DTN News: Analyst Sees US Tanker Contest As Last For Decades

DTN News: Analyst Sees US Tanker Contest As Last For Decades

* Air Force still sees contract award this fall * Further orders likely to be deferred, analyst says * Tanker orders a "drop in bucket" for EADS and Boeing Source: DTN News - - This article compiled by Roger Smith from reliable sources Reuters

(NSI News Source Info) WASHINGTON - October 20, 2010: The U.S. Air Force once planned to replace its aging fleet of KC-135 refueling tankers in three phases, but budget pressures may make its current competition for 179 planes the last for decades, defense analyst Rebecca Grant said in a new report on Tuesday.

"No one in Washington is saying it yet, but KC-X may end up being the only tanker competition," Grant wrote in the report. "Even if the U.S. buys more than the 179 tankers in KC-X, those buys are two decades away."

The U.S. Air Force expects to award a winner-take-all contract valued at up to $50 billion to either Boeing Co (BA.N) or the U.S. unit of Europe's EADS (EAD.PA) this autumn, in other words sometime by Dec. 21.

"It's still the fall," said spokesman Lieutenant Colonel Wesley Miller. He had no immediate comment on Grant's suggestion that additional orders could be decades away.

Grant, whose work is supported by several defense companies including EADS, said it was increasingly likely that the Air Force's future tanker fleet would consist of some KC-135s, KC-10s, and the new KC-X planes that it plans to buy soon.

The next two planned phases would likely be deferred for some time given the global recession, high outlays in Iraq and the Air Force's failure to "restock its fighters and bombers in numbers needed."

Grant's study looked at the importance of the Air Force tanker replacement program, saying it was an "absolute military necessity" for the United States, but the orders amounted to "something close to a drop in the bucket" for both Boeing and EADS -- in comparison with their total commercial sales.

"KC-X won't be central in keeping either company in business -- not by a long shot," she said. "While it's a prize, the ultimate health of both firms and the prospects for their employees and supply chain partners do not depend on KC-X."

Grant analyzed several notional tankers that added 15 percent, 25 percent or 35 percent to the KC-135's current fuel load, concluding that a plane with more fuel available would offer a qualitative advantage in any mission that involved a long loiter period or the need to refuel a big airplane.

She said a plane with 35 percent more fuel than the current KC-135 would allow the Air Force to use just four tankers, rather than five, which could offer significant savings.

EADS argues that its larger A330-based tanker would offer advantages to the Air Force since it can carry more fuel, passengers and cargo, while Boeing says its smaller 767-based tanker would be cheaper, burning 24 percent less fuel than the bigger Airbus.

Grant did not explicitly favor one plane over the other in her study, but said a KC-X tanker with greater capacity could better accomplish longer missions, creating "very useful force sizing and utilization options" for the Air Force.

She said it was critical to replace the current KC-135 tankers soon, before they needed another round of significant structural overhauls, noting that the cost to maintain the oldest of those planes could rise to $6 billion per year.

(Reporting by Andrea Shalal-Esa; Editing by Steve Orlofsky)

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