KC-30 Supporters Hit New Low

Fresh from swift boating General Handy, KC-30 supporters hit a new low this week by forming a front group called Alabamians to Build American Tankers (ABAT). They are running a smear campaign with radio ads and have set up their own website at bettertanker.org.

Here is the text of the ads:

Ad #1 - Alabamian Confronts Boeing
MAN: Boeing deserves the Air Force Refueling Tanker project because it's an American company employing American workers.
ANNCR: And Alabama where a better tanker would be built isn't in America?
MAN: You know what I mean, no sense creating new jobs in Alabama when we can do the work up in Washington State.
ANNCR: So 2500 new jobs in Alabama wouldn't help our national economy?
MAN: You can't build planes in Alabama.
ANNCR: Your company trusts Alabama workers to build high tech weapons, rockets and space vehicles.
MAN: But our Boeing planes are ready now.
ANNCR: Ready now? You mean the ones you promised Italy four years ago? Are those ready yet?
MAN: Hey, we're Boeing.
ANNCR: And the Alabama plane is newer, with better technology.
MAN: Hey, we're Boeing.
ANNCR: And the Alabama plane can carry more fuel, more passengers and more supplies.
MAN: Hey, we're Boeing.
ANNCR: Is that all you can say?
MAN: What else can I say? Clearly Alabama has a better tanker.
ANNCR: Paid for by Alabamians to Build American Tankers

Ad #2 - Boeing Can't Win
EFCT: Sound of jet engine whining along coming in several times during the ad
ANNCR: It seems like every time we hear about Boeing and military contracts we hear about cheating. The reason we are still trying to replace our aging refueling tankers is because Boeing executives were involved in a scandal of bribery and cheating in the last bid. Our Air Force is working hard to protect our country but it appears that Boeing's corporate policy is "if Boeing can't win no one can"...and that means our troops lose.
EFCT: Engine sputtering
ANNCR: May day may day
ANNCR: Paid for by Alabamians to Build American Tankers

Ad #3 - Alabama Can be Trusted
ANNCR: Boeing says America's in danger if Alabamians build refueling tankers for our troops. Boeing claims military technology will wind up overseas. Boeing's one to talk. Last February their engineer was arrested for sending trade secrets to Communist China. And, in June, the FBI caught a Boeing scientist with top secret defense information on his personal laptop. No telling where those secrets were going.
ANNCR: At lease we can keep a secret in Alabama. Paid for by Alabamians to Build American Tankers.

Just who is ABAT and who is funding them?

We would guess the members are a select group of people who either have been brainwashed by the local papers and pandering politicians or those who would benefit from an Airbus facility in Mobile. This seems to be the case as a news story on ABAT lists Mobile locals Bryan Lee, attorney/lobbyist Palmer Hamilton, real estate developer Paul Wesch, and accountant Mike Thompson as members.

We will not venture a public guess on who is funding them, but we probably all know who that is already.

We do know for sure that a PR firm that is doing work for ABAT is Strategy Public Relations in Mobile Alabama. And, a Ms. Krista Burroughs appears to be running at least the website efforts of this shameful campaign.

On Strategy's website it states Krista has:

"over 17 years experience in public relations, Krista is responsible for supervising our production quality and makes sure client services are delivered on schedule and on budget. In addition, she possesses strong and diversified managerial and administrative skills, over seeing day-to-day agency operations. Krista is also proficient in desktop and graphic design, having developed a number of various collateral and time-sensitive pieces. She is a certified webmaster, specializing in the industrial and entertainment field, and serves on the board of directors for the Mobile International Festival."

Well, she can now add outrageous propaganda director, EADS/Airbus apologist, and corporate attack ad specialist to that resume.

If you would like to comment either for or against her work please feel free to e-mail her at krista@strategy-pr.com, call (251) 432-9200, or even fax (251) 432-9209.

The two other members of the firm can be reached at dave@strategy-pr.com and jon@strategy-pr.com. You can track down the actual ABAT members and contact them on your own if you wish, but remember the old Southern saying about wrestling with a pig. You both end up dirty, but only your opponent enjoys it.

Boeing issued this response to the ABAT ads:

We have no idea who this group is or how it is funded. Boeing is the largest aerospace employer in Alabama. These ads are an affront to our more than 3,000 hard-working, highly-talented employees and their families in the state. They are also clearly a sign of desperation in support of our competitor. The ads do a disservice to our customer, the men and women who serve our country, more than 160,000 Boeing employees, and to Northrop-Grumman/EADS.

The GAO ruled that the recent tanker competition was seriously flawed and that the award to Northrop-Grumman/EADS should be recompeted. Our focus will remain on the new competition and getting the best technology to the warfighter and the best value to the U.S. taxpayer.

It is good to see Boeing taking the high road, but very disheartening to see some KC-30 supporters creating new ways to sink even lower.

(If anyone needs to know who really has the better tanker they can visit us at Tanker War Blog anytime.)

Tanker News 18 July

The following tanker related items caught our eye:

The Guardian: EU leaders lobbied White House on tanker contract
Key Passage:

European newspapers have reported for months that Brown, Sarkozy and Merkel have lobbied Bush, writing letters and raising the issue in direct talks.

Initially the leaders lobbied for the contract and more recently, according to the latest reports, they have expressed concern that the Pentagon decision to reopen the tanker competition could jeopardise Airbus jobs in Europe.

"He will support the Airbus bid in any way he can," an unidentified spokesman for Brown told The Times of London last week, adding that 11,000 jobs were at stake in Britain, where the wings for the A330 are built.

