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Boeing-Airbus contest ready to heat up

By Michelle Dunlop, Herald Writer / Published January 14, 2010

The refueling boom of a KC-135R Stratotanker aircraft nears a 6th Air Refueling Squadron KC-10A Extender aircraft during a Military Airlift Command channel cargo mission.
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The refueling boom of a KC-135R Stratotanker aircraft nears a 6th Air Refueling Squadron KC-10A Extender aircraft during a Military Airlift Command channel cargo mission. The Air Force is expected to replace it's entire KC-135R fleet with 179 new, yet to be determined, tanker aircraft.

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EVERETT, WASHINGTON -- The aerospace giants await Air Force tanker requirements and the WTO's ruling in their trade dispute

The outcomes of a lucrative tanker competition and a contentious trade dispute await the Boeing Co. and its rivals in the coming months.

On Tuesday, Boeing said it has delivered its fourth and final KC-767 tanker to Japan as the company gears up to compete for a roughly $35 billion tanker contract with the U.S. Air Force. EADS, Boeing's rival to replace 179 aerial refueling tankers for the U.S. Air Force, said Tuesday that it expects the Pentagon to release the final tanker requirements soon. But the European company emphasized the need for a fair set of rules as the Air Force tries for a third time to replace its KC-135 tanker fleet.

"We are perfectly happy to receive the proposal whenever they think it meets the objective of meeting a fair and open competition," said Sean O'Keefe, the new head of EADS North American division.

EADS' partner for the contract, Los Angeles-based Northrop Grumman, threatened in December that it will not bid for the $35 billion Air Force contract if the contest seems to favor Boeing and its 767 tanker.

Boeing said Tuesday that it delivered its fourth KC-767 tanker to the Japan Ministry of Defense on Friday. The tanker derivative of the 767-200ER commercial widebody airplane built at Boeing's commercial production facilities in Everett. Boeing workers in Wichita, Kan., modify the commercial jet. Boeing delivered the first three KC-767 tankers to Japan in February 2008, March 2008 and March 2009.

Boeing has said it will offer the U.S. Air Force a tanker based on either its 767 or its 777 jets. Northrop and EADS will offer a tanker derived from an Airbus A330 aircraft.

Boeing and Airbus have been locked in trade disputes with the World Trade Organization over alleged illegal subsidies for their aircraft programs, including Airbus' A330.

The WTO sided in part with Boeing in an initial ruling last year on the first complaint. Boeing believes the Air Force should take that preliminary ruling into consideration in the tanker dispute.

But the WTO has yet to rule on Airbus' countercomplaint. The organization could provide a preliminary ruling in that case this June, according to an AFP report out Tuesday. The Air Force has said it won't take into account preliminary trade rulings.

The controversy over government support of commercial airplane programs looks to grow as countries and states try to keep jet makers happy.

EADS has threatened to scrap its A400 military aircraft by the end of January unless it gets more funding from the European governments that have ordered the plane. Airbus is seeking help with its new A350 XWB jet.

On Tuesday, despite a wrecked budget, legislators in South Carolina cheered plans to borrow $270 million to build a new Boeing 787 assembly line in North Charleston. The approval came on the first day of a 2010 session overshadowed by a $563 million budget hole.

The Washington Legislature approved more than $3 billion in tax breaks for Boeing and aerospace companies here in 2003 as part of the state's effort to land the original 787 assembly line.



The Associated Press contributed to this report.