Flying-ADelta seems to have a fondness for buying airlines with directional names: Northeast, Western, and (via Republic) North Central, Southern, and Hughes Airwest.
By the way, a merger is when one company buys out another and the latter ceases to legally exist. Shareholders of the bought company receive shares of the buyer. A consolidation — much rarer — is when two existing companies combine to form a new one. Shareholders of the two companies receive shares of the new one.
Flying-AWith the summer travel season barely two months away, some people might be wondering why these airlines didn’t try to hang on until then. Maybe they and they creditors saw articles like this:
‘Staycations’ have travelers going nowhere
The Washington Times
March 23, 2008
By Andrea Billups
– This summer, Deborah Johnson is planning a restful vacation — at her house.
“Traveling is just so exhausting. The lines are long at the airport; the security takes forever; and I’m sick of schlepping and rushing, all for the chance to relax,” said the Michigan mother of two teenagers. “I’d rather spend my money doing something quiet and low-key.”
Mrs. Johnson, a 46-year-old nail technician, joins a growing number of people trading in fancy trips to exotic locales for time spent with family, working on home repairs, organizing closets and enjoying time with friends and family who live nearby.
Their stay-at-home vacation — or “staycation” — has been dubbed a new trend by the global ad agency JWT, according to its director of trend-spotting, Ann Mack.
With the economy flat-lining and busy professionals looking for more work-home balance, the idea just makes sense, Miss Mack said.
“People are rediscovering the delights of their own back yard,” she said. “The U.S. dollar is so weak, so it doesn’t make sense for them to travel overseas, particularly in Europe, where the euro is so strong against the dollar.”
Higher gas prices also are forcing more folks to rethink their travel plans, she said, adding that increasing concerns over the environment as well as the desire for more family time add to the staycation’s popularity.
“People are putting more investment in their homes, so they can think of it as their oasis rather than a place to live,” she said.
According to the Travel Industry Association in Washington, costs for travel are rising significantly, with the association’s February Travel Price Index up 7.6 percent over February 2007.
In the past year, TIA says, gas prices have risen 32.7 percent, air fares 7.6 percent and lodging 3.4 percent. The overall consumer price index rose 4 percent over February 2007, straining wallets and entertainment budgets and limiting vacations to long weekends rather than extended and often pricey getaways hundreds or thousands of miles away.
Mike Pina, a spokesman for AAA, formerly the American Automobile Association, said for those who do venture away from home, the trend is for shorter trips nearby.
“People are still traveling, but they are traveling differently,” he said. “People travel closer to home. They stay at less-expensive hotels and eat at less-expensive restaurants. … People are looking at more extended weekend trips.”
Ambitious family schedules also influence travel plans, he said, with many parents “reluctant to take their kids out of activities that they have paid for.”
Some two-career families also find it difficult to get time off for long vacations together, making shorter and less-elaborate vacations more practical.
How long will the staycation trend last? Miss Mack said it depends on how long until the economy rights itself, but “definitely this will continue through summer.”
Mrs. Johnson, who said she hopes to read, maybe get ambitious and paint the house or “reorganize my life” during her time off, said that while she’s hoping the economy improves, she sees benefits to staying at home that go beyond saving money.
“I want to indulge my kids, take them to see several shows in a week, something we never have time to do,” she said. “There’s a lot to be said for getting your personal life organized and just resting and slowing down. Sometimes, I think people need that more than flying off to some beach. It gives them more control over their lives.”
Flying-ASome more articles on this story:
Defense Focus: KC-45A politics — Part 1
Published: March 20, 2008 at 12:30 PM
By MARTIN SIEFF
UPI Senior News Analyst
WASHINGTON, March 20 (UPI)
— Although the U.S. Air Force has clearly chosen the Northrop Grumman-EADS KC-45A air tanker over its rival, the Boeing KC-767, political uncertainties continue to cast their shadows over the decision, both in the United States and Europe.
Germany and France, which dominate in the European Aeronautics and Space Co., are run by strongly pro-American leaders. But that could easily change.
