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Tuesday, February 13, 2007 - Page updated at 12:00 AM

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Boeing tweaks 767 for tanker

The Associated Press

WASHINGTON — Boeing on Monday announced a newly designed KC-767 as its proposed aircraft for a $40 billion Air Force contest to replace 179 refueling planes.

The Chicago-based company said it had tweaked the design of its long-range 767 freighter plane to improve fuel efficiency and allow it to take off and land on shorter runways, giving it greater flexibility in combat situations.

Boeing says the basic tanker platform would be built in Everett, then flown to Wichita, Kan., for major military modifications.

Boeing would likely do some initial modifications on the Everett assembly line. That would require setting up strict access control to the line, to comply with International Traffic in Arms Regulations that govern the export of defense-related articles.

Only U.S. citizens would be able to work on the airplanes destined for the Air Force.

If Boeing wins the tanker contract, the likely immediate job impact will be a revival of the engineering-design team working on the project.

767: past and future

History: The 767 first entered service 25 years ago, in 1982.

Orders: The recent order for 27 new 767s from UPS will bring the order total for the airplane to 1,002. The only other wide-body jet to top 1,000 orders is the 747.

Competition: Northrop Grumman has partnered with EADS to offer the KC-30, a modified Airbus A330, with final assembly at a proposed EADS plant in Alabama.

Military derivative: Winning the tanker deal would add a profitable extended life for the 767 line through a military derivative, in the same way the Navy's anti-submarine Poseidon airplane will extend the life of the Renton-built 737 platform.

Dominic Gates

Boeing is competing against Northrop Grumman, which is expected to offer its KC-30, a modified Airbus A330, at a discounted price. Northrop will partner with Airbus' parent, European Aeronautic Defence & Space.

"They [Boeing] can afford to make improvement to the aircraft — by putting in a couple of bells and whistles — and still be well below the price competition," said Paul Nisbet, analyst for JSA Research.

At stake is a multiyear contract to replace a portion of the military's older fleet of KC-135 aircraft, a medium-sized refueling plane made by Boeing.

The $40 billion contract is the first installment of an expected three-phase deal that calls for more than 500 planes and could be worth an estimated $100 billion.

In 2004, Boeing slowed 767 production to one per month as it sought to keep commercial production going long enough so that the line could switch to tanker production without a significant break. The 767 work force correspondingly shrunk to a minimum.

The Boeing-led team includes Smiths Aerospace, a unit of Smiths Group; Rockwell Collins; Vought Aircraft Industries; Honeywell; and Spirit AeroSystems.

Bids must be submitted by April 2. The Air Force will make its decision at the end of October.

The tanker program has been on hold for three years, after Boeing lost the contract amid an ethics scandal that resulted in prison for a former company executive and a former high-ranking Air Force official.

Boeing's 767 is, on paper at least, more affordable than Northrop's aircraft, with a listed retail price of roughly $120 million.

But industry insiders expect Northrop to heavily discount its KC-30 to increase its competitiveness. The current retail listing of the A330 is roughly $160 million.

Both companies typically sell planes to prime customers at a discount.

Last week, after much speculation Northrop would bow out of the competition, the Los Angeles-based defense firm said it would bid on the contract. Northrop said changes made by the Air Force addressed concerns it had that contract specifications would unfairly favor Boeing.

Northrop has been viewed as the underdog, with a heavier, less fuel efficient aircraft. The Airbus tanker would have a maximum fuel capacity of 200,000 pounds.

Northrop spokesman Randy Belote said Northrop's K-30 would tack on roughly 20 percent in fuel capacity.

Shares of Boeing fell 80 cents to t $89.20, while Northrop stock rose 40 cents to $74.40.

Seattle Times aerospace reporter Dominic Gates contributed to this report.

Oeuf on France's face over Saudi slip-up

French officials scrambled Monday to avoid a rift with one of the world's biggest arms buyers after prematurely announcing a deal to supply Saudi Arabia with refueling tanker planes.

The French Defense Ministry announced Defense Minister Michele Alliot-Marie and Saudi Crown Prince Sultan Abdul-Aziz had signed the strategically important agreement to supply Airbus MRTT tankers in a deal worth 350-400 million euros ($450-$520 million).

Less then two hours later, it released a second statement, changing course:

"Discussions between France and Saudi Arabia relating to the contract for MRTT are continuing."

MRTT is the Multi-Role Tanker Transport, which refers to converted passenger jets that that can be used for refueling or carrying troops.

Airbus parent European Aeronautic Defence & Space said the deal related to two air tankers, which are adapted from Airbus' A330 wide-body plane. The company declined to comment further.

A deal, if reached, would mark a strategic victory for Airbus in its bid to crack the military tanker market, dominated by Boeing.

The French ministry's U-turn appeared to be driven mainly by fears of breaching Saudi sensitivities over the timing of an announcement, with defense-industry officials confirming a deal was in the pipeline.

"It's a question of protocol," said a French industry source familiar with the matter.

French government officials were clearly flustered by the slip-up. Saudi officials were unavailable for comment.


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