According to a report in the International Herald Tribune, Tom Enders, a top EADS executive, accompanied Merkel to one meeting with Bush at the White House.

TWB has witnessed how the KS and WA Congressional delegations have been panned for merely standing up for the home team. How is it that the European politicians get no criticism for their near constant lobbying for EADS? (Thanks to George H. for sending us this article.)

CNBC: Protectionism Not Good in Tanker Deal
Key Passage:

Northrop Grumman CEO warned of a "political overlay" in the US defense procurement procedure, where, he said, a small number of members of Congress were merely looking out for their constituencies, particularly to keep jobs in their districts.

Both executives stressed that the aerospace industry is becoming increasingly global and that EADS should be not be viewed through protectionist lenses.

EADS should be "considered as an American citizen," Gallois said.

If Gallois really wants EADS to be considered an American citizen he should demand the quick passage of Rep. Tiahrt's Tanker Recompete Act. That way his company will finally be treated like a US company. It will also be held accountable for US laws/regulations including cost accounting standards, Buy America provisions, specialty metal provisions, the Foreign Corrupt Practices Acts, and compliance with the International Traffic in Arms Regulation.

Our guess is that he wants all the benefits of citizenship without the responsibilities. At Tanker War Blog we believe, based on its well documented shady past alone, EADS should not even be issued a tourist visa to get into the country, much less be able to apply for citizenship. (Thanks to Bobby L. for sending us this article.)

Reuters: Airbus writes off 9-year-old Saddam plane order
Key passage:

Nine years after France's top plane executive shook hands in Baghdad on a $500 million deal to sell airliners to the government of Saddam Hussein, Airbus finally conceded on Thursday the deal was off.

Airbus sales chief John Leahy ordered the deal removed from its backlog in response to an inquiry from Reuters about the long-forgotten deal at this week's Farnborough Air Show.

The deal to supply five A310 passenger jets had been on the Airbus order book since its then director Jean Pierson clinched the deal in 1989, as Iraq's skies reopened following travel curbs imposed during its eight-year war with Iran.

We admit that this article is not tanker news, but it was too interesting to pass up. The deal looks more like it was 19 years ago rather than 9, but maybe they kept moving it forward on their books. In the article Airbus complains that they did not get to bid on the last Iraqi plane contract. No kidding; perhaps the Iraqis remembered France opposed their liberation and was heavily involved in propping Saddam up with the oil-for-food scandal.

How EADS is Killing the Aerospace Free Market

EADS subsidies do no exist in a vacuum. These subsidies cause a ripple effect throughout the industry.

As a direct result, US aerospace companies lose market share and American aerospace workers lose current and future jobs. Additionally, to compete against these subsidies American companies are forced to cut costs; many times through the use of overseas suppliers, causing further US job loss.

America is not the only country affected. Canada which has the world's fourth largest aerospace industry - generating more than $22.7-billion in 2007 - has also suffered. Unlike the US though, Canada has decided to join EADS in the subsidies game.

The Canadian Government recently announced a $350 million dollar loan to support local owned Bombardier's new C-Series airliner. According to Canadian Business:

This is a plane that will reportedly use 20% less fuel than comparable aircraft on the market at a time when airlines around the world are struggling with record high fuel prices. According to Bombardier, it will give the third-largest civil aircraft manufacturer a huge advantage. So why are Canadian taxpayers involved?

Government officials, who hope the loan will earn a “positive” return, say they want Canada to maintain its strong position as an aeronautics supplier. They point to a $250-million auto fund, as if that shows the Harper government has always supported the logic behind corporate handouts (rather than offering another good example of Harper’s growing capacity for pandering).

Simply put, Montreal was competing with Missouri for assembly rights on the C-Series jet. And with buying votes in mind, the Harper government decided to sell its soul to woo Quebec. To do so, it was even willing to risk an international trade war, since the subsidized C-Series will compete with U.S.-based Boeing and Airbus-maker European Aeronautic Defence and Space Company (EADS).

Since EADS is the king of subsidies, we don't think they will complain too much. But, the US government and workers in Missouri should be outraged.

Brazil - home to Embraer, another competitor to the future C series - will probably also have some issues with the "loans". But, as Wikipedia points out neither company is a stranger to the subsidies game:

Both Embraer and its main competitor, Bombardier, were engaged in a subsidy dispute in the late 90s and early 2000s. It was found by the World Trade Organization (WTO), in a 2000 ruling, that Embraer has received illegal subsidies from the Government of Brazil. In its ruling, the WTO ordered Brazil to eliminate its Proex export subsidies program, which was found to aid Embraer. In October 19, 2001, the WTO ruled against Canada, just as it had ruled against Embraer, over low interest loans from the Canadian government designed to aid Bombardier in gaining market share.

Just when you think a free market is starting to be establish someone calls for a new round of subsidies and it all falls apart again.

Tanker News 2 July

The following tanker related items caught our eye:

Alabama Register: Mobile's Brookley Airfield Boss Fired
Key Passage:

[Marc] Pelham had the delicate task of executing the master plan for Brookley adopted by the board. It called for relocating or moving out some tenants who didn't fit the vision for the complex. The former Air Force base has 6 million square feet of industrial space, a significant share of all such space in southwest Alabama.

..."My reaction would be one of amazement and disbelief," said [Winston] Wells, whose company's 40-year tenure at Brookley is among the longest. "I thought Marc was the most personable person they'd had in that office for a while."

Marc was a visitor to, but hardly a fan of, Tanker War Blog. He could be counted on to rise in support of Mobile or offer insight as he did in the comments section to this post. This is new and a very strange twist to the KC-30 team's efforts in Mobile which saw the June 28th ground breaking ceremony for its new assembly plant cancelled due to the GAO decision.

