* EADS poised to announce won't protest contract - sources
* Boeing shares up, EADS down
* Fuel prices widened gap between Boeing, EADS planes
(Summarizes EADS reaction to contract in paragraph 3)
By Tim Hepher and Andrea Shalal-Esa
PARIS/WASHINGTON, March 3 Europe's EADS
EAD.PA is poised to concede defeat in a decade-long battle
with Boeing Co (BA.N) by deciding not to appeal a $30 billion
U.S. tanker contract, sources familiar with the matter said.
The parent of Airbus could announce as early as Friday that
it will not protest last week's surprise decision by the Air
Force to award Boeing a contract for 179 new refueling planes,
said the sources, who were not authorized to speak publicly.
Since the award to Boeing last week, EADS has been measured
in its public response to the decision and has said it is
looking forward to competing for other U.S. programs.
The move should avert the transatlantic tensions that
flared after the Pentagon in 2009 revoked an earlier contract
with EADS, but would likely dismay lawmakers in Alabama, where
EADS had planned to assemble the flying gas stations.
It would hand a double victory to Boeing -- keeping its 767
production line running for a decade longer, and blocking
Airbus from establishing a commercial airplane manufacturing
site in the United States on the back of the tanker deal.
EADS shares, already depressed by Dubai's cancellation of a
$4.76 billion Airbus jetliner order, closed down 2.7 percent at
19.78 euros in Paris, while Boeing shares rose 3.1 percent to
$71.70 in afternoon New York Stock Exchange trading.
"Most likely there will be no appeal," said one source
familiar with internal discussions at EADS.
Guy Hicks, spokesman for EADS North America, said the
company was continuing to evaluate information provided by the
Air Force this week and no final decision had been made.
Scott Hamilton of Leeham Co said the news was disappointing
for EADS, but meant U.S. troops would finally get new refueling
planes, which extend the range of military operations.
"That's the way things go in the world -- you win some and
you lose some," he said.
Richard Aboulafia of the Teal Group said rising fuel prices
had widened the gap in operating costs between the larger
Airbus A330-based tanker and Boeing's more modest 767.
The expected peaceful conclusion contrasts with a bitter
ongoing dispute between Europe and the United States over civil
aircraft subsidies and would come just a year after French and
German leaders warned of the threat of U.S. "protectionism."
The Pentagon awarded the contract to Boeing last week,
calling it the "clear winner" in a contest that Alabama Senator
Jeff Sessions described as a "low price shootout."
Air Force Chief of Staff General Norton Schwartz on
Wednesday reiterated that EADS was entitled to protest the
contract loss if it believed mistakes were made and said the
company would not face "payback" for doing so.
He acknowledged the "ugly" history of the tanker
procurement, but said Air Force officials were convinced they
had handled the process fairly this time and would prevail in
any legal challenge. [ID:nN02254951]
EADS has until March 7 to decide whether it will protest,
but company officials are already shifting their focus to other
U.S. weapons competitions and the hunt for acquisitions that
could help it expand its footprint in the United States
Airbus Chief Executive Tom Enders last week looked beyond
tankers to future business, telling Reuters: "We have given our
competitor a tough fight and forced them to offer a very low
price. For Boeing, losing this would have been a disaster; for
us it is only a lost business opportunity." [ID:nN25160928]
EADS officials were briefed by Air Force officials about
the tanker decision on Monday and again on Tuesday, and are
still carefully examining all the information; but sources said
the company was leaning against a legal challenge.
The Air Force was tight-lipped to EADS in its initial
explanation of the contract award, prompting the company to
request a second briefing; but the sources said officials have
not found the kind of "egregious" error that EADS North America
Chairman Ralph Crosby had said it would take to justify a
A formal announcement by EADS, which is likely on Friday,
would pave the way for Boeing to begin work on a $3.5 billion
development contract signed with the Air Force last week.
Neither the Air Force nor Boeing had any comment.
A key Boeing union said its workers are ready to start
building the new planes.
"It's time for the lawyers to stand down," said Ray
Goforth, executive director of the Society of Professional
Engineering Employees in Aerospace Local 2001.
EADS and Boeing are likely to battle it out again in coming
years, when the Pentagon plans to stage separate competitions
for another 300-plus refueling planes.
(Additional reporting by Kyle Peterson in Chicago)
(Reporting by Tim Hepher and Andrea Shalal-Esa, editing by
Gerald McCormick, Dave Zimmerman and Tim Dobbyn)