Chancellor Angela Merkel especially is looking vulnerable in Germany. If the United States gets involved in future military action — for example over North Korea, Iran or to defend Taiwan — that is unpopular or controversial in Europe, national governments could come under intense pressure to terminate or renegotiate the KC-45A contract.
Also, relying on overseas sourcing for a key weapons system is something every great power through history has sensibly tried to avoid. In this case, it could also prove to be bad business.
The U.S. dollar is currently weak and the U.S. foreign trade balance of payments deficit and annual federal budget deficits are now running at record levels. Given the reluctance of the Bush administration to let interest rates soar in order to attract foreign capital back into the United States, the dollar could plunge far further on international exchange markets. And the real cost of “buying European” for the gigantic KC-45A contract could therefore soar out of control. The U.S. Air Force has already contracted for 179 KC-45As worth $35 billion. The contract is eventually expected to grow to 600 KC-45As worth $100 billion.
On the other hand, defenders of the KC-45A contract praise it as creating a vital bridge of mutual interest between the United States and its main continental European allies, and therefore as vital to retain and strengthen unity in the often strained trans-Atlantic alliance. This is another strategic or geopolitical imponderable that cannot be quantified on a balance sheet.
The KC-45A program is currently on ice for a 100-day period while the U.S. Government Accountability Office, following a request from Boeing, carefully re-examines it. However, even if the GAO should find in favor of Boeing, it can only issue a recommendation and its conclusions have no binding power. Only the U.S. Congress could act to force a renegotiation of the contract or cancel the award.
Reversing the decision against Boeing would be unprecedented for such an enormous defense procurement deal. However, in a presidential election year where defending U.S. jobs against the growing thereat of foreign competition has already become a central issue, the temptation to do so may well be large, especially for Democrats hoping to build working-class support for the November elections. That is especially the case for Sens. Barack Obama, D-Ill., and Hillary Clinton, D-N.Y., who are both seeking to woo the crucial white working-class vote in their long, closely fought contest for the Democratic presidential nomination.
Supporters of the U.S. Air Force’s KC-45A choice claim that no strategic loss of technology would be involved as the technology to build air refueling tankers has been around for half a century.
However, that is far from true. No European country over the past half century has been able to develop both the technology and the production lines to make large numbers of large air refueling tankers of their own. Such a technology is essential for any nation that wishes to project its power around the world rapidly.
Defense Focus: KC-45A politics — Part 2
Published: March 24, 2008 at 11:59 AM
By MARTIN SIEFF
UPI Senior News Analyst
WASHINGTON, March 24 (UPI)
— It might well be in the long-term U.S. national interest to have European allies that can finally build for themselves the large numbers of long-distance military transport aircraft and the large air refueling tankers to boost their range of rapid response military operations.
That could make the major European nations far more effective partners for the United States in projecting power and maintaining security around the world in places such as Afghanistan.
However, developing those capabilities would mean that the Europeans would also be formidable rivals for Boeing and other domestic U.S. manufacturers in markets that large U.S. defense contractors have maintained comfortable monopolies or huge superiority in for more than half a century.
And at a time when the U.S. manufacturing base has been so heavily eroded in recent decades, first by Japan and the smaller East Asian industrial tigers, and then by China, losing such an important area of continuing U.S. high-tech global supremacy would have grave national repercussions.
Also, supporters of the KC-45A deal with Northrop Grumman and the European Aeronautics Defence and Space Co. have neglected to note what the effects the gravitational power of $100 billion in added investment and revenues in aerospace will be on the U.S. and European aerospace industries.
Boeing and its industry teammates may well be forced to lay off scores of thousands of their most valuable engineers, designers and technicians. Once lost, that kind of experience and expertise is almost impossible to reassemble again. And as we have repeatedly noted in previous columns, it is the accumulation of expertise concentrated in tens of thousands of scientists, engineers, technicians and skilled workers that is essential in ensuring efficient completion of ambitious high-tech programs on time and within budget.
