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The French Saudi tanker fracas

French officials scrambled Monday to fix a misunderstanding with the Saudis after prematurely announcing a deal to supply Saudi Arabia with refueling aerial tankers. First the French defense ministry announced that the French Defence Minister and the Saudi Crown Prince had signed a strategically important agreement to supply Airbus MRTT tankers in a deal worth ~400 million euros.

Two hours later the French released a second statement, changing course: "Discussions between France and Saudi Arabia relating to the contract for MRTT are continuing." The French U-turn seems driven by fears of breaching Saudi sensitivities over the timing of an announcement. Recall the Saudis reaction to British concerns with graft on the Typhoon order. Probably the Saudis are also concerned how Washington will see this order.

MRTT is the Multi-Role Tanker Transport, based on the A330, and known in the US as the KC-30 for the USAF tanker competition. EADS says the deal related to two tankers and declined to comment further. Airbus has yet to fly a fully equipped MRTT but said last month that its boom system had been flown and tested on a A310. Canada has two A310-based MRTTs and Germany three.

Another A330-based MRTT customer is the Royal Australian Air Force which ordered five. Britain is also negotiating with EADS to use A330 MRTTs for refueling Royal Air Force planes under a 27-year outsourcing contract.

The Saudis enjoy playing vendors off against each other. But Saudi Arabia will find Washington a much cooler place (with Democrats in charge) to visit when this tanker deal is finally announced. After selecting the Typhoon and now the MRTT, people in Congress and the Pentagon will feel slighted – these orders appear ungrateful to the US which has defended the, if not corrupt, then suspect Saudis. Large amounts of terror money is invariably traced back to Saudis. Perhaps these orders going to Europe reflect a growing belief in Saudi Arabia that Europe's increasingly Muslim population naturally makes for better allies.

The French Saudi tanker fracas

French officials scrambled Monday to fix a misunderstanding with the Saudis after prematurely announcing a deal to supply Saudi Arabia with refueling aerial tankers. First the French defense ministry announced that the French Defence Minister and the Saudi Crown Prince had signed a strategically important agreement to supply Airbus MRTT tankers in a deal worth ~400 million euros.

Two hours later the French released a second statement, changing course: "Discussions between France and Saudi Arabia relating to the contract for MRTT are continuing." The French U-turn seems driven by fears of breaching Saudi sensitivities over the timing of an announcement. Recall the Saudis reaction to British concerns with graft on the Typhoon order. Probably the Saudis are also concerned how Washington will see this order.

MRTT is the Multi-Role Tanker Transport, based on the A330, and known in the US as the KC-30 for the USAF tanker competition. EADS says the deal related to two tankers and declined to comment further. Airbus has yet to fly a fully equipped MRTT but said last month that its boom system had been flown and tested on a A310. Canada has two A310-based MRTTs and Germany three.

Another A330-based MRTT customer is the Royal Australian Air Force which ordered five. Britain is also negotiating with EADS to use A330 MRTTs for refueling Royal Air Force planes under a 27-year outsourcing contract.

The Saudis enjoy playing vendors off against each other. But Saudi Arabia will find Washington a much cooler place (with Democrats in charge) to visit when this tanker deal is finally announced. After selecting the Typhoon and now the MRTT, people in Congress and the Pentagon will feel slighted – these orders appear ungrateful to the US which has defended the, if not corrupt, then suspect Saudis. Large amounts of terror money is invariably traced back to Saudis. Perhaps these orders going to Europe reflect a growing belief in Saudi Arabia that Europe's increasingly Muslim population naturally makes for better allies.

Tanker battle is on

Dow Jones reports Northrop Grumman has told the USAF it intends to take part in a competition for a new aerial refueling plane, according to Air Force and congressional officials. $14 billion is set aside for the program between 2008 and 2013 in the service's new budget request. So its easy to see why Northrop Grumman and EADS won't give up easily.

We suspect EADS is going to offer a bargain like never before on the A330. Given Boeing's success with UPS this week, Airbus will price lower than ever before is our guess. Overseas nations looking for tankers are going to watch this deal closely because the winner here will likely take overseas orders also. The stakes are amazingly high. In some ways, its a winner takes all. Whereas Boeing has other successful programs, EADS needs this deal to help it fund its programs. Airbus' A330 is the best widebody plane it has and consequently can be expected to pull out all the stops. The Pentagon must be rubbing its hands in glee – the harder Boeing and Northrop Grumman/EADS fight the better for them.

What a turn around from the scandals. Senator McCain must be all smiles – he's the hero who saved American billions, no matter who wins. How convenient for 2008. Accountants at both companies should close their eyes to the numbers because regular rules are out the window. This is going to be an awesome fight.

Tanker battle is on

Dow Jones reports Northrop Grumman has told the USAF it intends to take part in a competition for a new aerial refueling plane, according to Air Force and congressional officials. $14 billion is set aside for the program between 2008 and 2013 in the service's new budget request. So its easy to see why Northrop Grumman and EADS won't give up easily.

