* Airbus parent calls Boeing bid "extremely lowball"
* Says Boeing's bid was $2 billion cheaper in total
* EADS seen shifting focus to other programs, acquisitions
(Adds quotes, Boeing, Air Force reaction, byline)
By Andrea Shalal-Esa
WASHINGTON, March 4 Airbus parent EADS EAD.PA
conceded defeat in an epic, decade-long contest to sell aerial
tankers to the Pentagon and confirmed it would not protest the
award of a $30 billion contract to Boeing Co (BA.N).
EADS North America Chairman Ralph Crosby expressed
disappointment after Boeing won the contract on the third
attempt, but said the U.S. company had undercut the bid to use
European Airbus aircraft by a total of $2 billion.
"It's clear that there is no foundation for protest," he
said, adding that while EADS still had misgivings about the way
the Air Force had structured the competition this time, the
service had followed the new ground rules scrupulously.
In the end, Crosby said EADS decided that it could not have
undercut what he described as an "extremely lowball bid"
submitted by Boeing to keep Airbus from securing a U.S.
production site for mid- to large-sized airliners.
"When you're in a fixed-price game and the other guy
decides he's going to win at any cost, there's probably not a
lot more that could be done," Crosby told reporters.
But he said he did not believe EADS made a mistake by
competing on its own after its former partner Northrop Grumman
Corp (NOC.N) pulled out of the running, and said the
competition had saved about $16 billion from the initial 2001
tanker deal that the Air Force proposed with Boeing.
EADS confirmed its decision at a news conference after
Reuters reported on Thursday that it was poised to waive its
right to appeal the contract for 179 planes, turning its focus
to other weapons contracts and acquisitions.
EADS North America Chief Executive Sean O'Keefe said the
company was actively looking at a possible acquisition target
and could be ready to make a move soon, although he declined to
give any specific timetable or scope for a possible deal.
EADS' decision to skip a protest may ease trans-Atlantic
tensions over defense contracts but came as a huge
disappointment to officials and workers in Alabama where EADS
planned to assemble its fleet.
For Boeing, the move marks a double victory -- 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.
Boeing welcomed the news and said it was ready to go to
work on an initial $3.5 billion development contract for the
first 18 planes that it signed with the Air Force last week.
The new KC-46 planes will replace the Air Force's fleet of
KC-135 tankers, which are about 50 years old on average.
The Air Force underscored that both competitors were
"world-class companies" and said it expected to continue the
long-standing relationships it had with both firms.
This is the Air Force's third bid to buy new refueling
planes since 2001. The first deal collapsed amid a procurement
scandal that sent two former Boeing officials to prison.
The Pentagon canceled the second attempt in 2009 after
government auditors upheld a Boeing protest. (For chronology,
EADS shares closed down 0.4 percent. Boeing was down 1.28
percent at $70.43 after making big gains on Thursday.
The Pentagon awarded the hotly contested contract to Boeing
last week, calling it the "clear winner" in a competition that
Alabama Senator Jeff Sessions said had devolved into a "low
Air Force officials had said EADS was entitled to protest
if it believed errors were made, but that the Pentagon expected
to prevail in any protest.
Defense analyst Loren Thompson said Boeing now faced tough
pressure to perform under the aggressive bid it submitted.
EADS officials said Boeing's bid was riskier than their
own, given that EADS is already building very similar tankers
for Australia and other foreign countries, and said EADS would
be ready to jump in if Boeing's performance faltered.
EADS said its own analysis showed that Boeing's proposed
price was $21.4 billion against its own offer of $23.4 billion,
making the EADS proposal more than 9 percent more expensive.
It said the Air Force's total evaluated price of the Boeing
bid was $20.6 billion, a figure arrived at after subtracting an
estimated $800 million from Boeing's bid for an estimated fuel
usage advantage and $300 million for military construction.
EADS said its evaluated price was $22.6 billion, noting
that the $800 million advantage earned by the company on a
complicated fuel effectiveness model was effectively canceled
out by Boeing's advantage for fuel usage and construction.
EADS said its proposed engineering and development costs of
$3.5 billion compared to $4.4 billion for Boeing.
(Additional reporting by Kyle Peterson)
(Reporting by Andrea Shalal-Esa; Editing by Phil Berlowitz,
Tim Hepher, Dave Zimmerman)