As Boeing filed its bid on Friday for a US$35 billion US Air Force tanker contract, the company said it was changing the production line of its 767 jets to cut costs and better compete with a rival bid.
Boeing’s bid was submitted a day after the European Aeronautic Defense and Space Co (EADS), the parent of Airbus, filed its paperwork for what could be the largest military contract awarded over the next several years.
Both bids come slightly more than a week after a panel of the WTO ruled that Airbus had received government subsidies to build its commercial planes.
Boeing has complained that European support could help EADS undercut Boeing’s price on the aerial refueling tankers even though Boeing’s plane is smaller and would be expected to cost less. As a result, Boeing executives said they were reshaping the final assembly line for the 767, the model on which its tanker entry is based, to cut costs and speed production.
The EADS tanker is a variant of Airbus’ A330-200 jet. The cost-cutting will help ensure that the Pentagon pays the lowest price for the tankers no matter which company wins the contract.
“We are deeply concerned about the ability of Airbus and EADS to be able to accept the financial risk that a commercial company like Boeing cannot,” Jean Chamberlin, a Boeing vice president who manages its tanker program, said in an interview on Friday.
Chamberlin said Boeing feared that EADS could accept lower returns on the tanker contract and “turn in a proposal that we would have a difficult time matching.”
EADS executives, however, have dismissed such concerns, saying that the subsidies cited by the trade panel — mainly low-interest loans to help Airbus develop planes — were irrelevant to the tanker contest. Pentagon officials have refused to consider the subsidies in evaluating the tanker bids, even though Boeing’s supporters in US Congress have been clamoring for them to do so.
Ralph Crosby, the chairman of EADS North America, said on Thursday that even though its plane was larger, his company could compete with Boeing because its jet was more modern and efficient and the commercial version was still being produced in larger numbers than the 767.
Referring to the complaints about subsidies, he said Boeing’s supporters were “wasting a lot of time trying to derail a process because their plane is inferior.”
Boeing plans to replace the 767 in its commercial lineup with the new 787 Dreamliner and it is making the changes in the 767 assembly line as it clears space in its factory in Everett, Washington, to increase production of the 787 Dreamliner.
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