Boeing’s own negative experience with the Future Intelligence Architecture program of next-generation intelligence, surveillance and reconnaissance satellites demonstrated the dangers of taking such work away from a company — in that case Lockheed Martin — that had decades of successful institutionalized experience with such systems, and giving it to another corporation that, however impressive and reliable its work was in its own areas of expertise, would have to develop that kind of institutionalized experience from scratch.
In the case of the competing air tankers programs, it is Boeing that has now more than 50 years of successful maintenance and operating experience of such aircraft, and it is EADS that will have to learn these skills from scratch.
Currently, the U.S. aerospace industry has only one-seventh of the employees it had a quarter century ago under President Ronald Reagan. By contrast, EADS will receive the resources to hire and train thousands more engineers and technicians. This one decision therefore would threaten to undermine the Bush administration’s long-promised efforts to maintain and expand the traditional U.S. lead in global aerospace and high-tech industries.
Boeing says losing the contract would cost it and its partners the creation of 44,000 jobs in the United States. EADS-Northrop advocates countered that their program would create 25,000 jobs, primarily in Alabama, where the assembly plant for their new air tanker is to be located.
As criticism mounted, they dramatically revised those figures to claim that in fact 48,000 U.S. jobs would be created. As most of the work in actually constructing the huge aircraft would be carried out in Europe rather than in the United States, there is ample cause to be skeptical about these revised figures.
On balance, it appears likely that the U.S. Air Force’s contract with Northrop Grumman and EADS will stand. But even if that is the case, political controversy over it is likely to continue. The decision to award it could well become a political football in the U.S. presidential election campaign and in many congressional races.
It is already striking that the issue has crossed party lines, with senators and congressmen from states like Alabama that stand to profit from the contract in favor of it, whether they are liberals or conservatives, Republicans or Democrats, while Republicans and Democrats alike from states that stand to lose from the deal because of their reliance on Boeing and its industry partners fiercely oppose it.
Flying-AAnother opinion piece on the KC-45A. It has a number of points that have been made before, some disputed, but it shows that the issue isn’t going away.
April 10, 2008, 6:00 a.m.
Tainted Tanks
EADS comes with a pernicious past.
By David N. Bossie
Dwight Eisenhower once observed, “History does not long entrust the care of freedom to the weak or the timid.” The danger of weakness in prosecuting the War on Terror brings to mind the wisdom of Eisenhower’s prescient observation.
Consider the recent decision by the Department of Defense to award a $35 billion contract to build America’s fleet of refueling tankers to the French-owned European Aerospace Defense and Space Company (EADS). In one of the most colossal blunders of the struggle against the terrorists, we have handed over the future of a vital tool in the projection of U.S. power over to bureaucrats and politicians in Russia and France.
The tanker contract has sparked bipartisan outrage in Congress. A crescendo of opposition is now building, from conservative and pro-family U.S. Senator Sam Brownback to liberal Democrat Jack Murtha, to reverse the decision or deny funding to the Pentagon to implement it.
The lack of ease that accompanies the decision is hardly surprising; the catalogue of horrors at EADS reads like a “how not to” primer in a business-school ethics class. The company has a long and sordid history of bribing governments to purchase their airplanes, especially when competing with U.S. aerospace firms. Former CIA Director James Woolsey has called the practice rampant, and concluded that it was an integral part of EADS’ corporate culture. A European Parliament report in 2003 confirmed these corrupt practices, and that EADS has been embroiled in bribery scandals in Canada, Belgium, and Syria.
According to a New York Times report just last October, a French financial regulator turned over evidence of insider trading by senior EADS executives to prosecutors. The executives failed to inform the public about production delays in the A-380 jumbo jet while they quietly dumped their own stock. When the delays became public, unwitting shareholders watched their holdings plummet in value. The co-CEO and co-chairman of EADS resigned under pressure, and now some EADS executives may face indictments.
