U.S. Air Force sees single tanker winner

By Andrea Shalal-Esa

WASHINGTON (Reuters) - U.S. Air Force Secretary Michael Wynne said on Tuesday he saw no prospects for additional funding that would allow the service to split a $40 billion aerial tanker contract between two rival bidders.

Given current funding earmarked for the program, the Air Force could only buy 12 to 15 refueling tankers a year, and it would be uneconomical to split that amount between Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) and Northrop Grumman Corp (NOC.N: Quote, Profile, Research, Stock Buzz), which is teamed with Europe's EADS (EAD.PA: Quote, Profile, Research, Stock Buzz), Wynne told the Reuters Aerospace and Defense Summit in Washington.

"The cost of that would be prohibitive, unless there was sufficient funding to essentially buy between 24 and 30 -- which has not been authorized, and I don't see any prospects for," Wynne told Reuters Television.

"That leads me to think that the right answer right now is for a single purchase from a single winner," he said.

He said a contract award was expected in the first quarter, but possibly after the current February target date.

"I'd like to say in February, but let's say an award sometime in the first quarter," he said.

Wynne said the Air Force was working hard to make the competition as transparent as possible, especially given the fact that a previous $23.5 billion plan to lease and buy Boeing 767 tankers had to be scrapped after a major procurement scandal that sent a former top Air Force official to jail.

Air Force evaluators were being very open with the companies about any questions or issues with their proposals, Wynne said.

"The scoring is being fed down to each of the vendors to allow them the right kind of response. At the end of the day, it's the contractors and suppliers that have to feel treated fairly, and I think they will be," Wynne said.

Defense consultant Jim McAleese told the summit that Wynne and other top Air Force leaders viewed the successful completion of the tanker competition as critical: "The Air Force looks at this as a defining moment."

Air Force officials say the tanker is their No. 1 acquisition priority, arguing that the fighters and bombers require fleets of flying gas stations to do their jobs, and the current fleet of tankers is getting too old.

Richard Aboulafia, vice president of Virginia-based Teal Group, an aerospace and defense consulting firm, predicted on Monday that Boeing had the best odds to win the competition, which is valued at over $100 billion in the longer term.

"I still give the Boeing product the majority chance," Aboulafia told the Reuters Summit, citing Boeing's strong support from Democratic lawmakers.

Any move by the Air Force to split the contract between Boeing and Northrop would have been a victory for the Northrop-EADS team, which analysts say remains the underdog in this highly publicized fight.

Northrop Grumman Chief Executive Ron Sugar told the Reuters Summit on Monday his company was in the competition to win and would submit a final pricing offer before the end of the year.  Continued...