Analysts say Boeing can land tanker contract

? A $23.5 billion Air Force plan to lease and purchase 100 refueling tankers from Boeing Co. is probably dead, but Boeing remains in a strong position to win an eventual contract to supply refueling planes, analysts said Wednesday.

It remains unknown how many planes the Air Force may order and at what cost.

On Tuesday, Defense Secretary Donald Rumsfeld ordered a six-month delay in the tanker deal to allow for two new studies.

The delay was the second Rumsfeld has ordered since December, as the unusual lease-purchase plan draws increasing criticism from members of Congress and others as being tilted in Boeing’s favor.

The deal had called for the Air Force to lease 20 767s for use as refueling tankers and buy an additional 80 planes. The tankers were to be modified at Boeing’s plant in Wichita after assembled at its Everett, Wash., plant.

Proponents said the plan was a way to get badly needed refueling planes in the air quickly, with less upfront cost, but critics called the lease deal overpriced and unnecessary.

Rumsfeld, who had already requested three separate reviews of the plan last winter, ordered two new studies Tuesday — including one that requires a comprehensive look at other refueling options. The so-called analysis of alternatives could open up the tanker deal to competition from other bidders.

Loren Thompson, an analyst with the Lexington Institute, a Virginia-based think tank, said Rumsfeld’s decision effectively kills the leasing aspect of the deal, which Thompson said had become a political liability and an easy target for critics.

“The lease is dead on Capitol Hill,” Thompson said. “Not only is it too hard to do politically, but because the number has been cut back, the business case for leasing has been severely impaired.”

Even with the new studies, the Pentagon is likely to determine that the aging tanker fleet needs to be replaced — and Boeing is still in the best position to win the contract over Airbus and other competitors, Thompson and other analysts said.

The current planes, known as KC-135s, average more than 44 years of age, with increasing risk of corrosion and other problems.

“There is going to be a modernization program, and Boeing is almost certain to be the supplier,” Thompson said.

Paul Nisbet of JSA Research in Rhode Island predicted that Pentagon officials will again look at other options — such as converting used aircraft to tankers — but will eventually decide to buy new 767s from Boeing.

“I think they’ll come up with the same conclusion they had before,” he said.