Boeing loses Australian contest

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Boeing's ongoing problems in finalising a deal with the US Air Force for Boeing KC-767 in-flight refuelling aircraft has cost it A$2 billion ($1.5 billion) Royal Australian Air Force (RAAF) tanker programme. The RAAF is instead to acquire five Airbus A330-200 Multi-Role Tanker Transports, the first of which will enter service in 2007.

Approved on 15 April, the Australian Department of Defence recommendation in favour of EADS Casa was officially based on lower platform costs and superior capability. However, DoD and Boeing sources say the US firm's bid was ruled non-compliant because it depended on the non-recurring costs of the KC-767 tanker variant being met by the USAF as part of a 100-aircraft order.

Without a firm USAF order, Australia faced having to fund design, engineering and modification work to install additional fuel tanks and power generators, and replacement of the existing 767 cockpit with a fully digital suite.

Australian DoD sources also say Boeing suffered from a negative evaluation of the company's past performance on Australian defence projects. The sources said that Boeing Australia was now several years behind schedule on the upgrade of the Australian Defence Forces high-frequency radio communications network project, although it was ahead of schedule on the RAAF's Boeing 737 Wedgetail airborne early warning and control aircraft programme.

Australia had sought at least four tankers to replace its three Boeing 707 in-flight tankers with options sought from both Boeing and EADS Casa for a fifth. The EADS Casa bid is thought to have proposed the total acquisition and in-service cost for all five aircraft below the publicly stated A$2 billion target. Australian defence minister Robert Hill says that in terms of capability, DoD tender evaluators had found that "Airbus won the contest. In terms of value for money Airbus also won. And in terms of support the fact that Qantas Defence Services was part of the team and that Qantas operates the commercial version of the A330 provided significant synergies."

Hill says four aircraft will be modified by EADS subsidiary Australian Aerospace at a Qantas site in Brisbane. The DoD is yet to advise on whether it will take up options proposed by EADS Casa for early delivery of an unmodified A330 to reduce demands on the 707 fleet.

PETER LA FRANCHI / CANBERRA