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Originally published Monday, December 6, 2010 at 4:23 PM

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Analyst: Boeing's hopes fading for tanker win

After an inadvertent peek at Defense Department data, Boeing executives believe the Air Force is likely to award the long-awaited tanker contract to Airbus parent company EADS, according to a leading defense analyst with close ties to Boeing.

Seattle Times aerospace reporter

Following an inadvertent peek at Defense Department data, Boeing executives believe the Air Force is likely to award the long-awaited tanker contract to Airbus parent company EADS, according to a leading defense analyst with close ties to Boeing.

That view of the feeling inside Boeing is confirmed by two congressional sources familiar with the $40 billion tanker competition.

Citing conversations with several unnamed senior Boeing officials, Loren Thompson of the Lexington Institute said Monday the company's hopes faded when Air Force analyses of the two contending airplanes were accidentally leaked to both sides earlier this month.

Those analyses confirmed Boeing's worst fears, Thompson said. They showed the Airbus A330 tanker scoring well ahead of the Boeing 767 tanker in a mission-effectiveness rating.

"The conclusion you come to is that probably Boeing is going to lose this," said Thompson, who has written papers supporting the Boeing bid.

The effectiveness rating is one of three measures used by the Air Force to adjust the bid price for the airplanes. The two others are assumed to favor Boeing's smaller aircraft — military infrastructure construction costs and fuel burn over the entire life-cycle of the program.

But Thompson, backed again by the congressional sources, said the way the Air Force measured those criteria gave Boeing very little advantage over its rival.

"Boeing has told me many times over the last year that the way the Air Force was calculating the cost of fuel and infrastructure had the effect of minimizing the life-cycle costs of the larger plane" from EADS, Thompson said. "They are not very happy with the way in which those things have been calculated."

A congressional source said Boeing believes the Air Force has underestimated the projected cost of jet fuel in the future, thereby lowering the life-cycle fuel costs. And it has chosen 10 airfields for the military infrastructure analysis that Boeing considers unrepresentative of typical space constraints, lowering projected construction costs also.

Much therefore depends on the mission-effectiveness rating, a score derived from a computer model known as IFARA (for Integrated Fleet Aerial Refueling Assessment) that simulates operational tanker missions.

IFARA rates each airplane's capabilities as a tanker: how much fuel it delivers, how far it flies, how long it can stay on station. It was always clear that the larger A330 would score better than the 767 by this measure.

Earlier this month the Air Force mixed up two computer disks and sent the two companies the IFARA outcome for the other airplane.

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EADS opened the IFARA data on the Boeing tanker. While Boeing realized the mistake sooner and sent back the disk without opening the file, the Air Force afterward decided to level the playing field by providing both sides the IFARA data on the other side's plane.

"When (Boeing officials) saw the ratings for the two planes, I think they became downright alarmed," said Thompson.

A congressional source who spoke on condition of anonymity said the data reinforced a growing pessimism among Boeing executives as to the outcome.

"The confirmation of where they stood on IFARA pushes it over the top," said the congressional source.

Another congressional source said that some Boeing supporters are pushing to have the IFARA measure discounted altogether because of the disk mix-up that revealed the data to both sides.

However, this seems very unlikely and would certainly draw a formal protest from EADS.

Boeing's supporters in Congress have also tried to insist that the Air Force add billions of dollars to the EADS bid price in response to a World Trade Organization (WTO) ruling that Airbus had benefited from illegal government subsidies, including money that directly funded development of the A330.

But the consequences of the subsidies ruling must ultimately be worked out in a WTO process likely to last years, and the Defense Department has repeatedly said that it cannot legally penalize EADS in the interim.

Absent a financial penalty in the tanker competition, EADS will likely underbid Boeing, according to the second congressional source.

Thompson's position was first reported over the weekend by the Press-Register in Mobile, Ala., which is where Airbus plans to build a final assembly facility if it wins the tanker contract.

Both Boeing and EADS declined to comment Monday.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

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