CNBC: KC-30 Team Launches New PR Campaign
Key Passage:

Now, buy your popcorn for “The Return of the Euros.” After a couple of weeks of not talking, Northrop Grumman has reemerged to tout its Airbus-based tanker entry with the new, edgy ads, and with a new press release. The release announces that the KC-45's refueling boom has completed its 100th flight.

We think TAnchorman has made better ads without having to pay someone on Madison Avenue hundreds of thousands of dollars. (This is a spoof of a KC-30 ad.) The new KC-30 PR campaign though definitely signals they are going back on the attack, and we sense an escalation in the hostilities.

NYTimes: Another EADS Executive Taken Into Custody

Ho-hum, another day and another EADS executive being detained by the French authorities for insider trading. This time it is former Airbus president Gustav Humbert. It seems as it is only a matter of time until Ralph Crosby, CEO of EADS North America has his number called.

TAnchorman Exclusive Report

On his blog, TAnchorman has an exclusive report on EADS's comments about the recent GAO ruling that the Air Force tanker contract decision had numerous errors.

He also has a first look at the Air Force's reaction to the GAO's findings and its recommendation that the contract be rebid.

More EADS Insider Trading Charges

Bloomberg today reports that the former number two official at EADS, Chief Operating Officer Jean-Paul Gut,was charged with insider trading for selling shares before the company disclosed problems on Airbus' A380 superjumbo airliner and A400M military cargo plane.

According to the Bloomberg article:

Gut, 46, was arraigned on a preliminary count of insider trading by investigating judges and released on bail of 400,000 euros ($619,000), said Isabelle Montagne, a spokeswoman for Paris prosecutors. Gut is the second former EADS executive charged in the case.

Well, we all know he can afford the bail money.

The article also states that:

The probe is one of two over the timing of disclosures that wiring problems would delay the 525-seat A380s introduction. As many as 17 current and former executives at EADS and its Airbus unit are under investigation in a related Autorite des Marches Financiers civil case....

The Paris prosecutors opened the inquiry in 2006, after EADS shareholders filed a lawsuit claiming insider trading and the French market watchdog began a probe into shares sold ahead of announcements that Lagardere and Daimler were each selling 7.5 percent stakes in EADS and about delays in the A380 program at EADS's Airbus SAS unit.

The New York Times has already reported that, the CEO of EADS North America Ralph Crosby, who was the main architect of the KC-30 Air Force tanker contract partnership, has been identified as one of the 17 officials under investigation.

In related news the Wall Street Journal reported that last Friday the EADS insider trading scandal was introduced in American courts:

Two U.S. law firms filed suits Friday in federal court in New York's Southern District, alleging insider trading in shares of EADS and that managers and shareholders misled investors. Both are requesting class-action status. The U.S. cases come on top of continuing investigations by French prosecutors and stock-market regulators into alleged insider trading at the company.

The Wall Street Journal article states that although EADS shares are not registered to trade in the U.S.

...attorneys in the two U.S. cases contend that the global aerospace giant conducts enough business in the U.S., and has enough U.S. investors, to merit filing complaints in the U.S.

One suit, filed by New York law firm Dreier LLP on behalf of an individual European shareholder, Danielle Bobin, alleges insider trading by Lagardère and Daimler. Both sold large blocks of EADS shares in April 2006, just weeks before EADS announced major delays in its flagship A380 project. The suit also targets two senior EADS managers who are U.S. citizens.

The other complaint was filed by San Diego law firm Coughlin Stoia Geller Rudman & Robbins LLP on behalf of an unnamed institutional investor and individual investors in the U.S. Its suit targets EADS and some top managers, alleging they misled investors about the state of the A380 program while selling EADS shares, the law firm said in a statement.

Some in Pentagon Wary of EADS Ownership

While KC-30 tanker supporters would like you to overlook the foreign government ownership of EADS, Congress and DoD would be negligent to gloss over this fact. The important distiction is that EADS is not just a foreign company, it is a government owned and controlled foreign company. And, by doing business with the government owned EADS, the Pentagon is essentially reversing 60 years of procurement policy.

There are solid reasons the U.S. government no longer owns numerous arsenals, ship yards, and defense manufacturing facilities. Since the end of the New Deal, Congress has steadfastly been on the side of increased privatization. Throughout the American government and, indeed, throughout American society, there is a widely shared and ultimately decisive belief that placing primary reliance on the private sector to produce the nation's arms is good for reasons of political principle as well as practicality.

Foreign government owned and subsidies firms like EADS should not be treated as other truly private companies. The rise of these strange hybrids of government-owned enterprise should be viewed in fact as undermining the very foundation of the free market.

Luckily not everyone in DoD is blind to this fact. InsideDefense.com in an article entitled, "Pentagon Surveying use of Sovereign Wealth, Private Equity Funds" (subscription required) reported that, unlike those in Air Force procurement, some in DoD are starting to get worried about the potential impact of foreign government ownership on the U.S. defense sector.

Gary Powell the Assistant Deputy Under Secretary of Defense for Industrial Policy has commissioned a RAND study on how foreign governments use sovereign wealth and private equity funds and the potential impact on the U.S. defense sector. The report is due to be completed in January 2009.

In the InsideDefense.com article, Mr. Powell talks about foreign government ownership:

“So if the government of China wants to buy a U.S. defense contractor, what are the implications of that?” he questioned. “We’re a little worried about that because our concern is that we understand from a business perspective when one company wants to buy another company -- what the motivation is” but less is known about the intentions of a country.

