Airbus bids to over bid for US Air Force contract

Boeing, the US aviation company, is angry that the United States Air Force has decided to order refueling planes from its European rival Airbus. At the end of February the Air Force awarded a contract to a consortium run by the US company Northrop and the European EADS—Airbus' parent company—to produce a new fleet of air takers, replacing the army's aging ones. The 35-billion dollar contract could potentially be worth 100 billion over its lifetime. RFI's Sarah Elzas has this report:

Boeing, feeling rebuffed at not getting the Air Force contract, took the issue to Congress this week, asking for an investigation. They’re not the only ones angry. Republican representative from Kansas Todd Tiahrt said it was not a fair competition: “The deck was stacked against the American supplier and against the American workers.”

Other US lawmakers have been outspoken against the contract, including Democratic representative Norm Dicks from Washington state, where the Boeing tankers were to have been produced

At a press conference Tuesday the CEO of EADS, Louis Gallois, said his company got the contract fairly. He says the process was professional, transparent and fair. Plus, he says, they have a feeling of having the best product.

Christian Stoffaes, who runs an international economic institute in Paris says awarding the contract to the Northrop/EADS consortium is more than them just having a better product:

“The difference between the products is not so important,” he says. “What you have is politics. Internal warfare within Air Force procurement. Some years ago a major conflict happened with accusations of corruption and conflict of interest within procurement.”

A Boeing executive spent time in jail after a corruption scandal involving a lucrative Air Force contract in 2003. The same scandal caused the then CEO to resign.

“The chance is to retaliate against wrong practice of Boeing,” says Stoffaes. He says awarding the contract to Northrop is a slap on the wrist to Boeing.

Many are talking about this as a French contract, but the main partner, Northrop, is an American company. Jean-Louis Gergorin is a former VP at EADS in North America. He says there was no way Airbus would have gotten the contract on its own. “We needed Northrop because we needed an American partner,” he said. “It’s a defense system and all the electrical parts need to be done by an American contractor.”

This is not unique to the US. Boeing for example, would not be able to land a French defense contract without a French partner. Gergorin says there would be a similar reaction in France, too. “There would have been some outcry,” he says. “Members of parliament, it would have been a similar situation.”

The CEO of EADS announced 2007 results on Tuesday, revealing larger than expected losses. EADS has been outspoken about the negative effects of a rising Euro, which broke $1.55 this week. Pierre Dussauge a professor at Paris’ HEC school of business, explains why a strong Euro could hurt Airbus: He says almost all their sales are in dollars. They convert those dollars into Euros, to pay their costs, and as the dollar drops, they lose money:

“We can calculate more or less if the dollar goes from one dollar to one euro to 1.5 to the euro, how much Airbus loses on the exchange rate. And a very easy estimate, it’s probably between 5 and 10 billion euros.”

In this Air Force contract, parts of the Northrop/Airbus planes will be built in Alabama, in the Untied States. Producing parts in the dollar zone is one way to hedge against the rising Euro. Though Dussauge doesn’t think this contract is about that—it’s less an economic coup, he says, than good PR: “If they can sell airplanes to the US military against Boeing, it’s a tremendous marketing advantage.”

The Congressional oversight committee will take up to 100 days to investigate Boeing’s challenge to the contract. Jean-Louis Gergorin, former VP at EADS is not worried. “To challenge a procurement decision is not unusual,” he said. “I have all reasons to think the procedure was regular. I think the accounting office will accept it. What might happen is guerilla fight in in Congress, refusal of budget- but you can’t deny the Airforce to have the plane that they want.”

Listen to the report:

Tags airbus, business, united states

Share digg del.icio.us facebook newsvine

Listen Real Audio Download MP3 Podcast Subscribe

Serbia's president has officially dissolved parliament and has called early elections. President Boris Tadic says the snap elections will be held on May 11. The move comes after parliament collapsed last weekend following a deep split over Kosovo's independence and Serbia’s ties with the European Union. President Tadic wants his country to pursue EU membership even though 18 of the 27 member states have recognised Kosovo’s autonomy. But his coalition partners led by nationalist Prime Minister Vojislav Kostunica hold the opposite view. They insist that unless member states reverse course and declare Kosovo as part of Serbia, the country shouldn’t seek to join the EU. Kosovo’s declaration of independence was always expected to have a dramatic effect on Serbia. I asked Marta Razborsek, Radio Slovenia’s correspondent in Belgrade, if the collapse of the Serbian government was expected? 

And now we go from parliamentary elections in Serbia to local elections in France. The first round of these elections took place last Sunday, the second round is this weekend. The elections will determine the political fate of around 33 thousand mayors. One local representative, running for a seventh consecutive term of office, is standing out during this campaign: by prohibiting death in his village. John Laurenson has more in this postcard. 

The European Union is the biggest donor of development aid in the world. Projects range from training silk weavers in Cambodia, to helping small businesses in Peru find exports markets, and providing technical assistance to Egypt to eradicate a pest which threatened its vital potato exports. The EU funding amounts to some 48 billion euros annually – but this assistance hasn‘t been free of criticism. Critics argue that the EU gives with one hand and takes with the other. Radio Sweden’s Azariah Kiros explains. 

Last year, Berlin received some very unflattering media coverage. The country’s most respected news magazine, Der Spiegel, said Berlin was no longer a hip and happening European metropolis -- unlike Barcelona, Copenhagen or even the Estonian capital Tallinn. Berlin had, in the words of the magazine, missed the boat. But the city has refused to accept defeat. This week, Berlin launched a new slogan as part of a multi-million-euro advertising campaign, aimed at spicing up the German capital’s appeal. And as Thomas Marzahl reports from Berlin, the campaign for starters targets Berliners themselves. 

Something else that potentially needs an image revamp is Polish food. In the communist era, local dishes had a reputation for being gray and stogy. And as trendy bistros and international restaurants open up in the Polish capital, there’s fear traditional dishes could be left behind. Michal Kubicki from Polish Radio External Services set out culinary tour of Warsaw, and found, to his surprise, that Polish food still has a place in the hearts of its citizens. 

This month we want you to identify a French film director, writer and producer who's celebrating his birthday on March 18th. He was born in Paris to parents who were both scuba diving instructors and this very much influenced his childhood. He long thought about becoming a marine biologist, but then discovered film. Every week, we are giving you a different clue as to his identity. Here’s the second one: he produced the video clip for the following song by Madonna.