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Saturday, January 12, 2008 - Page updated at 12:00 AM

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Airbus pitches its plan to make jets in the U.S.

Seattle Times aerospace reporter

The contenders

EADS/Northrop Grumman

The airplane: A tanker based on the freighter version of the popular Airbus A330 widebody jet.

Where built: The first four tankers would be built in Toulouse, France, but then assembly would shift to Mobile, Ala. An adjacent Northrop plant would install military systems.

Jobs: About 1,000 direct new jobs in Mobile on the tanker. Assembly of A330 cargo jets would add another 300.

Boeing

The airplane: Based on the 767. Boeing built and maintains current Air Force tankers. It has also developed 767 tankers for the Japanese and Italian air forces.

Where built: In Everett, finished off in Wichita.

Jobs: Perhaps 3,600 at Boeing and its suppliers in the state.

Airbus will play a last-ditch trump card Monday in its bid to beat Boeing for an Air Force refueling tanker contract worth tens of billions of dollars.

Chief Executive Tom Enders plans to announce that if Airbus wins the tanker competition, it also will assemble commercial airplanes in the U.S.

Enders and Alabama politicians are to announce the plan in Mobile, where the tankers would be assembled.

The prospect of gaining a U.S. commercial widebody jet plant — comparable only to Boeing's Everett operation — is sure to galvanize Southern politicians, and could shift the political calculus in Congress when it evaluates how the Air Force awards the huge contract as early as next month.

And while Airbus contemplates building only up to 15 tankers and another 30 widebody commercial jets a year at the Alabama plant, that foothold in the U.S. commercial and defense sectors could expand in time.

"Boeing could find it has a cancer growing in the heart of its most important market," said Loren Thompson, a veteran defense analyst with the Lexington Institute.

The Air Force contract is worth about $40 billion for the initial set of 179 airplanes. Potential follow-on orders to replace the entire Air Force tanker fleet could add up to $100 billion over the decadeslong service of the tankers.

The Airbus proposal envisages up to four aircraft a month rolling out of a plant at Brookley Field in Mobile, a person familiar with the plan said.

Airbus parent company EADS has already promised 1,000 direct jobs in Mobile to build the tanker, and the proposed expansion for A330F commercial cargo planes would add 300 more.

Large commercial jets are assembled today at only two locations in the world: Boeing in the Pacific Northwest, and Airbus in Toulouse, France.

A regional battle

The proposal raises the political stakes in this already-bitter contract fight.

"Obviously this move strengthens EADS' political hand in competing for American military business," Thompson said.

The Airbus A330 from EADS and its U.S. partner Northrop Grumman is up against Boeing's 767 for the Air Force next-generation refueling tanker.

Boeing has repeatedly promoted its bid in nationalistic terms: "America's tanker" versus a European contender to supply the U.S. military.

Lawmakers such as Rep. Norm Dicks, D-Bremerton, vice-chairman of the House Defense Appropriations Subcommittee, have lobbied hard for Boeing. Because labor unions are weak in Alabama, Boeing has also had fulsome support from national unions that hold sway primarily with Democrats.

Alabama Gov. Bob Riley and U.S. Sen. Jeff Sessions, both Republicans, are scheduled to appear alongside Enders on Monday. In October, the governors of five Southern states wrote to President Bush supporting the EADS bid.

"This is mainly a regional battle, the Pacific Northwest against the South. Mainly a partisan battle, primarily Democrats versus primarily Republicans. And also union versus nonunion," said Larry Sabato, director of the University of Virginia's Center for Politics.

Sabato said that with Democrats in control of Congress, Boeing has the political advantage.

"A Hail Mary at best"

Dicks was dismissive of Airbus' play.

"All it does is give them a little bit of political cover. Most of the assembly I think will still come from other countries," Dicks said, "Overwhelmingly in Congress, they want this plane built by Boeing."

"I think it's a Hail Mary at best," said Dicks, who played middle linebacker for the University of Washington. "Not a good one. If you're desperate and you're behind, and it's the fourth quarter, it doesn't work."

But to defense analyst Thompson, the Airbus move looked more shrewd.

"This is not a merit-based decision. The customer for the tanker is a political system that must reach a minimal accommodation of regional interests for any transaction to go forward," Thompson said. "This will become an intense political battlefield."

He said the Alabama congressional delegation is unusually tenacious. It could block money for the Air Force to force Congress to split the tanker buy and give EADS/Northrop a portion of the contract.

Broader implications

And the impact will stretch beyond the defense sector.

Aerospace analyst Scott Hamilton said that it wouldn't make economic sense to build a new factory for tankers alone, producing perhaps as few as just one airplane a month.

Further down the road, he said, it's possible Airbus could move all A330 production — including passenger jets as well as cargo — to Alabama.

Moving some commercial-jet assembly to the U.S. has multiple benefits for EADS:

• It spreads the capital-investment costs of building its tanker factory over many more airplanes, allowing it to reduce the tanker price.

• It positions EADS to bid for future military contracts on more level terms with U.S. rivals Boeing and Lockheed Martin.

• It enables Airbus to move a big chunk of its costs into dollars, at a time when the strength of the euro is badly hurting its bottom line.

As with other Airbus jets, the A330 is built in large sections at plants around Europe. These are then flown in large transport airplanes for final assembly in Toulouse, France. The proposal is that the A330 freighter sections would instead be shipped by sea for assembly in Mobile.

Monday's announcement is not a surprise, but its timing had been uncertain as Airbus conducted sensitive negotiations with its unions back in Europe about outsourcing.

Boeing declined to comment ahead of the official Airbus announcement Monday.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Washington, D.C., bureau reporter Alicia Mundy contributed to this report.

Copyright © 2008 The Seattle Times Company

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