Powell said DOD has heard stories about Russia harnessing its oil influence to put pressure on Ukraine. On that note, he wondered to what extent Russia would be willing “to use these sovereign wealth funds to buy into our firms and then do things for political purposes that may be counter to our best interests?”

Earlier this year, Russia warned of targeting missiles against former Soviet neighbor Ukraine if it joins NATO. The countries have also argued over natural gas over the last few years.

In a similar scenario, a Russian bank bought a roughly 5 percent stake in EADS, a French-German aerospace manufacturer, in 2006, he said.

“What if Russia uses that and they develop a voice in the management of the company? And they decide, ‘EADS, we want you to move your production facility from France to Russia. We want you to eliminate some of your non-Russian subcontractors and use Russian subcontractors,’” Powell said.

What Mr. Powell fails to mention is that in addition to Russia, Dubai, through the use of its sovereign wealth fund, also owns 3% of EADS.

Just as the U.S. must counter the rise of Illiberal Democracies, which undermine the very foundation of Democracy, so to must we confront and counter government-owned enterprises, like EADS, if we are to protect and maintain the independence and integrity of the private enterprise system.

Katrina Aid Funneled to KC-30 Team

Though it went largely unnoticed at the time, in June 2006 Alabama Gov. Bob Riley reserved $255 million in tax-exempt financing, for the construction of the yet unbuilt KC-30 tanker assembly center in Mobile.

This money was part of the federal Gulf Opportunity Zone Act, Public Law 109-135, which President Bush said, when he signed it in December 2005, was meant to help the citizens of the Gulf Coast to put their lives back together and rebuild their communities in the wake of the devastating hurricanes that hit the region earlier that year.

As the Mobile Register reported at that time:

The allotment for the airport authority -- $105 million for Northrop Grumman Systems Corp. and $150 million for EADS North America and its affiliates -- is the largest approval thus far, and represents 12 percent of the financing available to Alabama, according to figures provided by the governor's office.

At that time this allotment concerned some taxpayer watchdog groups, who said that priority should be given to hurricane-related projects:

"The intent of the GO Zone Act was to rebuild properties that existed before Katrina hit, and not to give these sweetheart bonds away to multi-national defense companies that can afford to build on their lonesome," said Keith Ashdown, vice president of policy for Washington, D.C.-based Taxpayers for Common Sense.

The state is using "Katrina to sweeten the pot for these companies," he said.

We have since searched the tanker taxpayer crusaders Citizens Against Government Waste releases and the entire web using a number of key phrases (including CAGW, "Go Zone", bonds) and found that they have been strangely silent on this government give-away. This omission is somewhat glaring since the Congressional Budget Office estimated that the GO Zone Act's tax-exempt private activity bonds will cost the federal treasury $1.6 billion.

As you might imagine, not everyone in the state of Alabama was happy with Gov Riley's largess being showered on the KC-30 team. The then Lt Gov. Lucy Baxley denounced the decision because she claimed it was put ahead of funding to replace Katrina-damaged schools.

On top of the $255 million in tax exempt financing, the KC-30 team also received a $120 million package of incentives from the state and local governments.

Are we the only ones that think the KC-30 team being given Katrina aid to fund their tanker assembly plant, which allowed them to lower their bid proposal costs to the detriment of others in the competition, is wrong? If not, be sure to show up to protest the groundbreaking of the Brookley Field facility in Mobile on June 28th.

One would think that given the tens of billions of dollars in European subsidies EADS gets, it would not have to ask the state of Alabama or Uncle Sam for tanker contract handouts. For EADS it certainly looks as though being the Governor's new favorite son has its privileges.

EPI Releases Tanker Jobs Study

A just released Economic Policy Institute (EPI) analysis of the Air Force tanker contract finds a significant difference in U.S. job creation between proposals by Boeing and the KC-30 team.

We at Tanker War Blog have only been able to glance over the report as of yet, but in a press release the Institute states:

Boeing would likely create at least twice as many US jobs as NG/Airbus under the 35 billion contract, according to EPI economist Robert Scott.

Also, at the end of the press release the Institute mentions EADS's prior inflated job statistics in regards to the Army light duty helo contract; an issue we had specifically questioned in the past:

Total employment impact estimates put forward by both bidders were higher than the figures arrived at by EPI, although the difference was far greater in the case of NG/Airbus. Scott said the claims by NG/Airbus were at least 45% higher, and as much as 179% higher, than what could be realistically expected. A previous contract for light duty helicopters awarded to Airbus parent company EADS failed to create even half of the U.S. jobs claimed.

It should be noted that EPI's methodology for categorizing and determining of what they call re-spending jobs is very different than the Commerce Department. In the report EPI determines the following:

Direct jobs:	Boeing 6,838	KC-30 Team 3,419
Indirect jobs:	Boeing 7,098	KC-30 Team 3,549
Re-spending jobs:	Boeing 14,770	KC-30 Team 7,385
Total Employment:	Boeing 28,707	KC-30 Team 14,353

In order to determine the truthfulness of the competitors previously claimed statistics, and compare the job numbers of Boeing and the KC-30 team, you need to understand that both their claims use Commerce Department nomenclature and methodology.

As we mentioned, EPI seems to use its own jobs model. What EPI labels separately as direct jobs and indirect jobs, the Commerce Department labels both as direct jobs. Second, what EPI calls re-spending jobs the Commerce Department calls indirect jobs. Lastly, while the EPI jobs model uses an implied average "re-spending" multiplier of 1.06, the Department of Commerce uses a multiplier of 2.3 for its indirect jobs calculations.

