Boeing, Airbus Battling Takes Bizarre Turn

The contentious battle to win a $35 billion contract to replace the U.S. Air Force’s aging fleet of air refueling tankers took another bizarre turn last week as Airbus officials accused the Pentagon of providing their main competitor, Boeing, with information putting them at a competitive disadvantage. 

Officials from French-based aircraft maker Airbus contend that Pentagon officials provided Boeing with pricing information on a contract Airbus had previously won, but was later withdrawn after a complaint was filed by Airbus.   

"Of course it's convenient for Boeing (...) to have the breakdown of our cost and price. And we could find (it) convenient for us to have the same as a reciprocity," chief executive Louis Gallois said, according to AFP.  

At the same time, southern lawmakers, led by Alabama Republican Senator Richard Shelby, are claiming that the bidding process is inherently flawed because it most recently failed to take into account whether the bidders can meet deadlines and price constraints.  Many southern states, including Alabama, are set to gain thousands of jobs if Airbus eventually wins the contract.   

The acrimonious bidding process is already into its eighth year and third round. Both aircraft manufacturers have bitterly battled over the lucrative $35 billion contract. The process has become a politically sensitive issue plagued by scandals, investigations, trade disputes and now accusations of collusion between the Air Force and Boeing. 

In February of 2008, as EconomyInCrisis reported, the Air Force awarded the contract to French aircraft manufacturer Airbus and its partner Northrop Grumman over Boeing.  

The contract, however, was stripped that September after the Government Accountability Office deemed the original bidding process to have contained “significant errors.”  

As we reported back then, 14,000 American jobs are at stake in the deal in the near-term. Furthermore, the winner of the contract will be provided a built in advantage in future competitions, which is significant because the Air Force will likely replace its entire fleet of again tankers in the near future at an ultimate cost of $100 billion. 

Moreover, Boeing desperately wants to win the contract to keep its edge in the manufacturing of commercial aircrafts. Currently, Boeing enjoys a virtual monopoly in that department, with no domestic competition. If Airbus were to win the contract, the company has stated its intentions to build a manufacturing facility in Mobile, Ala. and enter the U.S. market building commercial aircrafts.  

Based on a study of the deal by Economic Policy Institute economist Robert Scott, Boeing would create nearly twice as many U.S. jobs as Airbus. In total that would account for roughly 14,000 U.S. jobs. He has also found that NG/Airbus’ estimates for employment impact in America are inflated by at least 45 percent and possibly as much as 179 percent. Recently Airbus’ parent company, EADS, failed to create even half the U.S. jobs it claimed it would deliver after being awarded a contract for light duty helicopters. 

The bidding process has the potential to once again devolve into a highly charged political battle. On the one side, Labor unions and the Washington and Kansas delegations are supporting Boeing. Organized labor claims that awarding the contract to Airbus will kill thousands of American jobs and pave the way for the company to gain a foothold in America much the same way Toyota and other foreign automakers have. Kansas and Washington lawmakers have lobbied for the contract to be awarded to Boeing because the company has factories in both states, which would be certain to gain jobs in the event that Boeing won.  

On the other side, business groups and lawmakers from Mississippi and Alabama are lobbying for the contract to be awarded to Airbus. Business groups claim that favoring Boeing is a breach of “free trade” principals and will hurt American companies overseas. Southern lawmakers are desperately trying to attract jobs to their economically downtrodden states.  

Pentagon officials, however, have said that they are aware of the charges and are attempting to rectify them.   

"With this new draft request for proposals, we are very cognizant of the criticisms made and are taking very strong steps to try and correct those criticisms," Pentagon spokeswoman Cheryl Irwin said, according to the Associated Press. 

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