Air Force Tanker Deal Makes Sense
By Alan Stewart Carl | Related entries in Economy, MilitaryYesterday, I wrote about John McCain’s involvement in a Air Force tanker deal that ultimately went to Airbus as partnered with Northrup-Grumman. McCain’s involvement aside, the story raised the question as to why we’d ever let a foreign company win a contract to build American military equipment. Now, via RealClearPolitics, American Thinker Editor and Publisher Thomas Lifson has the answer:
In an ideal world, defense dollars generated by American taxpayers might always stay at home. But those who spend military budgets face a world in which there is only one potential American supplier of airliner-based aerial platforms. Competition for Boeing, to keep the procurement process vigorous must come from the only other major player, Airbus…
Like airlines, the Air Force desperately needs at least two healthy potential suppliers of airframes for airliner-based transports and tankers. The dangers of relying on a monopoly supplier are all too evident in the wake of the scandal a few years ago. While current jobs manufacturing the new tankers are important, so is the question of the effect of this contract on future competitive dynamics.
Not only will a new final assembly facility be erected in Alabama, many other contracts will be let for American suppliers to manufacture components, assemblies, and other specialty equipment to make the airliner shells into functional tankers, and to supply services. Some of these contracts will go to new entrants in the defense aviation business. They will provide the competition for Boeing that was once provided by the likes of McDonnell-Douglas before it merged into Boeing.
Simply put, without competition from Airbus, Boeing would have no free-market controls over its costs and quality. Since nationalization of a company like Boeing is neither wise nor practical, foreign competition is the only current solution. However, since much of this plane will be assembled in the United States, the deal will still use an estimated 48,000 American jobs while giving new U.S.-based competitors a foothold in the defense industry.
Boeing will continue to protest this deal, but its specifics are not as worrisome as a cursory look might indicate.
This entry was posted on Wednesday, March 12th, 2008 and is filed under Economy, Military. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
March 12th, 2008 at 7:34 pm
Yeah, gee, I think we ought to contract out the duties of the Army, Navy, Air Force and Coast Guard. I mean, if Mexico can supply an Army for half price and Russia wins the Navy bid, why not? Maybe next time, former U.S. soldiers and sailors will get their act together and offer more for less.
When you get down to it, why do we even need Boeing at all? Hey, a little reverse engineering and China will be able to sell 777 copies at 40 percent less.
Seriously, Lifson is a fine example of those who know the cost of everything and the value of nothing.
March 13th, 2008 at 8:58 am
What would you have the Airforce do? only allow Boeing to exclusively sell planes to the USAF? .
Thats just damn fraudulent! It means Boeings previous aquisitions to get rid of competition enables it to get big fat and lazy. Boeing is becomming the HOme Depot of the USAF…
Airbus was a much better aircraft.
March 13th, 2008 at 2:57 pm
Apparently the pundits pushing Airbus do not understand recent history, nor do they understand basic global economics of the commercial airplane manufacturing business. With due respect to Mr. Lifson, his proposal rewards EADS/Airbus for its earlier predatory behavior that adversely affected airplane manufacturers other than Boeing.
Airbus, because of its subsidy base origins, pushed Lockheed out of commercial airplane manufacturing, and so undercut McDonnell Douglas it courted a deal with Boeing in 1997 since they were about to go bankrupt because their commerial offerings could not compete with Airbus socialist built planes. This is a very important point. Airbus built what are called “white tails,” airplanes for which no buyer had yet been found. Typically airlines do custom orders on planes, which are placed in line to be built in the future. Airbus sold their whitetails (because they were subisidized) at steep discounts, as they were not beholding to shareholders expecting profits. they wer just interested in a jobs program for their respective countries. Similarly the subsidy issue allows them to offer cheaper capital cost planes than Boeing. However, the lifecycle costs are higher because the A330’s cost more to operate. They are not a better plane than the 767, just different. And, to make a distinction here, bigger is not always better. Bigger planes are not as nimble, even as tankers.
The A330 is a larger (longer, wider, taller, heavier) airplane and it cannot land or take off from some of the airfields in a battle theatre. It is too large to fit in the hangars where it would need to be serviced. That means the Air Force will have to get new or modified buildings along with their new tanker. This was not part of the competition but it will cost taxpayers even more in future budgets. Do you not think this should have been, or now should be disclosed as a cost of selecting the A330 platform?
March 15th, 2008 at 6:45 pm
The manufacturing guys over at Evolving Excellence have also been taking Boeing to task, first in terms of the hypocrisy of whining about losing the tanker deal to NG/Airbus at:
http://www.evolvingexcellence.com/blog/2008/03/boeing-whiner-e.html
Then the even greater hypocrisy of the politicians that are siding with Boeing:
http://www.evolvingexcellence.com/blog/2008/03/so-whos-more-pa.html
Ken