In other words EPI multiplies the sum of its direct and indirect job estimates by 1.06 to calculate the number of re-spending job that are created; while the Commerce Department model simply multiplies the number of direct jobs by 2.3 to calculate the number of indirect jobs created.

It is sort of confusing, but in the end if you use EPIs job creation analysis but the Commerce Department nomenclature and 2.3 multiplier you can adequately compare the past job claims:

Direct jobs:
Boeing claim: 13,497	Boeing EPI/Commerce hybrid estimate: 13,936
KC-30 claim: 14,147	KC-30 EPI/Commerce hybrid estimate: 6,968

Indirect jobs:
Boeing claim: 30,600	Boeing EPI/Commerce hybrid estimate: 32,053
KC-30 claim: 34,190	KC-30 EPI/Commerce hybrid estimate: 16,026

Total jobs:
Boeing claim: 44,097	Boeing EPI/Commerce hybrid estimate: 45,989
KC-30 claim: 48,000	KC-30 EPI/Commerce hybrid estimate: 22,994

So the bottom line is that Boeing seems to have fairly estimated is jobs numbers. But, the KC-30 team has grossly exaggerated its contribution to the economy and will produce not only half the jobs as Boeing but less than half of the jobs they claim.

It is also very interesting that the EPI/Commerce Department hybrid estimate we came up with is about the same number of jobs the KC-30 team originally stated prior to the KC-X contract selection. Or as a Seattle Post-Intelligencer article stated:

The Northrop team originally projected that the new tanker contract would create about 25,000 U.S. jobs. Amid the uproar following the Air Force announcement, the team increased its jobs creation claim to 48,000 jobs.

Remember, Senators Maria Cantwell (WA), Debbie Stabenow (MI), Patty Murray (WA), and Ron Wyden (OR) last month sent a letter to Secretary of Commerce Carlos Gutierrez and Secretary of Labor Elaine Chao asking them to verify the claims made by KC-30 team concerning the creation of U.S. jobs.

Given the fact that the KC-30 team claims more US jobs than Boeing while also admitting the KC-30 has less US content, we can't imagine why it is taking Mr. Gutierrez or Ms. Chao so long to determine what EPI has already figured out.

Note: Jobs claims for Boeing were taken from the EPI report. And, jobs claims for the KC-30 Team are were taken from Leeham Companies, LLC's state by state listing, which is identical to the job claim numbers the KC-30 team has distributed to offices on the Hill.

More EU Subsidies for Airbus and EADS

Bloomberg reported yesterday that the Airbus SAS request for European governments to contribute $18.2 billion in development costs for the A350, which will directly compete against Boeing's 777 and 787, has been tentatively approved.

The article states that:

Airbus approached European nations for aid and ministers have agreed "in principle" to the idea, Peter Hintze, Germany's deputy economy minister, told reporters today at the Berlin Air Show. His comments were echoed by Dominique Bussereau, junior minister for transport in France.

Loan commitments for the new A350 widebody jet may exacerbate a trade dispute between the European Union and U.S. over aid for planemakers. The U.S. filed a complaint with the World Trade Organization in 2005 about European assistance to aerospace companies. The EU filed a countersuit against the U.S. and the dispute is still being weighed at the WTO in Geneva.

"It's not going to do trade diplomacy any favors, but it's not like they have a choice," said Richard Aboulafia, vice president at Teal Group, a consultant in Fairfax, Virginia. "Delaying the most important product for the company in the name of diplomacy doesn't sound like a smart move."

I know what Mr Aboulafia means, but I disagree that Airbus does not have a choice. They can choose to compete fairly without asking for a government handout every time they want to develop a new product. Airbus chooses not to forgo subsidies because its state-ownership and shared-production business model is not competitive without them.

This new round of subsidies comes in addition to other announced government "investments" in A350 components such as the Welsh government's contribution to $14.8 million to develop the next generation composite wing technology for Airbus.

The Bloomberg article quotes EADS Chief Executive Officer Louis Gallois saying that Airbus needs more state aid to compete fairly with Boeing.

"We are asking only for a level playing field with the competitor," Gallois said in an interview. "We feel the competitor is getting support from its government for research and development, and from the states of Kansas and Washington."

Gallois said yesterday at the company's annual meeting in Amsterdam that EADS doesn't need to seek a capital increase from investors for A350 funding because the company has 8.3 billion euros in cash.

It is hard to fathom how a company that has over $11 billion is cash, with which it could finance any development, still needs an $18 billion government handout.

Also, I must have missed the billions of dollars in US government support for commercial products Boeing is supposedly getting when the appropriations bills were signed into law last year. Maybe Mr. Gallois knows more about this than those who help write the bills. It is also funny to see he no longer mentions defense contracts as a Boeing subsidy like the original EU WTO countersuit.

One of the most absurd parts of this dispute though is how those in the executive branch, who talk of using all elements of national power, would seemly surrender our nation's economic power and all its leverage over EADS to give up its illegal subsidies.

Why should EADS give up its subsidies when DoD would rather myopically take advantage of the lower the System Development and Demonstration (SDD) cost and reduced unit prices these subsidies provide? No need to look out for the economic interest of the country as a whole if you can cut yourself a good deal.

In fact, DoD seems intent on rewarding EADS as quickly as possible and support the EU's economic war against America's largest manufacturing exporter. You're doing a heck of a job, Brownie...oops I mean Robbie.

Better watch out, next thing you know Kanye West will be saying Bush doesn't care about American workers either.

