Airbus loses tanker contract

The government of India has canceled a contract to buy a half-dozen Airbus KC-30 tankers, a deal estimated to be worth between $1.5 billion and $2 billion.

The planes were intended to supplement the squadron of six IL-78 tankers that the Indian Air Force now operates. India bought those planes — a deriviative of the ’70s-vintage Soviet IL-76 cargo jets — from the Chkalov Tashkent Aircraft Production Co. in Uzbekistan in 2003, at a price estimated between $25 million and $35 million apiece.

According to various Indian media reports, the deal was deep-sixed by the Indian Finance Ministry, which balked at the high cost of the Airbus planes and questioned why the Ministry of Defense wasn’t looking at cheaper Russian-built IL-78s from Ilyushin. (Boeing was invited to submit a bid for the Indian tender, but didn’t, according to the reports.) The air force generals argued that — compared to the Ilyushins — the KC-30s were a better plane.

India’s struggles to settle on a tanker contract seem familiar to anyone who has followed the U.S. tanker in-fighting:

  • India has been trying to expand its tanker fleet since 2004;
  • The air force had a clear favorite (in this case, the KC-30), but the generals couldn’t overcome political opposition — much the way Airbus took advantage of support from John McCain to overturn the U.S. Air Force’s early support for a Boeing KC-767;
  • The losing bidder, Ilyushin, mounted a political protest that delayed, then sank, an Airbus contract;
  • There’s a history of recent procurement scandals — Airbus in 2007 lost a deal to provide Eurocopters to India because of “a dubious selection procedure,” the Indian Express said.
  • And — just as it is in America — the gap between purchase price and life-cycle cost is an issue here too.

The result of all this is that India will have to start over again, and the Indian Air Force could be as much as five years away from actually getting new planes. “It would take us a few years now to select a tanker, unless they force us to buy the Russian tanker,” one general complained to Daily News & Analysis of Mumbai.

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2 Responses to “Airbus loses tanker contract”
  1. Jim says:

    Just read this on the AFL-CIO blog. The last thing we need is to ship this many good jobs overseas!

    Airbus has asked for an additional $7.6 billion toward its transport plane project—this just after the World Trade Organization ruled that billions of dollars in European subsidies to Airbus violated trade rules. This move by Airbus should be considered by the U.S. government as it weighs whether to grant a $35 billion Air Force aerial tanker contract to either Northrop-EADS (Airbus) or Boeing. Some European nations won’t even allow their neighbors in the European Union to come into their defense markets to compete let alone the United States having a shot to compete overseas. Granting Boeing the contract would create 44,000 jobs in the United States. Today’s jobless data shows the nation needs every one of them.

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  1. […] week, we noted that the Indian Finance Ministry had deep-sixed plans to acquire six Airbus KC-30 tankers for the country’s air force. At issue: a dispute between […]

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