Boeing leaves open tanker price tweak

Dennis Muilenburg, President and CEO of Boeing Defense, Space & Safety, speaks during the Reuters Aerospace and Defense Summit 2010 in Washington September 7, 2010.

WASHINGTON (Reuters) - Boeing Co (BA.N) left open the possibility of trimming its current bid to build 179 new U.S. refueling aircraft in its continuing drive to deny the deal to Airbus parent EADS (EAD.PA), its European rival.

The U.S. Air Force is weighing competing bids on the contract, valued at $25 billion to $50 billion, that were due on July 9 and is asking the bidders follow-up questions.

The rematch marks the third time the Air Force has sought to start replacing its Boeing-built KC-135 tanker aircraft that on average are about 50 years old. The purchase has long been listed as the Air Force's top acquisition priority.

The government typically seeks a final proposal revision and if asked, "we'll respond to that," Dennis Muilenburg, the head of Boeing's weapons-building arm, told the Reuters Aerospace and Defense summit in Washington on Tuesday.

"Our intent is to continue to offer a winning offer," he said when pressed on whether the company might lower its bid for competitive reasons. "Beyond that I can't comment until we get specific requests from the customer."

He said the tanker is a "national priority, and Boeing is prepared to respond with that kind of priority."

Guy Hicks, a spokesman for EADS's North American arm, said in response that an "interactive process with the customer" has begun.

"We have submitted a compelling proposal that meets our business case," he said in an email. "We have the most capable tanker available -- period."

The Air Force says it will award a contract this fall, which could mean as late as December 20.

Muilenburg said Chicago-based Boeing must balance its responsibilities to all stakeholders as it weighs any such bid revision. "We're going to make decisions here that are financially responsible," he said.

The initial Air Force tanker-acquisition effort, a would-be lease-purchase with Boeing, collapsed in 2004 amid a scandal that sent the Air Force's former second-ranking arms buyer and Boeing's ex-chief financial officer to prison for conflict-of-interest violations.

The Pentagon in 2008 awarded a 179-plane deal to a team made up of Northrop Grumman Corp (NOC.N) and EADS, only to have it overturned on appeal from Boeing. The U.S. Government Accountability Office found the Air Force had made enough errors in judging the contest to have changed its outcome.

Boeing's bid in the latest round of competition was cheaper than its previous, failed bid against Airbus for the 179-plane deal, Jean Chamberlin, Boeing's general manager for the bid, told Reuters in a July 9 telephone interview. Boeing remained concerned about a "heavily subsidized competitor," she said, alluding to a U.S.-European subsidies dispute that adds a diplomatically sensitive geo-economic dimension to the tanker mix.

Muilenburg declined to describe the 767 variant Boeing is offering this time but said it is an existing airframe with "in-line modifications," such as an all-new digital cockpit of the type used in the 787 Dreamliner.

Boeing's catalog has three different sizes of the passenger version of the 767, built to carry 181 to 245 people between 5,600 and 6,600 statute miles.

In an effort to deny information to its competitor, Boeing has not said publicly which airframe it would use, but Muilenburg's comments appeared to rule out a hybrid version that EADS contends would be risky to produce.

(Reporting by Jim Wolf and Tim Hepher, editing by Gerald E. McCormick)