[Note: The commentary to this post is not the consensus view of Tanker War Blog. While we are all in full agreement on the Airbus subsidy issue, many members are not convinced the SecDef has had much of a role in the tanker dispute. But, we do respect the member's right to make their view known and we believe their perspective is a valid contribution to the tanker debate.]

More EADS $$$ = Less US Jobs

Given that in 2007 EADS was supposedly hard at work engineering "America's New Tanker" and was ramping up production of Army's light utility helicopter (a contract they won in June 2006 worth up to $3 billion for 352 helicopters), one would expect the numbers for US workers at EADS to be skyrocketing.

You would be right to expect this, but you would also be very wrong. It turns out that the exact opposite has happened. In EADS's newly released 2007 Annual Report (Book Three) on page 73, EADS list its US employees for the past three years as follows:

Dec 31, 2005.......1877 US employees

Dec 31, 2006.......1932 US employees

Dec 31, 2007.......1777 US employees

While we at Tanker War Blog expect these numbers to go up in 2008 (how can they possibly go down?), we find it more than a bit curious that after their previous billion dollar DoD contract EADS ended up cutting its US workforce.

So until their Dec 31, 2008 statistics are released, we would warn the American public to be very sceptical of EADS's proclaimed commitment to "in-source" U.S. jobs.

Timber! Falling Faith In US Trade Policy

A central theme of this blog has always been that the tanker issue is not really about Boeing vs. Northrop Grumman or Boeing vs. the USAF, but in fact Boeing and US aerospace workers vs. Airbus and the illegal subsidies it receives.

At Tanker War Blog we contend that the US government has a duty to balance the promotion of free trade with enforcement of free trade. Blindly clinging to the idea that competition and market forces will result in fair trade is folly. Competition doesn't work when the playing field is tilted toward one side or one of the competitors is given an unfair advantage.

Some of us at TWB had hoped that the Executive Branch would realize its mistake in buying an illegally subsidized product like the EADS/Airbus A330 and stop the tanker contract. But others here, who have long since lost faith in US trade policy, have pointed out that even when the administration seemingly stands up for fair trade it may in fact be just lining insider's pockets.

A case in point is the 2006 timber trade settlement with Canada. The Seattle Post-Intelligencer in a recent article by Robert McClure asks the question:

Is it an illegal $1 billion slush fund for Bush administration friends in the timber industry, extorted from Canada and designed to evade congressional oversight?

Or is it a fairly negotiated end to an expensive trade war that's "the best thing that has happened to private forest land conservation in the United States in 100 years?"

Given that at least one of the groups to receive money from the settlement, the U.S. Endowment for Forestry & Communities ($200 million), was hastily set up during the settlement and established just before the deal was finalized, it is probably right to ask these questions. The article also notes that the deal was monitored by Harriet Myers, then still the President's chief lawyer, so suspicions should be heightened all the more.

At Tanker War Blog we believe our government should stand for fair trade and look after the interests of US workers and consumers in trade disputes and not just industry and party insiders. We firmly believe this is also what the American people want.

We further believe that if there was proper enforcement of free trade EADS would never have been allowed participate in the tanker contract.

It is also becoming clearer to us that only Congress has the will and the ability to properly solve disputes such as the tanker controversy.

EADS Tanker Grounded: Revenge of the Bobbittboom

For all the talk of proven technology and the working boom on the EADS/Airbus A330-based tanker, we now find that the Australian A330 Multi-Role Tanker Transport (MRTT), with the prototype EADS boom has been grounded since March because of boom issues.

Boeing has stated in the past that EADS "continue(s) to struggle with the development of the boom they've proposed for the...tanker. Reports indicate their boom is not expected to be operational until late 2010." And Boeing reported that the Air Force had been very concerned about the EADS boom during the contract selection process.

EADS has countered that its "boom has been built, and successfully tested."

Here is what Aviation Week reported today:

"The Australian Multi-Role Tanker Transport (MRTT), the first developmental Airbus A330-based tanker, has been grounded since March while receiving new parts for its refueling boom system.

...The MRTT is expected to return to flight by September, according to Tim Paynter, a Northrop Grumman spokesman. He declined to provide dates for when the A330-based boom is expected to transfer fuel in flight to a receiver.

What is actually being done to the boom during this period is a bit murky."

A bit murky is right! The NG/EADS team has ridiculed Boeing as providing a Frankentanker but as this article points out, EADS has what could be described as the Bobbitboom. (In honor of John Bobbitt and his loving wife Loretta who previously lived in wedded bliss right down the road from DC in Manassas, Virginia.)

The Bobbittboom is currently on an A310 but EADS hopes to have it surgically attached to the A330 and fully functional by 2009 . As the article states:

"EADS has developed this boom specifically to compete with Boeing in the international tanker market. The boom on the A330 has not yet been extended during flight.

The boom system has been flying on an A310 test bed conducting various risk reduction activities."

[The article goes on to say that the Australian tanker program has been restructured "to allow more time for development."]

We are somewhat sure there is a pill these days that can help with the failure to "extend" problem, but as for the boom reattachment to the A330...well your guess is as good as ours.

EADS's Tanker: American as Apple Strudel

Like politicians running for public office, the KC-30's nationality seems to change with what ever constituency it is pandering to at the moment.

In case you missed it, last month EADS won an in-name-only competition to lease 14 tankers to the British Air Force for $26 billion dollars. (We will save our commentary for later on how crazy this price is even if it does include infrastructure, training and maintenance services. BTW: In the US we are buying 179 of them for $35 billion. Talk about king of all lease rip offs!)

