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airbus contact worth billions

  1. 184 Posts.
    I thought this could be of interest, I would hope TZ would be getting in on some of the action.

    WASHINGTON (AP) -- Northrop Grumman and the maker of Airbus planes beat out Boeing Co. to win a $35 billion government contract to build up to 179 military refueling planes, the Air Force said Friday.

    The selection of Los Angeles-based Northrop Grumman and its European-based partner, European Aeronautic Defence and Space Co., came as a surprise to industry and government officials.

    It is a big blow to Chicago-based Boeing, which has been supplying refueling tankers to the Air Force for nearly 50 years and had been widely expected to win the deal.

    The contract positions EADS to break into the U.S. military market in a big way. And it opens up a huge new business opportunity for Northrop Grumman.

    In after-hours trading, shares of Northrop climbed $3.74 to $82.37, while Boeing's stock price fell $2.59 to $80.10.

    The Northrop-EADS refueling tanker, the KC-45A, "will revolutionize our ability to employ tankers and will ensure the Air Force's future ability to provide our nation with truly global vigilance, reach, and power," Air Force Gen. Duncan J. McNab said in a statement.

    The Air Force has estimated the tanker contract will be worth between $30 billion and $40 billion over 10 to 15 years. It is the first of three deals that could eventually be worth as much as $100 billion over 30 years to replace the entire Air Force fleet of nearly 600 refueling tankers.

    As the winners of the first award, EADS and Northrop will be in a strong position to win the two follow-on deals, analysts believe.

    Military officials say the Air Force is long overdue to replace its air-to-air refueling tankers, which allow fighter jets and other aircraft to refuel without landing. The service currently flies 531 Eisenhower-era tankers and another 59 tankers built in the 1980s by McDonnell Douglas, now part of Boeing.

    But the new contract has emerged as a major test for the Air Force, which is trying to rebuild a tattered reputation after a procurement scandal in 2003 sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.

    The tanker deal is also certain to become a flashpoint in a heated debate over the military's use of foreign contractors since Boeing painted the competition as a fight between an American company and its European rival. Boeing is expected to protest the decision.

    Boeing spokesman Jim Condelles said the company is disappointed but has not yet made a decision about whether to appeal the award. Boeing will phase out its 767 line at a factory in Everett, Wash., Condelles said.

    The EADS/Northrop Grumman team plans to perform its final assembly work in Mobile, Ala., although the underlying plane would mostly be built in Europe. And it would use General Electric engines built in North Carolina and Ohio. Northrop Grumman, which is based in Los Angeles, estimates a Northrop/EADS win would produce 2,000 new jobs in Mobile and support 25,000 jobs at suppliers nationwide.

    "I've never seen anything excite the people of Mobile like this competition," Sen. Jeff Sessions, R-Ala., said. "We're talking about billions of dollars over many years so this is just a huge announcement."

    Associated Press Writers Ben Evans and Matthew Daly in Washington contributed to this report.

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