March 7, 2008 / 12:41 AM / 12 years ago

Old grudges feed uproar over Airbus tanker

WASHINGTON (Reuters) - Grudges over Iraq and Afghanistan are feeding an uproar over a $35 billion U.S. Air Force snub of Boeing Co (BA.N), the top U.S. exporter, to buy 179 refueling planes built largely by European archrival Airbus.

A man walks past a display at the Boeing booth at the Singapore Air Show in Singapore February 19, 2008. Grudges over Iraq and Afghanistan are feeding an uproar over a $35 billion U.S. Air Force snub of Boeing Co, the top U.S. exporter, to buy 179 refueling planes built largely by European archrival Airbus. REUTERS/Vivek Prakash

Lawmakers weighing the possibility of blocking the deal in a presidential election year say they will look beyond the technical merits that clinched it for Northrop Grumman Corp (NOC.N) and its partner, Airbus parent EADS EAD.PA.

“The political implications are very severe here,” said Rep. John Murtha, a Pennsylvania Democrat who chairs the House of Representatives Appropriations subcommittee that holds the Air Force’s purse strings.

The United States “couldn’t even get NATO to give us an additional 3,000 troops in Afghanistan,” he said Wednesday, launching a formal congressional inquiry. “In Iraq, they’ve pulled back most of the forces from Europe.”

“This is as political as anything that we do,” Murtha said. “This committee funds this program. All this committee has to do is stop the money, and this program is not going to go forward.”

At issue is the Air Force decision announced last Friday to spend up to $35 billion for 179 modified Airbus A330 wide-bodied jets over the next 15 years. The tankers refuel warplanes in flight. Chicago-based Boeing built the current KC-135 U.S. fleet, with planes averaging 47 years of age.

Sen. Patty Murray, a Democrat from Washington state, where Boeing builds its 767 airliner, the platform for its proposed tanker, says the choice of the Northrop-EADS KC-45A takes jobs from Americans and amounts to “outsourcing” the U.S. military.

“Do we want France or any other country to have the ability to slow down our military capacity because it doesn’t like our policies,” Murray said on the Senate floor on Thursday.

U.S. ties with Germany and France, where EADS maintains twin head offices, have improved greatly since more pro-American leaders replaced those who opposed the U.S.-led invasion of Iraq in 2003.

Still, residual mistrust, chiefly toward France, bubbled up Wednesday as lawmakers listed why they might seek to block the award, including preserving U.S. jobs, the military’s industrial base and American know-how.

“I want to make sure that any technical developments within this program that are vital to the future interests of the United States are not going to be transferred to the likes of a country that I do not have all the confidence I’d like to have — namely, France,” Rep. Bill Young of Florida, the defense appropriations subcommittee’s top Republican.

Panel member David Hobson, an Ohio Republican, referred to Northrop Grumman as a “front” for France, where the commercial version of the A330 is assembled from parts built mainly in France, Britain, Germany and Spain.

In an interview, Young deplored rewarding a company, Airbus, that is the target of a U.S. complaint at the World Trade Organization.

The European Union and United States are pressing competing complaints with the WTO over tens of billions of euros and dollars in state support provided to Boeing and Airbus.

The United States accuses Airbus of getting grants and loans at unfair rates in the form of “launch aid.” Europe’s case against Boeing hinges on the provision of research and development assistance from NASA and the U.S. Department of Defense.

Los Angeles-based Northrop Grumman, the Pentagon’s third-ranking supplier after Lockheed Martin (LMT.N) and Boeing, was quick to respond to congressional geopolitical concerns and criticisms raised at the hearing.

“All of the KC-45A’s critical military technology will be added by an American company, Northrop Grumman, in America, in Mobile, Alabama,” where the tanker will be assembled, said Randy Belote, a Northrop spokesman.

Sen. John McCain of Arizona, the all-but-certain Republican presidential nominee, derailed a post-September 11 Air Force plan to lease and then buy 100 modified Boeing 767s as tankers.

Sue Payton, the assistant secretary of the Air Force for acquisition, told lawmakers that she had stuck to the letter of the law in picking Northrop/EADS.

“I wish I could award to somebody I like,” she told a panel member critical of France. “I wish I could award to somebody who offers things that I think you like.”

Boeing is scheduled to be briefed by Air Force officials on Friday about why it lost the contract. This starts a 10-day clock for a possible formal challenge to the Air Force decision.

Joel Johnson, an expert on international military trade at the TEAL Group, a Washington-area aerospace consultancy, said the United States and Boeing had a lot to lose by any reversal of the Northrop-EADS award.

Commercial airlines based in the Airbus-supplying countries of France, Britain and Germany have more outstanding orders for Boeing wide-bodied planes than the tanker program is worth, and their orders are double those of U.S. carriers, he said.

“Thus who is carrying whose industrial base? Boeing and the Congress best be careful as to how they throw their ‘Buy America’ weight around for 12-15 aircraft a year,” he told Reuters. “The cost could be far larger if the Europeans get huffy.”

Reporting by Jim Wolf; Editing by Tim Dobbyn

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