Tanker Troubles

Rep. Henry Waxman, Chairman of the House Committee on Oversight and Government Reform purports to be concerned about “transparency” and “accountability” in government contracting. It sounds great — but from all indications, this is just a public relations gimmick to justify going after American companies in the midst of a war.

This week the liberal California congressman took Blackwater USA CEO Erik Prince to task over how the North Carolina-based company has carried out its State Department contracts in Iraq. The day after Mr. Prince testified, one of his civilian-piloted helicopters skillfully landed in a Baghdad street to med-evac Poland’s ambassador to Iraq, Edward Pietrzyk, after he was wounded by the blast of a roadside bomb. This life-saving feat of airmanship earned no accolades from Mr. Waxman. If the Beverly Hills Congressman really cared about government contracting he would suspend his vendetta against Blackwater long enough to look into another looming contract controversy that could well cost Americans jobs, billions of dollars and eventually, lives.  

The top procurement priority for the U.S. Air Force isn’t a stealth fighter or a new long-range bomber — it’s a mundane aircraft, without which these combat planes are virtually useless. It’s an aerial re-fueler — dubbed the KC-X — designed to replace more than 500, half-century-old, KC-135 Stratotankers, based on Boeing’s antique 707 commercial airframe. Air Force Secretary Michael Wynne says that by “the end of the year” his service will decide between two competing bids from Boeing and Airbus for the first 179 new tankers, priced at $40 billion over 15 years.

On the surface, all this sounds fair enough — competition — particularly for lucrative Defense contracts — is supposed to keep costs down. On a level playing field, competition in a fair market should give taxpayers “more bang for the buck.” Unfortunately, in the case of the KC-X, the playing field may not be level and the “airspace” is full of headwinds.

Though the competing aircraft are both based on commercial airframes — Boeing’s 767 and the Airbus A330 — their tanker “variants” are hardly similar. Boeing’s KC-767 has a smaller payload than the Airbus KC-30, but it uses a ton less of fuel per flight hour and requires shorter fields for takeoffs and landings – meaning the Boeing bird can land in more places — a major factor in today’s troubled world. However, these operational disparities pale in comparison to the problems the Air Force may inherit by tying itself to Airbus and its deeply troubled parent company, the European Aeronautic Defence & Space Company (EADS).

As previously noted in this column (“Buy American,” 19 January 2007), EADS and Airbus have been cited numerous times for “irregularities” in aircraft manufacturing and sales. In a 2003 investigative report, The Economist singled out EADS/Airbus for massive fraud and bribery designed to boost sales to airlines in Switzerland, Belgium, Saudi Arabia, Kuwait, India, Canada and Syria.

EADS/Airbus managers vowed then that they had improved the ethical culture at the European aerospace giant, but The Atlantic Times, an English language paper published in Germany, maintained that EADS/Airbus was still being wracked by "delays and turbulence." One industry insider told me at the time, “If anything, the use of Schmiergelder (‘grease monies’) to facilitate sales became more rampant as Airbus sales tanked in 2006 and the vaunted Airbus 380 white elephant collapsed amidst design flaws and faulty wiring.”

Now, more than eight months later, it appears that the corruption at EADS was even worse than critics imagined. Last week, while Mr. Waxman and his fellow Democrats in Congress were attempting to pillory Mr. Prince and Blackwater USA, the Autorite des Marches Financiers (AMF) —  France’s stock market regulator – sent a criminal referral to a Paris prosecutor about possible insider trading by the former managers and top shareholders at EADS.  

According to the French daily Le Figaro, and the Associated Press (AP), AMF regulators believe that twenty one of EADS’s senior officers and shareholders engaged in “massive insider trading” once they became aware of production delays, technical difficulties and profitability problems with the new Airbus A380 super jumbo and their mid-range A350 passenger jet liners. German prosecutors are also said to be investigating suspected insider trading at EADS.

The company filed a “profit warning” on 13 June 2006. Importantly, this is the same time frame in which EADS/Airbus was maneuvering to bid for the U.S. Air Force KC-X contract.

Those of us with long memories recall that it was France that denied the U.S. Air Force over-flight rights in April 1985 when we attacked Muammar Ghadaffi’s terror bases in Libya. While President Nicholas Sarkozy’s new government in Paris is certainly more amenable to America than those of his predecessors, we have no assurances about his successors.

Do we really want our next generation of aerial tankers to be built in a place that could cut off the flow of parts in the midst of a crisis? Do we want a company with a dubious ethical culture like EADS getting such a contract? If Mr. Waxman is sincere about “Government Reform” he needs to adjust his sights and put EADS/Airbus in his crosshairs.