Air Force Rejects Made-in-America

Last Friday, the Air Force awarded a European firm $40 billion contract to replace America’s aging airborne refueling fleet. That decision effectively outsources thousands of American jobs to a firm subsidized by a foreign government and could further reduce our industrial manufacturing base. This deal encourages Europeans to continue underfunding their own security and should become a presidential campaign issue.

The Air Force has been seeking a replacement for its fleet of Eisenhower-era KC-135s for decades with increasing desperation. They realize that without the tanker fleet at full operational status, US ability to project power around the world is reduced from the speed of a jetliner to the speed of a ship.

Friday, Air Force Secretary Michael Wynne announced “…that the development and procurement of up to 179 new KC-45A tanker aircraft is awarded to the Northrop Grumman Corporation.” Los Angeles-based Northrop Grumman is teamed with the European Aeronautic Defense and Space Company (EADS), the maker of Airbus planes, to build airborne refueling tankers based on the Airbus A330-200 airframe. EADS beat Chicago-based Boeing for the contract despite the fact that Boeing has been supplying refueling tankers to the US Air Force for nearly 50 years.

No doubt our tanker fleet needs to be replaced. The average airplane in the fleet is 44.2 years old and a Pentagon official stated, “The fleet’s readiness, reliability and availability are in decline and costs to maintain the fleet are going up.” The service currently flies 471 KC-135R/T tankers, 59 KC-10s and another 85 KC-135Es which will be retired by 2009.

An Air Force officer said it wasn’t until after 9-11 and the conflict in Afghanistan that the Air Force made tankers a top priority. The early part of the Afghanistan war highlighted how important tankers were in an operational environment where American aircraft – fighters, bombers and transports – couldn’t land in many nations enroute to the conflict.  Prior to the war, the glamorous F-22 Raptor and the C-17 Globemaster, crown jewels to the Air Force, kept tankers on the back burner.

Few details are known about why the Air Force chose the Northrop-EADS team over Boeing. Air Force officials have yet to debrief the two companies on their proposals, and those debriefings may stir up a lawsuit by Boeing to overturn the Air Force decision.

Air Force General Arthur Lichte of Air Mobility Command, said the larger size of the European aircraft was important: “More passengers, more cargo, more fuel to offload.” But the formula that’s critical is the right mix of offload capability and numbers of tankers. A greater number of tankers offers more operational flexibility than fewer with more fuel.

Another consideration could be that Boeing’s aircraft, the KC-767, was designed in the late 1970s and by the time the Air Force bought a significant number, few other customers would be flying the basic aircraft, making the cost of parts and maintenance upgrades more expensive.

The problem isn’t whether the EADS aircraft can do the job but rather that it’s primarily foreign-made. Surprisingly, Secretary Payton acknowledged that the issue of shipping jobs overseas was not “taken into consideration.” 

Suprisingly, neither was it significant to the Air Force that EADS has no track record with air-to-air refueling and their fueling boom, a critical component, has only started testing.

EADS claims the KC-30 project will produce 2,000 new jobs at an assembly facility in Mobile, Alabama and support 25,000 jobs at 230 US companies in 49 states. Boeing contends its KC-767 program would have supported 44,000 American jobs and 300 suppliers.

Given that a sizable portion of the Boeing product would be produced in China, Japan and Italy, perhaps the Air Force’s acquisition teams did consider the American content in both competitors’ proposals. 

An active duty Air Force pilot familiar with tanker operations said “… as an American officer I’m pretty angry. I find it unforgivable that we have done this. It seems to me that with the competing aircraft pretty close in capability we ought to tilt very favorably toward the American company.”

He suggested that a common view among his peers is that “… our Air Force leadership has simply lost its way … This sad tale of the tanker acquisition, from Darlene Druyun till now, has typified the confused, misguided, and haphazard direction our generals have been on for nearly the last decade.” In 2004, Druyun admitted to favoring Boeing in the tanker deal while acting as an Air Force weapons buyer and, at the same time, negotiating a job contract with the company. She was sentenced to nine months in prison.

Richard Aboulafia, an aerospace industry analyst with Teal Group in Virginia, said of the decision to favor EADS over Boeing that “There’s always the chance that the Air Force wanted to distance themselves as much as possible” from the Druyun situation.

The Netherlands-based EADS – a group that includes Russia – was formed in 2000 by a merger with German, French and Spanish firms. Less than half of EADS’ stock is publicly held, while the majority is owned by a “Contractual Partnership” which includes the French and Spanish governments. 

European governments have kept EADS afloat, sustaining more than 116,000 European jobs. US Senator Patty Murray (D-WA), whose state includes a Boeing plant, stated that European nations have provided Airbus (read EADS) “illegal subsidies.”  

In 2001, Under Secretary of Commerce Grant Aldonas told a US House panel, “Airbus and other major aircraft manufacturers in Europe have a history of government ownership and control. Given this direct financial interest, European governments have undertaken steps to boost their industry’s competitiveness.”

In 2005, Peter Allgeier, the deputy US Trade Representative, indicated that European governments have forgiven Airbus debt and provided equity infusions, infrastructure support and research and development funds. These practices, said Allgeier, continued even after the Bush administration reached an agreement limiting government support for large civil aircraft programs. Allgeier said that support gives Airbus a “very significant” competitive advantage over Boeing.

A former EADS executive told this writer it was the “declared objective of Airbus to destroy, if possible the American commercial airplane dominance. With truly unfair trade practices and our naïve and stupid government they succeeded in shutting down Lockheed and McDonnel Douglas leaving Boeing to slug it out on a very unlevel playing field.”

EADS would not have been able to fund its side of the tanker competition without government financial assistance. Although European government “aid” to EADS may have been invisible to Pentagon technical decision makers it should be a red flag to American workers and those concerned about the export of our industrial manufacturing infrastructure.  

Apparently, Europeans have money to subsidize their aircraft industry but not enough to fund their own security. They rely on Uncle Sam’s troops, planes and ships to make their continent safe. While the US invests 4.2 percent of its GNP on defense, EADS supporters such as Germany spend only 1.5 percent. 

Pentagon contracts should always favor American manufacturers with an eye on preserving our industrial base, providing our fighting forces with quality products and wisely using taxpayer money. 

The tanker deal demonstrates flaws in our procurement decision making that pretends made-in-America isn’t important and gives our rich European partners another pass on being responsible security partners. Any serious presidential wannabee should show his or her true colors and stake out a position on the new tanker fleet.