to bid on the tanker program.” He further claimed that, should the competition be fair, the Russian solution would win.
However, this intermezzo was quickly terminated on Monday, as a spokesman for UAC told the press that such rumours were absurd and that the company did not have any plans to enter the competition.
Can EADS gain a stronger foothold in the US?
Now the focus can again return to the “traditional” participants in this competition, which has already produced headlines for several years, in particular since the controversial decision in favour of a protest filed by Boeing after the Northrop Grumman-EADS team won the contract to build the Air Force’s next tanker platform in 2008. The entire competition is minted by a procedural to and fro, creating a significant delay for the urgently required replacement of the ageing Air Force tanker fleet.
A win by EADS would provide the European-based aerospace giant with a valuable boost to its market position in the US. Although EADS already holds prime contractor status in the US for military helicopters, as Financial Times recently explained, the tanker contract would have an unparalleled effect on the company’s status in the US and would, furthermore, be a true bonanza, guaranteeing orders and flow of funds for a significant period. Considering the size of the US tanker fleet and the long-term maintenance requirements of such a heavy duty asset, the US contract would consolidate EADS Airbus’ currently troubled military aircraft business.
Nevertheless, it remains questionable a) whether EADS will be able to cobble together a new, adequately priced tender in this short amount of time, and b) if a European-led competitor would be able to win such an important contract in the US, thereby creating a sort of industry-political precedent. The outcome of the current development will shed more light on the future of EADS’ involvement in the US aerospace market.
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By Nicolas von Kospoth, Managing Editor
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