Within minutes after the Air Force announced that Boeing had won the tanker competition [Feb. 24], Politico put a story on its website suggesting that the main reason many people thought Boeing would lose was my frequent predictions of an EADS victory. The story may have over-estimated my influence, but either way this is one time that I'm real happy to be wrong.
I never doubted the Boeing 767 was a more cost-effective solution to the Air Force's aerial-refueling needs, a position pointedly noted in the Politico piece. Having believed all along the Boeing tanker was the better choice, it's pretty easy for me to guess why the plane won despite having predicted otherwise.
|Loren Thompson: "I never doubted the Boeing 767 was a more cost-effective solution to the Air Force aerial-refueling needs." Thompson is the author of the "Early Warning" blog for the nonprofit Lexington Institute. |
Since the two companies typically develop airliners to fit into market niches that their competitor has not already sewn up, it was inevitable the planes picked for the tanker competition would be significantly different in range and carrying capacity.
Boeing originally picked the 767 because it had more carrying capacity than the aging 707-type tankers the Air Force wanted to replace, but not so much capacity that it would be overly expensive to operate. The Air Force had selected the 767 for other missions too, such as the (now-canceled) E-10 successor to the AWACS radar plane, so a 767 tanker offered the prospect of commonality and economy from using the same wide-body airframe for a variety of missions.
Fuel Burn Was a Drag on EADS Proposal
When Airbus entered the fray it didn't have an airframe that would have more closely matched the performance characteristics of existing tankers, so it opted to offer the substantially bigger A330. The A330 could carry a lot more fuel and fly farther than the 767, but the penalty was that it also burned over a ton more fuel per flight hour than the 767 at a time when fuel costs looked likely to rise.
Working with partner Northrop Grumman in the first round of tanker competition, EADS was able to demonstrate that if aerial refueling was performed in a certain way, the larger size of the A330 -- it weighs 28% more than a 767 -- could be beneficial. The problem with this reasoning, though, was that the KC-135 tankers in the fleet today usually return from refueling missions with a lot of fuel still on board, so making the much bigger A330 look like a viable successor required the Air Force to think differently about how it would perform refueling missions.
This became all-too-apparent when the service realized that the A330 could not perform some wartime refueling missions in a scenario-based analytic model due to lack of adequate space at forward bases. The Air Force should have recognized the drawbacks of using such a big plane at that point, but under pressure from politicians to keep Airbus in the race, it chose to modify the model so the Airbus tanker could use bases off limits to the Boeing plane.
The first round of tanker competition was overturned due to procedural errors, and when the Obama administration mounted a second round, it chose to substantially change the selection process. Basically, both planes had to satisfy 372 mandatory performance requirements in order to submit a final bid, and after that hurdle was surmounted, the competition was mainly about price.
Price was defined to include not only the cost of production, but also the cost of operating the tankers over a 40-year service life. Once the competitive landscape was arranged in that manner, the excessive fuel burn of the bigger A330 became a definite drag on EADS' proposal. The company could tap European subsidies to defray the costs of production, but the Air Force would still be stuck with billions of dollars in unnecessary fuel expenditures to operate such a sizable airframe.
There were other costs, too, in operating the bigger plane, such as the need to rebuild hangers and runways to accommodate larger dimensions, but fuel burn probably was the dominant concern.
Either of the planes would have provided a tanker far superior to the Eisenhower-era KC-135s that comprise nearly 90% of the aerial-refueling fleet today. But the Boeing 767 promised to be much more cost-effective over a 40-year service life, and in the end EADS could not convince the Air Force that buying a much bigger plane made budgetary or operational sense.
Loren B. Thompson, Ph.D., is chief operating officer of Arlington, Va.-based non profit Lexington Insitute and chief executive officer of Source Associates, a for-profit consultancy. Prior to holding his present positions, he was deputy director of the Security Studies Program at Georgetown University and taught graduate-level courses in strategy, technology and media affairs at Georgetown. He also has taught at Harvard University's Kennedy School of Government.
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