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EADS vs. Boeing: Who's Got the Advantage?

Are the odds stacked against EADS and in favor of Boeing for winning the U.S. tanker bid?
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(Boeing, EADS article updated with comments from French President Nicolas Sarkozy)



) -- The drama behind the fight to build U.S. aerial-refueling planes continues, as Airbus parent


swoops in to

take a shot at winning the lucrative prize

worth tens of billions of dollars. But whether the company has a fair shot at winning the deal remains to be seen.

Back in February 2008, EADS and

Northrop Grumman

(NOC) - Get Northrop Grumman Corporation Report

had together beaten


(BA) - Get Boeing Company Report

for the roughly $35 billion contract to supply refueling tankers to the U.S. Air Force. It was a big upset for Boeing, but Boeing's loss ended up being short-lived.

The deal was later snuffed out when government auditors decided to uphold Boeing's protest. Northrop -- expressing outrage that the reversal, and subsequent rebidding process, was too friendly to Boeing -- decided in March to opt out of the latest bidding race to supply the Air Force's next generation of aerial-refueling planes.

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The request "clearly favors Boeing's smaller refueling tanker and does not provide adequate value recognition of the added capability of a larger tanker, precluding us from any competitive opportunity," Northrop Grumman's chief Wes Bush said in statement in March. At that point, Boeing looked to be the clear winner for the contract.

However, it looks increasingly likely now that one of the other bidders will be rejoining the race. While Northrop was loath to put any more time, effort and finances into what looked like an uneven playing field, its European partner looks increasingly likely to rejoin the race despite widespread concerns about how a win by this company would affect American jobs.

Meanwhile, French President Nicolas Sarkozy said EADS would pursue the contract if the playing field was fair and open, as President Barack Obama had promised, according to


"I said to him, I trust you; if you tell me that the tender will be fair and transparent, then EADS will bid and we trust you," Sarkozy said at a press conference following his meeting with Obama at the White House,


reported. France has a 15% stake in EADS.

This comes also amid the World Trade Organization finding that supports U.S. allegations that EADS's Airbus had been receiving illegal European subsidies that were unfair to its U.S. competition, like Boeing. "This is a powerful, landmark judgment and good news for aerospace workers across America who for decades have had to compete against a heavily subsidized Airbus. U.S. officials have estimated the commercial value to Airbus of all the government launch aid subsidies it has received at more than $178 billion (in 2006 dollars)," Boeing said in a statement issued on Mar. 23.

Airbus countered Boeing's statement of triumph, saying that from what it gathered and confirmed from the WTO panel report, 70% of the U.S. claims against the European Union had been rejected; that the European reimbursable loan mechanism has been confirmed to be a legal and compliant instrument of partnership between government and industry; and that the panel refused the U.S. request for remedies as legally inappropriate. "These results are in stark contrast to Boeing's enthusiastic expectations announced only last night in a statement by the company," EADS stated.

EADS, enthusiastic about deepening its imprint in the U.S. market, looks like it's ready to proceed with a bid. The Pentagon has already granted the company prime-contractor status, and the company is close to receiving a 90-day extension for the company to have more time to prepare for a bid, according to


"I believe that EADS sees a path where they could submit a bid with a reasonable chance of winning that Northrop did not see, and for different reasons," Leeham aerospace analyst Scott Hamilton told


According to the report, Hamilton also said that EADS had fewer qualms about fixed-price contracts than Northrop, given its know-how with commercial aircraft deals.

All of which begs the question: Looking at the past and current developments, what do you think are the odds of EADS winning the lucrative U.S. tanker deal?

-- Reported by Andrea Tse in New York


>>U.S. May Extend Tanker Deadline for EADS

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