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East New York

Boeing loses bigest Air Force contract in aviation history!

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On Februrary 29, 2008 history was made when the United States Air Force selected the Airbus/Northrop Grumman A330-200 based tanker to replace the current fleet of KC-135 tankers. This contract is worth $35 Billion, and was Boeings to lose. Boeing offered the 767 tanker, which is a vunerable design from the late 70's. Effectively, this now means the 767 will most likely end production in the near future. In my personal opinion, this is a major blow to our already week economy. Since when does the USAF order foreign aircraft? Well, John McCain wanted Airbus, so thats what he got!

 

After taking the weekend to digest the news, Wall Street reacted this morning with the same shock as everyone else to the U.S. Air Force's selection of a European-led design over Boeing for its new KC-45 refueling tanker.

 

In a flurry of research notes, analysts began to dissect the meaning of the Pentagon's surprise decision, which was announced after the markets closed last Friday.

 

"There aren't many individual contracts that really move the needle for prime defense contractors, but this is one exception," notes Citigroup's George Shapiro.

 

JPMorgan's Joseph B. Nadol, 3d, calls the selection of the AirbusA330-based tanker over Boeing's 767-based design a "major strategic loss" for Boeing, while Credit Suisse's Robert Spingarn labels the decision a "game changing win" for Northrop Grumman.

 

Nadol notes that Boeing's C-17 and F/A-18 programs are mature or scheduled to expire and that the long-term funding outlook for its Future Combat Systems program is murky. "We believe the tanker loss makes Boeing more likely to seek a major defense acquisition in the coming years," he writes. He also views the decision as bad news for Boeing's commercial airplane business because it will give rival EADS/Airbus, which will assemble the KC-45s in Alabama, a major aircraft manufacturing base in the U.S.

 

Beyond the decision's obvious implications for Boeing, EADS and Northrop Grumman, the selection affects a number of publicly-traded U.S. aerospace suppliers. General Electric (GE), which is slated to provide the engines on the A330-based tanker, is one winner, as are GE suppliers such as Precision Castparts and Woodward Governor. AAR Corp., which makes military cargo systems and was listed by Northrop Grumman as a supplier to the program, also should benefit, Shapiro says.

 

Conversely, the Pentagon's decision is bad news for Spirit Aerosystems, Pratt & Whitney and Rockwell Collins, which were all major suppliers to Boeing under its 767-based tanker proposal.

 

The big question now is whether Boeing will protest the award. Spingarn thinks a protest is likely after Boeing receives its debrief from Pentagon officials on March 12. He and other analysts expressed surprise that Air Force procurement officials appeared to favor the A330's bigger capacity over the 767's apparent lower operating costs. "We think Boeing would have bid the 777, rather than the 767, if that weighting had been clearer," Spingarn writes.

 

JSA Research analyst Paul Nisbet believes a protest is not a slam dunk, given the Air Force's desperate need to replace its decades-old tankers. "We would not be surprised if Boeing ... magnanimously favors the warfighter and the nation by choosing not to file a protest, thereby avoiding what could be a delay in the program of a year or more," he writes.

 

But Nisbet predicts "an eruption" in Congress over the Pentagon's decision. He estimates the selection means 15,000-20,000 U.S. jobs will be outsourced in an election year where jobs and a shaky U.S. economy are big issues for voters. He also takes a jab at Arizona Sen. John McCain, the presumptive Republican nominee for president, who was a major force in blocking Boeing's original ethics-tainted bid to supply the tankers via leasing. "McCain for President - of France?" reads the headline of Nisbet's research note.

 

Shapiro estimates the tanker work will add up to $1 billion to Northrop Grumman's annual revenues by 2010. But he declines to raise his "hold" rating on the company's stock. "It is selling at a more expensive valuation than Lockheed Martin, has slower organic growth and has had weaker quality earnings," he writes. Meanwhile, Nisbet says the recent battering taking by Boeing's stock provides a "rare opportunity" for investors to buy in at a good price.

 

Investors could learn more about Boeing's reaction on Wednesday morning, when Jim Albaugh, CEO of the company's defense unit, is scheduled to present at Citigroups' Global Industrial Manufacturing Conference in New York.

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I wonder if the USAF is gonna regret this later.....

 

Ever heard the phrase, "If its not Boeing, I'm not going."

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I wonder if the USAF is gonna regret this later.....

 

Ever heard the phrase, "If its not Boeing, I'm not going."

