EADS Won't Appeal Tanker Contract

Airbus parent EADS conceded defeat in an epic, decade-long contest to sell aerial tankers to the Pentagon and confirmed it would not protest the award of a $30 billion contract to Boeing Co (NSYE:BA).

EADS North America Chairman Ralph Crosby expressed disappointment after Boeing won the contract on the third attempt, but said the U.S. company had undercut the bid to use European Airbus aircraft by a total of $2 billion.

"It's clear the there is no foundation for protest," he said, adding that the Air Force had followed the ground rules.

EADS confirmed its decision at a news conference after Reuters reported on Thursday that it was poised to waive its right to appeal the contract for 179 planes, turning its focus to other weapons contracts and acquisitions.

The move may ease transatlantic tensions over defense contracts but is likely to dismay lawmakers in Alabama where EADS planned to assemble its fleet.

For Boeing, the move marks a double victory -- keeping its 767 production line running for a decade longer, and blocking Airbus from establishing a commercial airplane manufacturing site in the United States on the back of the tanker deal.

EADS shares closed earlier down 0.4 percent. Boeing was down down 1.28 percent at $70.43 after making big gains on Thursday.

The Pentagon awarded the hotly contested contract to Boeing last week, calling it the "clear winner" in a competition that Alabama Senator Jeff Sessions said had devolved into a "low price shootout."

Air Force officials had said EADS was entitled to protest if it believed errors were made, but that the Pentagon expected to prevail in any protest.

The EADS move paves the way for Boeing to begin work in earnest on an initial $3.5 billion development contract for the first 18 planes that it signed with the Air Force last week.

Defense analyst Loren Thompson said the news was almost all good for Boeing, allowing it to hold on to a core franchise and keeping its main rival out of the U.S. market.

But he said Boeing would be under intense pressure to perform under the very aggressive bid it submitted.