Early Observations of the KC-X Winner

By now everyone has heard that the USAF picked the Airbus A330 MRTT over the Boeing 767. This decision is ultimately very important to the Navy, the Navy has pretty much retired and does not have future plans for a carrier based tanker at this time, meaning the Navy will be relying on the KC-X winner for supporting its naval aviation, including carrier aviation.

By every metric, in our opinion the Airbus A330 MRTT is a better aircraft than the Boeing 767 for supporting the Navy. The long range combined with the larger payload will provide better coverage over the vast Pacific for operations, and will allow for greater loiter time over areas where air superiority is established like the Middle East. While we will wait to see what the DoD acquisition office says, it is very difficult to find a technical reason why the Boeing 767 option would have been better.

From an industry perspective, why isn't it smarter to buy the Airbus A330 MRTT? The commercial markets have embraced the aircraft, while at the same time the Boeing 767 is being phased out. It has been noted in a number of places the Air Force would be the only customer of the Boeing 767 by the end of the lifetime of the KC-X. That isn't true of the Airbus A330 MRTT.

In the end, the USAF faced a no win situation. Congress desires the Air Force to be more efficient, as it is an incredibly expensive business to fly military aircraft. Cost problems continue to hurt virtually every program of the USAF, and for the first time, the USAF made considerable cost considerations into this buy. Observe, at the purchase time, the currency exchange between the US and Europe is at its highest point ever. Does anyone expect things to honestly remain that way forever? As the currencies begin to trade more favorably to the US, the cost of the Airbus A330 MRTT will go down. The healthy commercial industry of the Airbus A330 MRTT will also contribute to lower costs over the lifetime of the aircraft. True the aircraft is more expensive per unit, but it is also bigger and more capable by every metric.

We observe there are only two arguments supporting Boeing in their cry of foul. First, they can claim this was a bid for medium aircraft, and follow the route of the CSAR complaints. That might work, but Boeing should have offered a 777 option anyway. Did they? Would it matter?

Second, virtually all the momentum on Capital Hill is based on a single theory, buy American. I'm all for forcing the Air Force to buy American, after all, the Navy is regulated if not over regulared in this regard, but in the end it is both smart defense policy and smart politics.

However, that law doesn't exist for the Air Force, and the only people at fault for that is Congress who makes the law. Congress will have a hearings today on the subject, and if they want to be smart about the whole deal, they get tough with the Pentagon on the strategy of the Air Force as a whole. The tanker deal as we see it is fine, but Congress can certainly step to the plate and change the circumstances, and has options including to help Boeing in a different way' by finding out why the Air Force thinks they don't need any more C-17s. Are the two related in any way? Given some of the comments, they might be.

Final thoughts. We very much enjoy how people were so outraged when Boeing 'fixed' the bid in 2002 with leases, because it highlights how silly it is when Boeing actually loses the bid. Failing to 'fix' the bid, and after losing in a fair competition, Boeing's solution is clearly to lobby for a public bandwagon on the "Buy American" motto to have the people 'fix' the bid for them, and many are ready to do exactly that (including Congress). What is the point of a competitive bid if the outcome will be 'fixed' in the end regardless of outcome?

Boeing's reaction to not winning is a symptom of the larger problem. This is an excellent example that explains why the USAF faints shock whenever they don't get their way, because the childish behavior of the Air Force is basically a reflection of the childish behavior of their industry.

In the end, we honestly don't have a preference in the final outcome, and we believe that if Boeing had pitched the 777 they probably would have won. Check out the first graphic Defense Industry Daily has up, it tells the story of the arguments sure to be discussed in Congress today. In the end, whether it is the Airbus A330 MRTT or if somehow the Boeing 777 enters stage right, the big winner is the Navy, as we believe it should be.