 

Definitely! Thats one of my favorite phrases. Boeing is by far my favorite. I have 78 model airplanes, only 4 of which are Airbus. I love planes just about as much as I do buses, and the only good I see out of this if the fact that my company GE gets to produce 450 engines valued at $12 Million each at list prices. But still, I can't believe the USAF is ordering a non-American tanker. Anyone still want McCain for president???

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Definitely! Thats one of my favorite phrases. Boeing is by far my favorite. I have 78 model airplanes, only 4 of which are Airbus. I love planes just about as much as I do buses, and the only good I see out of this if the fact that my company GE gets to produce 450 engines valued at $12 Million each at list prices. But still, I can't believe the USAF is ordering a non-American tanker. Anyone still want McCain for president???

Not me! I'm not a republican anyway.....

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Wow thats crazy, I would have kept it with Boeing since it stays within the U.S. I'm pretty surprised at this though. Hopefully this will not rattle Boeing too much and they can bounce back from this.

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Wow thats crazy, I would have kept it with Boeing since it stays within the U.S. I'm pretty surprised at this though. Hopefully this will not rattle Boeing too much and they can bounce back from this.

They'll be fine. They have 787s to produce.....

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Wow very interesting. Thanks for posting.

 

No problem.

 

They'll be fine. They have 787s to produce.....

 

OOOOOOH yeah, the 787 is the fastest selling commercial plane in history! Boeing will have 900 orders before the first one takes to the skys. They currently have orders for 885 at an average of $180 Million each! Boeing will be just fine!

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OOOOOOH yeah, the 787 is the fastest selling commercial plane in history! Boeing will have 900 orders before the first one takes to the skys. They currently have orders for 885 at an average of $180 Million each! Boeing will be just fine!
Exactly. Continental is one of the first to get em too so I can't wait!

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Our economy is already in a deep slump,I really don't think sending it out of the country is a good idea,however I don't think that it would bring our economy out of the slump its already in....

And if the USAF really wanted a decent airplane,they would contract a company(or several) to come up with a brand new design,that would be up to par with the USAF's standards rather then just taking 767 and converting it so it works as the USAF needs it. Also Boeing did not totally lose out...they still have that big contract making those unmanned spy planes for our armed forces.

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Exactly. Continental is one of the first to get em too so I can't wait!
Me either. The first plane in the US will be going to Northwest with Rolls-Royce Engines followed by Continental with GE NX engines. This is also why I think Delta wants to merge with Northwest because the 787 is sold out for any delivery spot until 2014, and Northwest gets some in 2009! Due to a "Gentlemans Agreement" between Delta, Continental, and Boeing, the two airlines operate all-Boeing fleets. Delta wants 787's BAAAAAD!!!:)

 

 

 

Our economy is already in a deep slump,I really don't think sending it out of the country is a good idea,however I don't think that it would bring our economy out of the slump its already in....

And if the USAF really wanted a decent airplane,they would contract a company(or several) to come up with a brand new design,that would be up to par with the USAF's standards rather then just taking 767 and converting it so it works as the USAF needs it. Also Boeing did not totally lose out...they still have that big contract making those unmanned spy planes for our armed forces.

 

You're right, boeing should have offered a 777 Tanker, and a 787 Tanker. They are both more cost effective than the 767. But I think I got it on why the USAF ordered the Airbus. The GE CF6 engine offered on the Airbus A330 are more reliable than the Pratt & Whitney PW4000 engines offered on the 767. If boeing had offered the GE engine as they do on the other 767 Tankers they have sold to other countries, they might have got the contract!

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Boeing should of updated their product offering. I can't blame the USAF to not say yes to a design from the 70's. Saying this the 747 is still the dominant big dawg, but the bigger A380 is a contender who just might take that title.

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Me either. The first plane in the US will be going to Northwest with Rolls-Royce Engines followed by Continental with GE NX engines. This is also why I think Delta wants to merge with Northwest because the 787 is sold out for any delivery spot until 2014, and Northwest gets some in 2009! Due to a "Gentlemans Agreement" between Delta, Continental, and Boeing, the two airlines operate all-Boeing fleets. Delta wants 787's BAAAAAD!!!:D
Ugh, I hope NWA doesn't make that plane look fugly with the scheme they rolling with now. To me, its just not cutting it. Them 787s look mighty pretty in that Continental scheme.

 

And about Delta, just two words, "HAR HAR!"

