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Published: Wednesday, 3/12/2008

Outsourcing charge won't stick in Airbus deal with Air Force

THE decision of the U.S. Air Force to buy tanker aircraft from a consortium whose largest partner is European Airbus has kicked off a debate that raises some of the most profound questions surrounding America's defense and the economics of maintaining it.

What set off the screaming and yelling is that the contract announced Feb. 29 went to the European Aeronautic Defense and Space Co. and its partner, Los Angeles-based Northrop Grumman, rather than to the previous tanker monopoly-holder, Boeing.

The amount of money involved is an initial $35 billion for 179 aircraft, which could grow to $100 billion over 30 years. It is, of course, the long-suffering American taxpayer who will pay for what eventually will amount to 400 new planes. The current fleet of aerial refueling tankers numbers 535.

The package of elements behind this controversial decision is formidable and complex.

The first is, are the new aircraft necessary?

The tanker aircraft now in use are old, refitted Boeing 707s and DC-10s. Replacing them has been at the top of the Air Force wish list for more than a decade. So let's take the Pentagon's word that they are needed.

Then comes the question of the comparative quality of the proposed planes. The Air Force maintains stoutly that its decision was made on that basis, citing the larger fuel capacity, lower cost, greater ability to carry cargo and passengers, bigger payload, and longer range of the European Airbus, based on its existing A330. Again, let's take the Pentagon's word that the Airbus tanker is better.

Then we get into one of the really sticky issues. Boeing said its plane would be built 85 percent in the United States. Northrop-Grumman/Airbus said its aircraft would have 60 percent U.S. content and that final assembly would take place at a new plant in Mobile, Ala., creating 1,300 new jobs there and 25,000 across the United States.

Boeing and its most attentive members of Congress immediately claimed that the Air Force, in having awarded the contract to Northrop-Grumman and EADS, was outsourcing American jobs to Europe. This is, of course, a particularly painful subject at a time when the U.S. economy is notably failing to create jobs. In fact, the economy shed 85,000 job in January and February and virtually everything bad that's imaginable is currently afflicting it.

In economic terms, what Boeing says is true. What Boeing is not rushing to point out is that it earns more from exporting aircraft to Europe than Airbus will ever make from the tanker deal.

There is another complicated piece to the argument. That is the national security aspect. Let's take a look at a "worst-case" scenario. Suppose the United States were to become involved again in a war as cataclysmic as World War II. Let's say, hypothetically, that America's supply of essential tanker aircraft, dependent in part now on a foreign supplier, turns out to be inadequate and the United States is cut off from Europe in terms of supply. Wouldn't we wish then that we had stayed with good old Boeing?

But the 767s that Boeing was proposing to modify into tankers would, we imagine, still be in production, given the number of orders for them extant. We also can assume that it would not be that difficult to modify them to meet the need, if such extreme circumstances ever came to pass.

Another complicating factor in this debate is the fact that all of this takes place in - wait, wait, don't tell me - a presidential election year, and one of the candidates, Republican Sen. John McCain of Arizona, was involved in an earlier chapter of this saga. Boeing originally had it sewed up and was going to lease - not sell - the tankers to the Air Force. The problem was that it turned out that the No. 2 U.S. Air Force procurement officer, Darleen Druyun, had worked out a private deal with Boeing that after she left government employment, she, her daughter, and her son-in-law would be employed by Boeing at generous salaries.

The whistle was blown, Ms. Druyun pled guilty and served time, and Boeing's CEO and the secretary of the Air Force resigned. Mr. McCain took credit for having scotched Boeing's sweetheart deal, saving the taxpayers an estimated $6 billion.

This raises the question of whether Boeing is still being punished for having been naughty.

That is probably not the case, but what is certain is that Sens. Hillary Clinton and Barack Obama, the Democratic presidential contenders, are now shuffling around the bonfire licking their chops.

Mr. McCain is hoping not to become the marshmallow on the fire for selling out loyal American firm Boeing in favor of evil European Airbus. "He gave our jobs away!", rehearse Mrs. Clinton and Mr. Obama.

There already have been congressional hearings and the decision is due to be reviewed by the Government Accountability Office.

So, where are we left? In my view, even though I don't like the idea of more American jobs going overseas, given the total interconnectivity of the world economy the decision of the Air Force that the Northrop-Grumman-Airbus tanker is the better of the two should be respected and adhered to.

The Air Force did not make the difficult decision without taking into account the political screaming and yelling that would ensue, so it has to believe that the Airbus is the better aircraft.

Trying to hang Mr. McCain for his earlier actions that prevented Boeing from getting away with its cute little deal - buying a government employee - would be entirely wrong, and the Democratic candidates should just shut up about it. It is to Mr. McCain's credit that he had the courage to pick up the porcupine of defense procurement and save us all some money in the process.



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