We suspect EADS is going to offer a bargain like never before on the A330. Given Boeing's success with UPS this week, Airbus will price lower than ever before is our guess. Overseas nations looking for tankers are going to watch this deal closely because the winner here will likely take overseas orders also. The stakes are amazingly high. In some ways, its a winner takes all. Whereas Boeing has other successful programs, EADS needs this deal to help it fund its programs. Airbus' A330 is the best widebody plane it has and consequently can be expected to pull out all the stops. The Pentagon must be rubbing its hands in glee – the harder Boeing and Northrop Grumman/EADS fight the better for them.

What a turn around from the scandals. Senator McCain must be all smiles – he's the hero who saved American billions, no matter who wins. How convenient for 2008. Accountants at both companies should close their eyes to the numbers because regular rules are out the window. This is going to be an awesome fight.

The USAF tanker deal

The USAF has not dramatically changed its RFP. Language now says that a higher priced offering will be considered based on capabilities. This was not quite what the Northrop Grumman/EADS team wanted, but it is not too far off. Many speculate that the KC-30 team will withdraw. We don't think so. They have a lot riding on this deal and giving up now will not be a good decision.

As pointed out by Scott Hamilton, "Long forgotten is the fact that Airbus parent EADS in 2001-2002 offered the KC-330 for a price that was less than Boeing offered the KC-767." Scott notes that Airbus offered its A330 (on which the KC-30 is based) at 44% off retail to Thai Airways. Scott then points out that the A330F launch customers might be paying $70m per unit – that's 56% off retail.

Boeing's 767 retails at $120m. Yesterday's UPS order gives Boeing a boost in terms of how low it will go in its bid for a 767-based tanker. Boeing could cut its price 50% on its plane, and offer it for $60m. Then the Pentagon would have to consider if the more capable KC-30 is worth $10m more than the KC-767. The question will be how much are the KC-30's additional capabilities worth? It is a more capable airplane. The Pentagon brass insist the primary mission is refueling. Other capabilities like cargo capacity are not as crucial. If refueling is given more priority then the KC-767 has the advantage and if the "other" capabilities are given more priority the KC-30 has the advantage.

But this decision will not be the Pentagon's to make. Too much is riding on this deal for politicians. In the current Congress, there seems to be more seniority on the Washington State side than on the Alabama side. The former being the "home" of the KC-767 and the latter the planned "home" for the KC-30. Even if the KC-30 was equally priced to the KC-767 and its additional capabilities were "free", the critical mass (or is that mess?) favors the xenophobes. The military's needs are secondary and tax-payer value for money comes way after that. At least Northrop Grumman/EADS is keeping Boeing honest this time round.

The USAF tanker deal

The USAF has not dramatically changed its RFP. Language now says that a higher priced offering will be considered based on capabilities. This was not quite what the Northrop Grumman/EADS team wanted, but it is not too far off. Many speculate that the KC-30 team will withdraw. We don't think so. They have a lot riding on this deal and giving up now will not be a good decision.

As pointed out by Scott Hamilton, "Long forgotten is the fact that Airbus parent EADS in 2001-2002 offered the KC-330 for a price that was less than Boeing offered the KC-767." Scott notes that Airbus offered its A330 (on which the KC-30 is based) at 44% off retail to Thai Airways. Scott then points out that the A330F launch customers might be paying $70m per unit – that's 56% off retail.

Boeing's 767 retails at $120m. Yesterday's UPS order gives Boeing a boost in terms of how low it will go in its bid for a 767-based tanker. Boeing could cut its price 50% on its plane, and offer it for $60m. Then the Pentagon would have to consider if the more capable KC-30 is worth $10m more than the KC-767. The question will be how much are the KC-30's additional capabilities worth? It is a more capable airplane. The Pentagon brass insist the primary mission is refueling. Other capabilities like cargo capacity are not as crucial. If refueling is given more priority then the KC-767 has the advantage and if the "other" capabilities are given more priority the KC-30 has the advantage.

But this decision will not be the Pentagon's to make. Too much is riding on this deal for politicians. In the current Congress, there seems to be more seniority on the Washington State side than on the Alabama side. The former being the "home" of the KC-767 and the latter the planned "home" for the KC-30. Even if the KC-30 was equally priced to the KC-767 and its additional capabilities were "free", the critical mass (or is that mess?) favors the xenophobes. The military's needs are secondary and tax-payer value for money comes way after that. At least Northrop Grumman/EADS is keeping Boeing honest this time round.

The tanker RFP is supposed to hit the street today. Here is an image showing the relative sizes of the KA330-tanker refueling a 777-tanker.

The tanker RFP is supposed to hit the street today. Here is an image showing the relative sizes of the KA330-tanker refueling a 777-tanker.