Congress in turmoil over Air Force tanker decision

WASHINGTON Sat Mar 1, 2008 7:44am EST

Pilot Lt. Col Dan McDonald flies a E-4B NOAC as a KC-135R tanker refuels his plane during a flight back to Andrews Air Force Base in Maryland from Ankara, Turkey, February 28, 2008. REUTERS/Mark Wilson/Pool

Pilot Lt. Col Dan McDonald flies a E-4B NOAC as a KC-135R tanker refuels his plane during a flight back to Andrews Air Force Base in Maryland from Ankara, Turkey, February 28, 2008.

Credit: Reuters/Mark Wilson/Pool

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WASHINGTON (Reuters) - A U.S. Air Force decision awarding a $35 billion aircraft contract to a team including the European parent of Airbus landed like a bomb in Congress on Friday, drawing howls of protest from lawmakers aligned with the loser, America's Boeing Co (BA.N).

The Congressional delegation from the Seattle area said they were "outraged." Kansas Republican Rep. Todd Tiahrt vowed to seek a review of the decision "at the highest levels of the Pentagon and Congress" in hopes of reversing it.

Boeing has big facilities in both Seattle and Wichita, which stood to gain from the long-term project to build up to 179 aerial refueling tankers. Although Boeing was favored to win the contract, the Air Force awarded it to a partnership between Northrop Grumman (NOC.N) and Europe's EADS EAD.PA.

Conventional wisdom was running so strongly against Northrop-EADS in some corners of Capitol Hill that Texas Sen. Kay Bailey Hutchison's office issued a statement late on Friday declaring Boeing the winner. It was swiftly retracted.

Lawmakers from Alabama, where Northrop and EADS plan to do some tanker work, were effusive in praising the Air Force.

"I thought all along that the Northrop Grumman-EADS proposal was the best," Sen. Richard Shelby, an Alabama Republican, told reporters. He said the contract would bring nearly 7,000 jobs to the state.

On the disappointment of Chicago-based Boeing's allies, Shelby said he understood. "If Boeing had won this contract ... I would have been concerned about it."

As for Tiahrt's vow to seek a review, Shelby said, "The Pentagon and the Air Force have made their decision and I think it was for the right reasons and I'll stand by that."

The decision was sure to result in a debate, with a formal protest also possible, said defense consultant Jim McAleese.

The tanker deal will give EADS a huge boost in the U.S. defense market, making it the second biggest foreign supplier behind Britain's BAE Systems (BAES.L), analysts said.

"We are so very excited about having the opportunity to help the Air Force acquire the most modern and capable refueling tanker -- a tanker assembled in America -- by Americans," said Alabama Republican Rep. Jo Bonner.

Bonner represents Mobile, Alabama, where assembly work on the aircraft will be done, although it will largely be constructed in France at facilities of EADS' unit Airbus.

Airbus, with large facilities in Toulouse, is Boeing's arch-rival in the global commercial airliner business.

Wichita's Rep. Tiahrt said, "I am deeply troubled by the Air Force's decision to award the KC-X tanker to a French company that has never built a tanker in its history.

"We should have an American tanker built by an American company with American workers. I cannot believe we would create French jobs in place of Kansas jobs."

Tiahrt said he will seek to have the decision reviewed by both the Pentagon and Congress. "At the end of this laborious process, I hope the Air Force reverses its decision."

Washington Senators Patty Murray and Maria Cantwell, both Democrats, along with six other lawmakers from the state said in a joint statement: "We are outraged that this decision taps European Airbus and its foreign workers to provide a tanker to our American military.

"We will be asking tough questions about the decision to outsource this contract. We look forward to hearing the Air Force's justification."

(Additional reporting by Andrea Shalal-Esa, editing by Richard Chang)

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