Boeing Wins Controversial Air Force Tanker Contract

In a much-awaited and long-debated announcement, the Pentagon said late Thursday that the Air Force KC-X tanker contract would be awarded to the Boeing Co. (NYSE:BA).

Boeing beat out European competitor EADS for the contract which involves the production of 179 aircraft.  The contract for the first 18 aircraft, which are expected to be delivered by 2017, is valued at more than $3.5 billion; the total value of the contract is estimated at upwards of $30 billion, according to a Boeing spokesman.  The air force said competition between the two companies to secure the contract was fierce.

“Both offers were deemed to have met the mandatory requirements and were considered awardable,” Deputy Secretary of Defense William Lynn said in a news conference held following the announcement. However, in response to a question from reporters as to how close the competition was, Lynn elaborated, saying that “Boeing was a clear winner.”

The Air Force’s attempt to recapitalize its ailing aerial refueling fleet has taken 10 years and prompted international disputes as to whether the government’s evaluation process was fair to both companies.

“This competition favored no one except the taxpayer and the war-fighter,” Lynn said.

EADS has 10 days following the announcement of the contract to file a protest.  In a statement released Thursday afternoon, EADS expressed disappointment over the decision.

“With a program of such complexity, our review of today’s decision will take some time,” said EADS North America Chairman Ralph D. Crosby, Jr. in a statement. “There are more than 48,000 Americans who are eager to build the KC-45 here in the U.S., and we owe it to them to conduct a thorough analysis.”

EADS had planned to build the KC-45 at a new production facility in Mobile, Ala.  The loss of the contract is a blow to the state, which had been hoping for the added jobs and economic benefits the project would bring.

“I’m disappointed but not surprised. Only Chicago politics could tip the scales in favor of Boeing’s inferior plane,” Alabama Senator Richard Shelby (R-Ala.) said in a statement. “EADS clearly offers the more capable aircraft.  If this decision stands, our warfighters will not get the superior equipment they deserve.”

Boeing said it was privileged to win the contract.

"We're honored to be given the opportunity to build the Air Force's next tanker and provide a vital capability to the men and women of our armed forces," said Jim McNerney, Boeing chairman, president and CEO, in a statement. "Our team is ready now to apply our 60 years of tanker experience to develop and build an airplane that will serve the nation for decades to come."

Boeing told FOX News that it estimates the project will create 20,000 jobs in Everett, Wash., and spur the creation of another 50,000 jobs more broadly around the country.

Shares of Boeing rose 53 cents, just under 1% in Thursday’s session, to finish the day at $70.76 a share. The stock surged another 3.5% in electronic trading after the market closed.