Boeing CEO hits Airbus tanker edge from subsidies

WASHINGTON, April 22 (Reuters) - Boeing Co's (BA.N) chief executive said government subsidies received by archrival Airbus give the European aircraft builder a "significant advantage" in their rematch for a potential $50 billon U.S. Air Force aerial-refueling fleet contract.

Two days after Airbus parent EADS (EAD.PA) said it would compete for the deal, James McNerney said Boeing was very concerned about the subsidies' impact in a fixed-price development competition for an initial 179 tanker aircraft.

"We're not afraid of global competition," he added at the Woodrow Wilson International Center for Scholars. "We just want level-playing-field rules applied in a common sense way."

McNerney made his remarks in response to a question after delivering a speech on U.S. global competitiveness, innovation and approaches to public-private cooperation.

President Barack Obama tapped McNerney last month to chair the President's Export Council, the principal national advisory committee on international trade.

McNerney referred to a World Trade Organization ruling last month that Airbus had benefited from illegal subsidies, including to develop the A330, the plane it is pitting against a modified Boeing 767 in the Air Force rematch.

"In a fixed-price development competition, that subsidy is a significant advantage," he said.

The tankers are used to refuel other aircraft in mid-air. They would replace Boeing KC-135 Stratotankers that average about 50 year old.

The Airbus-Boeing subsidy dispute goes back decades and is not over. The WTO is still to rule on a countersuit brought by Europe over U.S. support for Boeing.

The U.S. Defense Department has resisted pressure from Boeing's political backers to factor the dispute into the competition.

"My lawyers tell me that the WTO case gives us no basis on which to make a judgment," Defense Secretary Robert Gates told a House of Representatives defense committee last month.

A spokesman for EADS did not immediately respond on Thursday to a request for comment.

EADS announced Tuesday it would bid against Boeing for the contract, acting as its own prime contractor. Final bids are due July 9.

EADS had teamed with Northrop Grumman Corp (NOC.N) to win a similar contest in 2008, only to have its award overturned after Boeing protested. U.S. government auditors found the Air Force had failed to follow its own judging rules.

Northrop withdrew from the latest contest last month, with CEO Wes Bush saying the Pentagon's final bidding specifications "clearly favors" Boeing's smaller 767-based tanker.

The Air Force initially planned to lease and buy modified Boeing 767s as tankers in a $23.5 billion deal rooted in the post-September 11, 2001, commercial aviation downturn. That deal collapsed amid a conflict-of-interest scandal that sent two Boeing executives to prison, one of them the Air Force's former No. 2-ranking weapons buyer. (Reporting by Jim Wolf; Editing by Tim Dobbyn)