Air tanker deal renews Boeing

WASHINGTON - The Boeing Co., struggling financially since the Sept. 11 attacks, won a $16-billion contract from the Air Force to lease 100 modified 767 jetliners for use as refueling tankers.

The deal, announced Friday, is a major windfall for Boeing, but critics call it corporate welfare. The cost of leasing the planes, which does not include a $4-billion purchase option at the end of the six-year lease, is far higher than the cost of buying the planes outright, opponents complain.

"It's a lousy deal for the Air Force and for the American taxpayer," said Sen. John McCain, R-Ariz.

Pentagon officials contend the lease deal, which still must be approved by Congress, allows the Air Force to begin replacing its aging the KC-135E tanker fleet three years earlier than planned and requires less upfront costs than a straight purchase.

With an average age of over 43 years, the current tanker fleet is the Air Force's oldest combat weapons system. The new planes will carry 20 percent more jet fuel than the current fleet and can be refueled in flight themselves, Air Force officials say.

"People don't think of tankers as being that essential in our national security, but they should," said Sen. Pat Roberts, R-Kan., chairman of the Senate Intelligence Committee. "Without tankers and refueling, something like Iraq would not be possible, and the war on terrorism and our national security would be in danger."

The contentious deal has been delayed repeatedly as McCain and other critics questioned the price. Each plane is expected to cost $138-million, including $7-million in leasing fees. That price is significantly lower than Boeing's earlier estimates.

Congressional supporters of the leasing deal have maintained pressure on the Pentagon for more than a year.

Sen. Maria Cantwell, D-Wash., said the deal would be a major boon for her state's depressed economy. Washington has a 7.3 percent unemployment rate, one of the highest in the country.

"It's a big victory for our state's economy and will deliver a sustained boost for Boeing's production lines and its workers at a time when they need it most," she said.

Sen. Patty Murray, a fellow Washington Democrat, called the deal a victory for all sides.

"The taxpayers win. Boeing wins. The Air Force wins. And most importantly, the people who fly these planes and the soldiers who rely on them win," she said.

The lease plan allows the Air Force to get 67 new tankers in the next six years, as opposed to one in an earlier plan to buy the aircraft, said Edward "Pete" Aldridge, the Pentagon's chief of weapons acquisition. Buying 100 tankers would have cost $8-billion over the next six years, which would have had to have been taken from other military programs, Aldridge said.

The first leased tanker is scheduled for delivery in 2006, with up to 20 planes a year to be delivered after that, Aldridge said.

While the deal was important to the Air Force, it was crucial to Boeing. It preserves thousands of jobs in Washington state and Kansas. The 767 airframes are to be built in Everett, Wash., about 25 miles north of Seattle, while military modifications are to be done in Wichita, Kan.

"The 767 line had been in jeopardy of being shut down over the next couple years without this program," said Peter Jacobs, an aerospace analyst with Ragen MacKenzie in Seattle.The tanker deal "could mean another 10 to 15 years of life in that production line."

WASHINGTON - The Pentagon's top procurement official strongly endorsed the Marine Corps' V-22 Osprey, saying the aircraft had turned the corner on technological problems that caused the death of 23 Marines in two separate crashes.

The upbeat assessment Friday by Undersecretary Edward "Pete" Aldridge represented a dramatic change in his opinion about the aircraft.

"I believe we have demonstrated sufficient confidence in the aircraft for safety and reliability," Aldridge said.

If the V-22 had performed poorly in tests, Aldridge said he would have recommended that the massive $46-billion project, the Marine Corps' highest weapons priority, be terminated. He added that at one point he came "pretty close" to terminating the aircraft.

- Information from Hearst Newspapers was used in this report.

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