U.S. tanker delay could kill Boeing 767 line

The Pentagon’s pledge to require competitive bids to replace its aging refueling aircraft could deal a blow to Boeing Co.’s plants in Wichita and Everett, Wash.

Analysts and company officials said the decision to reopen bidding could delay a contract long enough to force Boeing to close its 767 production line in Washington and pull work from Kansas, where Boeing is the state’s largest employer.

“The 767 line will die within the next two years,” defense analyst Richard Aboulafia, of the Virginia-based Teal Group, wrote in his December newsletter.

The move to bids was expected. Congress killed a leasing aspect of the deal in a defense authorization bill last month in response to a growing scandal centering on a former Air Force official who admitted giving special treatment to Boeing.

The official, Darleen Druyun, later joined Boeing as a top executive. She has pleaded guilty on felony charges and was sentenced to nine months in prison. Boeing’s former chief financial officer, Michael Sears, also has pleaded guilty for his role in hiring Druyun.

Deputy Defense Secretary Paul Wolfowitz said in a letter to Senate Armed Services Committee Chairman John Warner, R-Va., that the department was studying a wide range of alternatives before proceeding on the tanker deal.

“After we have selected an appropriate alternative, we intend to require competition,” Wolfowitz wrote. “No matter which alternative we choose, leasing is not an option without new congressional authority.”

Wolfowitz’s letter, published Saturday in the Congressional Record, was hailed as good news by critics who contend the original deal was structured in Boeing’s favor.

“Competition doesn’t mean Boeing doesn’t get the contract. It just means taxpayers will get more bang for their buck,” said Keith Ashdown, vice president of Taxpayers for Common Sense.

Boeing said it respected the Pentagon’s decision and looked forward to the competition. European-based EADS, which owns most of Boeing rival Airbus, is expected to be the main competitor for the tanker deal.

“Backed by our 50 years of tanker expertise, the Boeing 767 tanker has already been selected by Italy and Japan,” said Boeing spokesman Doug Kennett. He said the Italian Air Force’s first full-up 767 tanker will roll out in February and fly in March of next year.

Ralph Crosby, chairman and chief executive officer of EADS North America, said that if there was a competition for the tankers, his company would participate.

“We will team with a major American partner, expand our industrial footprint in the United States, employ American workers and pledge to offer the finest military capability for the United States Air Force at the best value to our taxpayers,” Crosby said.

Boeing already has slowed 767 production to less than one aircraft per month to keep the production line open, industry observers say. Barring new orders, the Chicago-based company needs to make a decision about the future of the line next summer, Boeing spokesman Doug Kennett said.

He said there was a backlog of 27 orders for 767s. But many industry analysts say most of those orders could be filled with the new 7E7. Some observers have urged Boeing to adapt the 7E7 as a military tanker, although Kennett said that would not be an option until 2015 at the earliest.

Robert Stallard, defense analyst for Bank of America, said Boeing might be forced to close its 767 line but a restart would be expensive. Alternatively, Boeing could slow the commercial line further or aggressively seek out other tanker sales, possibly to NATO, until the United States made a decision.