July 1, 2005

The Air Force's future fleet of fuelers

By Thomas Lifson

Airbus Industrie, more specifically, its parent EADS, the chosen instrument aerospace powerhouse keeping the French...err...Europeans in the military aerospace technology game, is getting closer to landing a potential hundred—billion dollar order from the United States Department of Defense. Our airborne tanker fleet needs replacing, and Airbus wants to adapt its A330 airliner into an aerial filling station for long range missions.

Sacre bleu! Our hard—earned tax dollars being put to work employing Europeans, many of them French, at the same time they are subsidizing Airbus's plan to kill off the American civil aviation industry? Say it ain't so.

Well, it may be so, at least partially. And there are at least a few reasons why it might be good for us.

First, some specifics.

A few years ago Boeing offered a proposal to the Air Force to produce and lease a new fleet of tankers based on its 767 airliner platform, a model which, like the A330 airframe, is no longer very competitive in the civil airliner marketplace. A new application as tanker would keep the production line running, allowing great efficiencies by using existing tooling and other facilities.

But, regrettably, Boeing's proposal was shown to be corrupt:  
 
Boeing was on the verge of being awarded the contract when it was revealed that Boeing executives and Pentagon officials had been involved in some behind—the—scenes deals.

In return for the promise of high—paying jobs at Boeing upon returning to the private sector, the US government's procurement officials agreed not to scrutinize Boeing's costs too closely, resulting in a deal that was overpriced by up to $6 billion.

This was followed by lawsuits and dismissals. The CEO of Boeing and Secretary of the US Air Force James Roche both had to go. Darlene Druyun, the Air Force procurement official who was initially in charge of the tanker aircraft deal, and who subsequently landed a lucrative job at Boeing, is currently serving a nine—month prison sentence. The US Senate is still investigating the scandal.

With Boeing temporarily out of the field, EADS saw an opening, and proposed a fleet of A330—derivative tankers, to be assembled in the United States (based on European engineering, tooling, components, and other elements of the value chain, to be sure), and went through an elaborate ritual of choosing a site for the facility. Eventually they chose Mobile, Alabama, a Southern GOP stronghold, with a tradition of military—mindedness among both its citizenry and Congressional delegation. If EADS gets an initial contract for 100 tankers, worth $20 billion or so, up to 1000 Alabamians will be put to work in high—paying aerospace jobs.

EADS is playing the political game very well, hiring politically—connected staff and consultants, running clever PR ads and stunts, and playing up the great advantage of having competition work in favor of the buyer, the Department of Defense.

And it is true that when Boeing thought that it had no competition, it allowed its bid for tanker fleet replacement to become excessive — a cash cow to support development of a new generation of civilian airliners. Adding corrupt inducements to the pot backfired, however. If the DoD dismisses EADS's tanker bid on flimsy grounds, Boeing and every other defense contractor will essentially be given a nudge and a wink. The cost of a non—competitive contractor mentality, much less letting corruption bygones quickly become forgotten, can be horrendous, if allowed to metastasize. We don't want to send our troops to war with overpriced junk, the inevitable end result of a thoroughly corrupted regime of defense procurement. We must insist on consequences for bad behvior as a prophelactic measure.

Moreover, military contracting is becoming an increasingly globalized process, to the great benefit of the United States. We sell far more defense materiel to the Europeans than they sell to us, a situation unlikely to change. And we already are reaping benefits by having foreign firms supply us with defense products that happen to have an advantage over home—grown products. The most visible example has been the substitution of Beretta pistols for the old Colt 45 as the standard military sidearm.

As is customary, Beretta established a United States factory to produce the finished firearms, just as EADS would establish an Alabama facility for the proposed tankers. United States defense contractors do the same when selling to Europe or Japan, establishing local assembly facilities. There is no question that in the final analysis, American employment benefits most from the globalization of defense procurement, precisely because our companies are the most competitive, overall. Affirming this practice with orders for guns, or even the recent contract to a European consortium to supply new (American—assembled) helicopters for the Presidential fleet, is to our long run advantage.

So we need EADS to keep Boeing honest.

But having EADS supply us with tankers might also give Europeans a potential veto over our military exercise of power, critics warn. What if France decides that it will not provide us with essential spare parts or other support, if it objects to a forward projection of American air power? Cutting our tanker capability could mean that our fighters or bombers would be unable to attack distant targets.

This is more of a theoretical than a practical concern. In the short run, which is what counts when stopping a military action is at stake, it is unlikely that an entire tanker fleet would be grounded by a refusal to supply parts or support. Moreover, parts stockpiles are always in place as part of the normal maintenance program, and EADS will be producing in the United States, under American jurisdiction. At most, one or a few tankers might be grounded temporarily. But at a huge cost to EADS. They would never again sell another piece of military equipment to us, if such pressure were exerted.

While Airbus may be infatuated with the prospect of selling an entire 500 tanker fleet to the Air Force, it is politically unlikely that the Pentagon would allow EADS to walk away with all the marbles. Twenty percent is a nice shot across the bow of Boeing, though. Having two models compete with each other is good leverage. And while we may need to punish Boeing, keeping it healthy is also important to our defense capability.

When multi—billion dollar orders are at stake, many hidden factors will determine the final outcome. But it would not be the end of the world for the Europeans to walk away with a piece of Air Force tanker pie. It might even be good for America.

A hat tip to Tom Bevan for research help.

Thomas Lifson is the editor and publisher of The American Thinker.