Airbus parent EADS conceded defeat in an epic, decade-long contest to sell aerial tankers to the Pentagon and confirmed it would not protest the award of a $30 billion contract to Boeing Co .
EADS North America Chairman Ralph Crosby expressed disappointment after Boeing won the contract on the third attempt, but said the U.S. company had undercut the bid to use European Airbus aircraft by a total of $2 billion.
"It's clear the there is no foundation for protest," he said, adding that the Air Force had followed the ground rules. EADS confirmed its decision at a news conference after Reuters reported on Thursday that it was poised to waive its right to appeal the contract for 179 planes, turning its focus to other weapons contracts and acquisitions.
The move may ease transatlantic tensions over defense contracts but is likely to dismay lawmakers in Alabama where EADS planned to assemble its fleet.
For Boeing, the move marks a double victory -- keeping its 767 production line running for a decade longer, and blocking Airbus from establishing a commercial airplane manufacturing site in the United States on the back of the tanker deal.
Senator Maria Cantwell Reacted to EADS's announcement Friday saying,
"Today is a proud day for all Washingtonians. Today's announcement makes official what Washingtonians know in our bones: We build the best airplanes in the world. Even with the deck stacked against them, Washington aerospace workers prevailed over long odds, stiff competition and illegal foreign subsidies. Boeing, its workers and my colleagues in Congress never gave up in fighting for these 11,000 jobs."
Governor Christine Gregoire says, "The decision by EADS is more proof that Boeing submitted the best proposal to the U.S. Air Force, and provides the public with more assurance that Boeing will build the most cost-effective and safest refueling tanker that best serves our military and our taxpayers. There's no doubt Boeing and its workforce build the best planes in the world. I congratulate the 11,000 Washington aerospace workers that will play a role in manufacturing the next tanker, and look forward to seeing the first tanker come off the line."
EADS shares closed earlier down 0.4 percent. Boeing was down down 1.28 percent at $70.43 after making big gains on Thursday.
Air Force officials had said EADS was entitled to protest if it believed errors were made, but that the Pentagon expected to prevail in any protest.
The EADS move paves the way for Boeing to begin work in earnest on an initial $3.5 billion development contract for the first 18 planes that it signed with the Air Force last week.
Defense analyst Loren Thompson said the news was almost all good for Boeing, allowing it to hold on to a core franchise and keeping its main rival out of the U.S. market.
But he said Boeing would be under intense pressure to perform under the very aggressive bid it submitted.
EADS said its own analysis showed that Boeing's proposed price was $21.4 billion against its own offer of 23.4 billion, making the EADS proposal more than 9 percent more expensive.
Boeing was not immediately available for comment. The Pentagon plans to stage separate competitions in coming years for another 300-plus refueling planes, which provide fuel to fighter jets and other warplanes in mid-flight, extending the range of military operations.
(Reporting by Andrea Shalal-Esa; Editing by Phil Berlowitz, Tim Hepher) ((firstname.lastname@example.org; + 1 202 354 5807; Reuters Messaging: email@example.com))
(photo Via Boeing.com)