The interesting thing is that when the British government names the contractors working on the tankers, which we are told are near identical to those the US Air Force wants to buy, Northrop Grumman is not mentioned:

The contract,...was handed to AirTanker Ltd, a consortium led by Franco-German group EADS which includes Cobham, Rolls-Royce and VT Group of Britain as well as Thales of France, the government said.

But some how that same plane is then marketed as America's tanker and has Northrop Grumman listed as the prime contractor here in the good old USA. As we have said on other occasions, "we couldn't make this up if we tried."

We at Tanker War Blog refuse to suspend our disbelief on the nationality of the KC-30, especially when the first of tanker scheduled to be deliver as part of the contract is currently sitting in a hanger in Germany just waiting for the resolution of Boeing's protest. (See photo courtesy of Northrop Grumman above.)

Any nominations for this first EADS tanker delivered to the US be named "The Spirit of Mobile"? It might be fitting given all the phantom Alabama jobs it is supposedly creating.

Inquiring Frenchmen Want to Know

We at Tanker War Blog have been following Secretary Gates' recent scoldings of the Air Force. (Some TWB thinks are unwarranted) While reviewing the transcript of Gates' remarks earlier this week at Maxwell-Gunter Air Force Base, we came across this interesting closing question from a French Air Force Office attending the Air War College:

Question: Good morning, sir. (Inaudible name) from Air War College, from France. Sir, you mentioned this morning in your speech how important interoperability and working in coalition was for the U.S. Air Force. About a couple of months ago, the U.S. government decided that the future tanker will be provided by a consortium led by Grumman and Airbus. Since then, Boeing decided to challenge this decision. I would like to know -- and it will delay the overall process for the Air Force to procure this kind of aircraft. I would like to know what you think about this challenge and how -- (audio break).

SEC. GATES: Well, Boeing is using the legitimate processes that have been established to protest the award of a contract. As I understand it, the General Accountability Office will -- is evaluating the decision process and Boeing's process and Boeing's protest, and they will issue a decision in terms of whether they believe the protest was warranted...

[Secretary Gates goes on to say he wants to move ahead with the purchase and he is concerned that things DoD can not by law consider are in the mix on Capitol Hill.]

So let's frame this properly: A French exchange officer gets the chance of a lifetime to ask the U.S. Secretary of Defense a question....and he wants to know if the Airbus tanker buy will be delayed? This is so cliche we are not sure anyone would believe us if not for the link to the DoD public affairs press release.

Also, this being an election year someone is sure to make the accusation that this was a planted question so DoD could repeat its tanker contract talking points.

So yes intrepid flier of the Armee de l'Air the purchase will be delayed. In fact, we hope that when Americans start to get as interested in this EADS/Airbus tanker contract as those in France, it will be cancelled.

TAnchorman says: Stay Classy Northrop

[Note: In this post we would like to introduce someone who we hope will join in from time to time and help us moderate and report on the tanker debate: Tankerman.]

Thanks TWB but please read the prompter correctly, its spelled TAnchorman.

What do you think this is? Amateur hour?!

Anyway, today I would like to reiterated what I have said on a number of occasions, I don't believe an ugly fight between Northrop Grumman and Boeing is good for America. It also misses the point since the true enemy is Airbus.

We all know my friends at TWB have been very hard on EADS, Airbus' parent company, because EADS can not be trusted to be good economic or defense partners.

I am very disappointed to find that Northrop Grumman has decided to counter any questions raised about EADS by handing out fliers attacking its competitor and stating "Boeing has a long history of criminal misconduct".

Sweet Lincoln's mullet that's getting ugly!

Regardless of this attack, I have asked that Boeing not reciprocate by publishing their list of NG missteps because I believe it serves no purpose. As I have stated before, we all understand that companies have employees who have behave badly from time to time. What makes EADS unique in this discussion though is that the French or German governments rarely hold it accountable when its actions are detrimental to the US.

Also, I would like to take NG to task for putting the corporate front group Citizens Against Government Waste (CAGW) up to naming two of the tanker critics as "Porkers of the Month". Maybe it will score some points in Mobile, but everyone in this town has a pretty good idea on KC-30 team money to CAGW. Son of a bee sting! That's not fair to two elected officials who I believed have supported you in the past.

Besides, Airbus can fight their own battles. Here is a nice zinger just reported today:

“I think they [Boeing] are competition-averse, period,” Allan McArtor, chairman of Airbus Americas, told The Hill. He said the production of the commercial aircraft in Mobile will break Boeing’s monopoly in the United States.

Thanks for the aerospace industry insight Airbus, I'll be sure to lead with that story on the evening news.

Now as for you NG, like I said, "You Stay Classy."

EADS Tanker Funding May Stall in FY2009

In an article published yesterday, former Republican presidential candidate Senator Sam Brownback states that the Air Force's decision to award the tanker deal to France-based Airbus instead of Boeing is not over.

The closing line of the article is the most telling. Senator Brownback,

"states he is hopeful that when the U.S. House sends the fiscal year 2009 defense bill to the Senate it will include language that 'slows down' the Airbus contract, and the Senate will act in similar fashion."

In the FY09 budget the Air Force has requested $831.759 M for the "Next Generation Aerial Refueling Aircraft", which is a new budget item. (Source: pg 34, line #83 of FY09 RTD&E Programs Budget) It also still has available in FY09 $239.8 M from the "Tanker Replacement Transfer Fund," which are funds remaining from FY05 and FY08 appropriations that went unspent.

So, the total to be available to the Air Force if allowed to continue with the purchase of the EADS tanker in FY09 would be $1.0716 billion. Given the overwhelming sentiment of both the House and the Senate, the Air Force should not expect authorization or appropriation of anywhere near that amount.

