BAE snubbed in air tanker contract
The Guardian (UK) 01/13/04
author: David Gow
Copyright (C) 2004 The Guardian; Source: World Reporter (TM)
The government is set to deal a savage blow to BAE Systems and Boeing by awarding a £13bn contract to supply the RAF with a fleet of new air-to-air refuelling aircraft to a rival European consortium, industry sources said yesterday.
The decision, postponed last month and due to be announced soon, is understood to have come after a recommendation in December from senior Ministry of Defence officials in favour of the European team led by EADS and including Rolls-Royce, refuelling experts Cobham and French group Thales.
It follows a spate of Pentagon investigations into unethical conduct by senior managers at Boeing during negotiations for an $18bn (£9.8bn) refuelling contract for the USAF and other military orders as well as the dismissals and resignations of senior executives, including Phil Condit, chief executive, late last year.
Boeing, a virtual monopoly supplier, and its partners in the Tanker Team have been offering about 20 converted 767s while its rivals, Air Tanker, have proposed a mix of new and used Airbus A330-200s. Last month EADS broke into the refuelling market by launching the first of six converted A310s for the German and Canadian air forces.
Allan Cook, Cobham chief executive, said the MoD decision rested on three factors: capability, commerciality and politics. "We believe we have given the RAF the best capability, with the A330 able to carry more fuel and using our proven technology, and the best commercial solution with a PFI over 27 years. It's now about politics and ours is a European solution."
Employment prospects are believed to have helped swing the decision in favour of the European consortium. Air Tanker is promising to create or sustain some 7,000 jobs in Britain while Tanker Team says it will provide 5,000, with both claiming trade union support.
Mr Cook said: "I honestly believe that both Tanker Team and Air Tanker have run a close-run battle. But we started in air-to-air refuelling in 1934 and have well over 50 years' experience in providing the required pods on the aircraft wings."
Boeing executives have cast serious doubt on its rival's technology but Mr Cook said: "For Tanker Team to start rubbishing our refuelling facility is a little bit rich because we are talking about a rival paper design provided by Smiths Group. Both have provided credible solutions but it's just that ours is much better."
Mr Cook, meanwhile, confirmed that the cash-strapped MoD is unlikely to go ahead with the third and final phase of the much-delayed and costly Eurofighter programme - another blow to BAE, the lead contractor.