Them (I want to really put a mean word, but I won't. Takers can guess on it...) peoples don't deserve them planes yet even though they wouldn't look bad in the Delta scheme. Not the new one, the one prior to the new, which would be this one:

http://www.airliners.net/photo/Delta-Air-Lines/Boeing-777-232-ER/1320843

 

If Delta and NWA merge, NWA takes control of Atlanta International almost completely! (One reason why I hate ALT Intl because Delta currently almost run the place entirely screwing me over changing flights there.)

 

Boeing should of updated their product offering. I can't blame the USAF to not say yes to a design from the 70's. Saying this the 747 is still the dominant big dawg, but the bigger A380 is a contender who just might take that title.
Mind you, Boeing was offering modified 767s to the USAF. Airbus is offering modified A330s to the USAF.

 

I don't think the USAF would want the "Whale" as a tanker just yet........

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Ugh, I hope NWA doesn't make that plane look fugly with the scheme they rolling with now. To me, its just not cutting it. Them 787s look mighty pretty in that Continental scheme.

 

And about Delta, just two words, "HAR HAR!"

Them (I want to really put a mean word, but I won't. Takers can guess on it...) peoples don't deserve them planes yet even though they wouldn't look bad in the Delta scheme. Not the new one, the one prior to the new, which would be this one:

http://www.airliners.net/photo/Delta-Air-Lines/Boeing-777-232-ER/1320843

 

If Delta and NWA merge, NWA takes control of Atlanta International almost completely! (One reason why I hate ALT Intl because Delta currently almost run the place entirely screwing me over changing flights there.)

 

 

Mind you, Boeing was offering modified 767s to the USAF. Airbus is offering modified A330s to the USAF.

 

I don't think the USAF would want the "Whale" as a tanker just yet........

 

Well the way it is now, if they do merge, the Delta name and Headquartes will stay, and the NWA name will dissapear.

 

For the 767/A330 deal, the A330's are more fuel efficient. The A330 all but killed the 767 when it was introduced in 1994. The only thing keeping it alive now is an order from UPS for 30 planes. As far as the 747 goes, the USAF would never select thoes as tankers, and the new 747-8 which debuts in 2009 will be the contender with the A380. Currently, the only passenger airline to order the 747-8 is Lufthansa. If the A380 had come out on time, and was not 3 years late, they would be the leader. Fed Ex had 10 orders and 10 options on the A380, and the day Airbus announced another delay for the 2nd year in a row, Fex Ex canceled the order, and 45 minutes later announced an order for the 777 with 15 firm, and 15 options. Fex Ex could have been one of Airbus's best customers fot the A380.

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The Boeing Company

 

Boeing to File Protest of U.S. Air Force Tanker Contract Award

 

CHICAGO, March 10, 2008 -- The Boeing Company [NYSE: BA] will file a formal protest on Tuesday asking the Government Accountability Office (GAO) to review the decision by the U.S. Air Force to award a contract to a team of Northrop Grumman and European Aeronautic Defence and Space Company (EADS) to replace aerial refueling tankers.

 

"Our team has taken a very close look at the tanker decision and found serious flaws in the process that we believe warrant appeal," said Jim McNerney, Boeing chairman, president and chief executive officer. "This is an extraordinary step rarely taken by our company, and one we take very seriously."

 

Following a debriefing on the decision by the Air Force on March 7, Boeing officials spent three days reviewing the Air Force case for its tanker award. A rigorous analysis of the Air Force evaluation that resulted in the Northrop/EADS contract led Boeing to the conclusion that a protest was necessary.

 

"Based upon what we have seen, we continue to believe we submitted the most capable, lowest risk, lowest Most Probable Life Cycle Cost airplane as measured against the Air Force's Request for Proposal," McNerney said. "We look forward to the GAO's review of the decision."

 

Boeing said it would provide additional details of its case in conjunction with the protest filing on Tuesday.

 

This is not going to be pretty! I was watching CNN yesterday, and they were saying that the decision should be overturned by congress, and all of the American people should write to congress about the 44,000 American jobs that will be lost if EADS/Airbus/Northrup gets the contract. I think Congress should let Boeing re-submit a proposal sor the 767 with GE engines, and/or a 777 Tanker. I truely think the Air Force did not select the Boeing offering because the GE engines were to be replaced with Pratt & Whitney engines. Back in the late 80's Boeing was going to offer Air Force One with Pratts, but the Pentagon said... uh.... NO!! GE engines are hands down more reliable, Pratts are just more fuel efficient.

 

 

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