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Boeing bests EADS with US tanker win.

Boeing Company won a $30 billion contract for 179 new US Air Force refueling planes, trumping arch rival Airbus parent EADS in a fiercely-contested competition that began nearly a decade ago.

It was the third effort since 2001 to start replacing 50-year-old Boeing-made KC-135 Stratotankers, built before man first stepped on the moon.

'Boeing was the clear winner,' Deputy Defense Secretary William Lynn told reporters at the Pentagon. He said Boeing offered a far better deal at a time when defense budgets are under increasing pressure.

Boeing's shares rose 3.9 percent in afterhours trading on the news which gave the Chicago-based aerospace giant a solid win as it struggles to gets its ailing 787 Dreamliner commercial airplane program back on track.

EADS expressed disappointment and concern about the decision, but said the contract was just 'one business opportunity among many' in the United States.

EADS said last week it would only protest the contract if it saw egregious errors.

Boeing was 'humbled' by the win, said Dennis Muilenburg, chief executive of Boeing's defense unit.

He gave no details on pricing, but said Boeing was able to cut costs by working more closely with its commercial wing and making substantial investments to improve its 767 production line.

Muilenburg added that the Boeing plane was smaller, used 24 percent less fuel, and would result in less reconstruction costs for military airports.

US Air Force Secretary Michael Donley said the initial $3.5 billion fixed-price contract would pay for design, development and delivery of 18 planes by 2017, but could be worth over $30 billion in coming years.

Previous Air Force efforts to buy new planes to refuel other aircraft during flight have been marred by an ethics scandal and selection errors.

The contest has sparked transatlantic tensions and clashes among U.S. lawmakers eager to bring high-paying aerospace jobs to their states.

Analysts were caught off guard by the contract, given predictions that EADS would aggressively underbid Boeing.

Teal Group's Richard Aboulafia called the decision 'a major surprise' and said if it holds, Boeing will have succeeded in blocking EADS's biggest defense initiative.

Lynn said EADS could protest the decision, but said Pentagon officials were convinced the decision was fair.

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Publication:TradeArabia (Manama, Bahrain)
Date:Feb 25, 2011
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