So Both Sides in KC-X Got Subsidies, Now What?

The World Trade Organization has apparently issued a final ruling saying that Boeing did indeed recieve unfair — not illegal — subsidies that benefit the development of its aircraft fleet.

According to the New York Times, the WTO ruled, in a confidential report, that Boeing received about $5 billion in subsidies. The WTO focused on about $24 billion in R & D contracts Boeing receives from the military and NASA along with Washington state tax breaks that European governments say gave the Chicago-based company a technological and financial edge.

Last summer, the WTO found that EADS had received billions in unfair subsidies as well, something that was key in allowing EADS to eat up large amounts of Boeing’s market share around the globe, according to the U.S. trade representative.

This comes as the U.S. Senate is once again taking up the so called, “Level-Field” bill, that will require the Pentagon to factor in the impact of the subsidies in its evaluation of Boeing’s KC-767-based and EADS A330 MRTT-based offerings in the $35 billion KC-X contest.

Many who have watched KC-X closely didn’t think the proposed law would have a chance of getting passed before the Air Force choses its new tanker (something that may happen in the coming weeks).

A similar bill was first introduced in late Spring of last year when it appeared the service would award a contract sometime between September and mid-November.

Oh how things have changed. The Air Force has repeatedly delayed the contract award so that it can be as confident as possible that this round of the contest has been run by the book.

Remember, in 2008, Boeing successfully protested the service’s award of KC-X to EADS, claiming that the requirements laid out in the RfP for that contest weren’t clear enough. That came after the whole Darleen Druyun tanker leasing affair.

Hopefully this bill won’t delay the contest any longer. The KC-135 is great, but as we all know, the oldest are 50 years old and desperately need replacement.  So both sides received subsidies. Fine, lets just move on with the contest.

10 Comments on "So Both Sides in KC-X Got Subsidies, Now What?"

  1. So let me get this straight – the WTO (and by extension, Europe) is upset that Boeing has a superior operating environment?

    This is getting insane. What ever happened to shopping on the basis of the best product and the best price. It's not a jobs program!

  2. Since when is a tax break a "subsidy"? Does Europe really contend that letting someone keep their own property a "gift from the government"? Oh wow thank you Mr. tax man for letting me keep my own toothbrush! I don't anything, it all belongs to the crown!

    Talk about twisting words until they mean nothing. The fact is, is that the Airbus at its current sales price is unprofitable without European taxpayers kicking in the doe. Those "subsidies" the Euros are yapping about are only applicable if Boeing makes money. So they first have to make a profit, unlike EADS which can't compete on price, or keep a refueling boom attached to their plane. Unfair americans and there unfair "Welding" advantage.

    Now yes Boeing does get research grants, because Boeing is often asked to develop new things as a service to the government (so does EADS). Sometimes this technology ends up for civilian uses like the Internet, but this is nothing the wholesale funding of R&D and Manufacturing for their civilian fleet that EADS gets. Its ridiculous to compare the 2 companies in this way.

  3. Now what? We hit our heads on a brick wall while waiting for another several months sorting out some other type of complaint.

  4. Many military socialists are there for the very reason of escaping globalization and the increased competition it brings. The theory was that because nobody else was spending like drunken sailors it didn't actually matter if the industry was a disaster zone of corruption and incompetence run apparatchiks that would feel more than comfortable in Soviet Russia.. It was a cozy place sheltered from the chill winds of competition.

    But then two things happened firstly the easy money was gone and American taxpayers are pushing two to one to end the free ride for the military. Secondly China's exponential growth started to get noticed. Suddenly it mattered if the tankers were the best we could get and not just easy money for a Boeing that is badly stumbling in the commerical world.

    Anybody really think that Boeing will have to pay the government back $ if it delivers after 7 successive delays the way Boeing has to pay it's commercial customers? Of course not it will still make a profit – the whole objective of the contract is to avoid having to deliver on time and on budget.

  5. "Remember, in 2008, Boeing successfully protested the service’s award of KC-X to EADS, claiming that the requirements laid out in the RfP for that contest weren’t clear enough."

    To be fair, the Boeing never claimed and the GAO never found the solicitation selection criteria was confusing. The GAO agreed with Boeing when they found that the Pentagon
    1. Miscalculated the results, using EADS info to calculate some of the Boeing scores and vice a versa. In other words sloppy accounting or intentional deception depending on your viewpoint.
    2. did not follow the published selection criteria in awarding the contract. They based their decision on criteria that was not in the solicitation.

    The GAO recommended re-evaluating the award using the published criteria and awarding the contract in 2008. It was the USAF and DoD that decided to do it all over again.

  6. This should have been a no bid contract, which we've already done before. Canada just did it with the F-35. It should have just been given to Boeing from the start.

  7. Many military socialists are there for the very reason of escaping globalization and the increased competition it brings. The theory was that because nobody else was spending like drunken sailors it didn't actually matter if the industry was a disaster zone of corruption and incompetence run apparatchiks that would feel more than comfortable in Soviet Russia.. It was a cozy place sheltered from the chill winds of competition.

  8. tribulationtime | February 1, 2011 at 1:20 pm | Reply

    Premio!! tanto joder conque EADS era subsidiada y por eso era más barata…..Larga Vida a La…

  9. Er, guys, may I just point out that Airbus is selling a lot airliners than Boeing at the moment, yes a lot of it may be down to better deals, but mostly it is down to what is the best aircraft for the job. The reason that the USAF went for the Airbus rather than Boeing the last time, was that the Airbus could carry more fuel.
    As for the flame war over the subsidies, what it boils down to was that Airbus got the money from the European Union up front (because it is a neo-socialist organisation), while Boeing got the money from the US Government through the backdoor.
    If you want to have a good laugh go and look up the political outrage of the US Congress in the mid 1950's when Boeing had the audacity to misuse Government funds in converting it's design for the 717 Tanker aircraft (KC-135) into a passenger jet, the 707, or acuarately designing at the same time.
    Major political furfight that was.

  10. Actually, no. We would get less defense because the waste would continue.

    Here's our requirements for piece of equipment X. No one gets one f'n dime until we have a working prototype in hand and whoever best meets the specs gets the contract. Now, is that so f'n hard? Just how many flag rank powerpoint rangers does it take to make that happen? Bueller?

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