Tanker cost data tweeked in favor of EADS airplane

At the heart of Boeing's tanker contract protest (pg 80) filed March 11 with the GAO was the claim that the Air Force improperly made adjustments to its and its competitors bid costs. (It should be noted that this charge was not one of the claims that the Air Force asked the GAO to dismiss outright.)

Many of us did not truly realise the extent of the alleged manipulation though, until an alert reader sent us a recent Reuters article which states that,

"The U.S. Air Force added $5.2 billion in costs to Boeing Co's unsuccessful aerial tanker proposal, far more than it added to the winner, Northrop Grumman Corp, according to Boeing and documents viewed by Reuters."

The article goes on to say that the competitor's,

"tanker, based on the A330 made by EADS' Airbus unit, saw its estimated operation and support costs actually lowered by $1.4 billion, according to the documents."

If true, the Air Force procurement officials in essence penalized Boeing's bid by the astonishing amount of $6.6 billion!

Even defense expert Loren Thompson ,who has been a stanch defender of the Air Force's decision, noted that it is now clear the selection process was not as transparent as the Air Force had hoped.

"It appears that the Air Force's pricing methodology was stacked fairly heavily against the Boeing bid," he said.

Given this data tweeking, it is not surprising Boeing lost the competition, but that it was even a close race.

V-22 Refueling Issue Continued

We have received a great number of e-mails and comments on the V-22 refueling issue. In this post we will address some of the comments, summarize questions that seem to be still unanswered, and specify those issues on which we have conflicting information.

1) An anonymous post took us to task for declaring, "that the Marine Corps and the Special Operations community are up in arms," when no official statement has been made by either organization. Upon checking with our sources they have asked that we not get them out in front of their high headquarters on this issue and that we simply state that a number of people within those organizations were very surprised to learn the EADS aircraft could not refuel the V-22. We have since made that edit to our previous post.

2) Another e-mail asked under what flight parameters can the Boeing tanker refuel the V-22. The answer is that we do not know exactly. None of us at Tanker War Blog are refueler pilots but since the Air Force slide says, "throughout entire flight envelope," we are under the assumption that it can refuel the V-22 under all conditions. (Note: if you are a tanker pilot and want to help us with posts please e-mail us at tankerblog@gmail.com to offer your services.)

3) Mr. F. You from Alabama sent a comment that we can not post due to his very colorful language, but he did make a claim that we will reverify. Specifically he stated that the ability to refuel the V-22 was not part of the evaluation process. We were given the impression that it was. Since we do not currently have the source document stating V-22 refueling was, or was not, a discriminator we feel we owe it to our readers to research this and get back to you with an update. [Update: See John S. comments below. He provides the link to the source document where tilt rotor refueling is listed as an Object KPP (a disciminator that is desirable but not mandatory).]

4) A number of you felt that this issue was a bit of a red herring. From what information we have been given to date we don't believe this to be the case, but if it turns out to be a non-issue we will be glad to post such findings. We continue to believe EADS has enough faults that we don't need to manufacture any for them.

5) A number of others asked what was the specific reason the EADS aircraft could could not refuel the V-22. We are currently still researching this. Some have commented that it was due to stall speed, several people sent us that it was due to the turbulence of a larger aircraft, one person told us it was due to the refueling attachment (drouge?). The truth is we don't the reason know for sure yet, but we hope to have a clearer picture soon. [Update: NG now claims that their aircraft can also refuel the V-22. The only problem is that the Air Force has not changed their postion that it can't. Our view remains that until the Air Force says the NG/EADS aircraft can refuel the V-22 the issue is still very open.]

The Undisputed Champion of Corruption?

The past few weeks we have been hearing many naive and somewhat uninformed pundits say that Boeing deserved to lose the contract because of the original corrupt tanker lease deal.

The trouble with such thinking is that it assumes EADS and its subsidiary Airbus are good corporate citizens. As this Economist article "Airbus's Secret Past" and this Center for Security Policy report on EADS show, this is far from the truth. The scale and depth of the historic corruption at EADS and Airbus is truly staggering.

Here is a list of some recent and past notorious EADS, its subsidiaries and predecessors, corruption and bribe scandals:

• EADS senior management and worker insider trading (Current investigation)


• EADS lobbyist pays Austrian Air Force General's wife (Current investigation)


• The Clearstream Scandal: Nothing in American History is Comparable (2006)


• EADS implicated then mysteriously cleared of bribery in Singapore (2005)


• Convictions on EADS bribes in South Africa South (2003)


• Airbus Middlemen convicted of bribing SyarianAir Officials (2001)


• Sebena Airlines goes bankrupt over suspicious Airbus purchases (2001)


• Canada uncovers slush fund of Airbus consultant (2000)


• Air India Airbus purchases (1986-2000)


• NSA twarts Airbus bribes to Saudi officals (1994)


• Kuwait Airways purchase of Airbus aircraft over Boeing (1991)

The really troubling thing about the above list is that the examples are only the corrupt EADS/Airbus practices that have been uncovered. (Note: Please e-mail us if you know of other EADS/Airbus malfeasance)

The fact the governments of Spain, Russia, France, Dubai and Germany own EADS means that it is in their best interest that EADS corruption is not brought to light. Cover-ups and refusals to investigate these corrupt practices is often the norm.

In the US we prosecute such corruption. For its part in the Darleen Druyun fiasco Boeing paid a $615 million fine, its CEO was forced to resigned and the individuals who committed the crimes went to jail. EADS has never been held to such standards.