France confident US tanker deal will be "fair"

Tue Feb 8, 2011 2:42pm EST

* Minister says award to EADS would be positive sign

* Says US counterparts assured him process would be fair

* Contract announcement expected in February or March (Adds quotes, background, byline)

By Andrea Shalal-Esa

WASHINGTON, Feb 8 (Reuters) - France is confident that the U.S. government will conduct a "free and fair" competition between Boeing Co (BA.N) and Europe's EADS EAD.PA for an order of refueling planes valued at up to $50 billion, French Defense Minister Alain Juppe said during a visit to Washington.

"We are confident in the process ... We are certain that this competition will be free and fair," Juppe said in response to questions after addressing the Washington-based Carnegie Endowment for International Peace.

"We have been reassured by our counterparts in America," said Juppe, who met earlier Tuesday with Defense Secretary Robert Gates.

Juppe's remarks came as Boeing and EADS prepared to submit final bids on Friday in the long-running competition, paving the way for the U.S. Air Force to award a contract for 179 new refueling planes in February or March.

Juppe said a decision by the U.S. Air Force to once again award the contract to EADS would be a welcome sign of deepening cooperation between Europe and the United States, but said an award to Boeing would not necessarily signal conflict.

The Air Force awarded a contract valued at up to $35 billion to EADS and Northrop Grumman Corp (NOC.N) in February 2008, but the Pentagon later canceled the deal after government auditors upheld parts of a Boeing protest.

EADS decided last April to submit a bid of its own after Northrop quit the competition and the Pentagon gave EADS 60 additional days to submit a proposal.

"If the message is positive for EADS, it will be a good signal for the cooperation between Europe and the United States. If it is not, it will not be the signal of a conflict or a misunderstanding," Juppe said.

France holds a stake of about 15 percent stake in the French-German company, but has no say over its strategy.

French President Nicholas Sarkozy weighed in on the bitter competition last year during a meeting with President Barack Obama. He said Obama had assured him that the competition would be completely transparent and that EADS would bid on its own if the terms of the competition were fair.

The Pentagon announced a day after Sarkozy's visit that it would extend the deadline for tanker bids by 60 days, a move criticized by Boeing backers in Congress, who accused the Pentagon of bending its rules to placate Europe.

This is the Air Force's third attempt since 2001 to begin replacing its aging fleet of KC-135 refueling planes, which are over 50 years old on average.

Congress killed the first deal, a lease-buy agreement with Boeing, in 2004 amid a huge procurement scandal that saw a former top Boeing official and a former Air Force weapons buyer sentenced to prison for violating federal ethics rules.

The latest round of the bitter transatlantic competition is nearing a pivotal moment against the backdrop of a longstanding trade dispute between Europe and the United States.

The World Trade Organization has ruled that both Airbus and Boeing have benefitted from illegal subsidies from their respective governments for large passenger aircraft. But the two sides remain at odds over the amount of subsidies, and the issue is likely to remain in litigation for some time.

(Editing by Bernard Orr)

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