Even more worrisome is the power grab by Vladimir Putin, who is buying up the depressed shares of EADS like a corporate raider. The prospect of the authoritarian Russian leader, whose political opponents are harassed and jailed while prying journalists turn up missing or murdered, having a heavy hand in EADS affairs is deeply troubling. Russia opposed the invasion of Iraq and has sought to undermine U.S. plans to deploy a missile defense system in Poland and the Czech Republic.
The most troubling aspect of the tanker contract is the danger it poses to U.S. national security. According to a report by the Center for Security Policy, EADS has been a leading proliferator of weapons and technology to some of the most hostile regimes in the world, including Iran and Venezuela. When the U.S. formally objected to EADS selling cargo and patrol planes to Venezuelan despot Hugo Chavez, EADS tried to circumvent U.S. law by stripping American-built components from the aircraft. Chavez is now building an oil refinery in Cuba to keep Castro’s failed Communist state afloat, funding terrorists seeking the violent overthrow of Colombia’s government, and recently meddled in the presidential election in Argentina with secretly smuggled cash contributions. If EADS had its way, Chavez would now be advancing his anti-American designs in the Western hemisphere with U.S. technology and components.
EADS entanglements with Venezuela make the Pentagon’s decision to waive the Berry Amendment, which prohibits the export of technology that might be developed during the building of the tanker to third parties, indefensible. Given the sophisticated radar and anti-missile capabilities of military tankers, this is no small matter. Such technology falling into the hands of state sponsor of terrorism would devastate our war fighters.
And such a scenario is hardly unreasonable. EADS executives recently attended an air show in Iran and were caught red-handed trying to sell helicopters with military applications. When confronted, an EADS executive said the company was not bound by the U.S. arms embargo against Iran. EADS also sold nuclear components vital to exploding a nuclear device to an Asian company that in turn sold them to an Iranian front operation.
There is no question that America desperately needs to replace its aging tanker fleet, which dates to the time of Eisenhower, with new aircraft. Given the thousands of sorties flown by U.S. fighters and bombers over Iraq and Afghanistan, the tanker has become a critical tool in winning the war on terror. But outsourcing this vital aircraft to a proliferator of technology to our worst enemies, with partial ownership by the French and Russian governments, is an act of military malpractice.
Relying on foreign governments that are wary of U.S. power, as long-term suppliers for a strategic program so critical to projecting U.S. power around the globe is short-sighted and foolish. France has not demonstrated that it is a reliable ally of the United States, and EADS has not been a reliable supplier.
EADS must end its bribery problem, resolve its insider trading scandal, stop its proliferation of weaponry to bad actors like Chavez and Ahmadinejad, kick the Kremlin out of its board room, and stop using anti-competitive trade practices like subsidies from foreign governments. Then — and only then — can it compete for U.S. defense systems with U.S. contractors on a level playing field.
Lenin once said that capitalists would sell him the rope with which he would hang them. In this case, the Department of Defense is buying from EADS a rope that it might someday find around its neck. The Pentagon should cut its losses and reverse this ill-advised plan.
— David N. Bossie is president of Citizens United.
Flying-AThe U.S. Geological Survey estimate is smaller than some of the figures floating around the internet, but it’s still huge, about 3.65 billion barrels of oil, plus natural gas. Details at:
http://pubs.usgs.gov/fs/2008/3021/
Of course, it will be a number of years before the field comes on line. The new technology has to be perfected, infrastructure built, and the biggest barrier of all, human opposition from various sources.
Flying-AThe U.S. Geological Survey estimate is smaller than some of the figures floating around the internet, but it’s still huge, about 3.65 billion barrels of oil, plus natural gas. Details at:
http://pubs.usgs.gov/fs/2008/3021/
Of course, it will be a number of years before the field comes on line. The new technology has to be perfected, infrastructure built, and the biggest barrier of all, human opposition from various sources.
Flying-AMore views, 2 pro and 1 con:
National Review Online
March 31, 2008
Right to Protest?
Boeing has a right to challenge its loss of the Air Force bid, but is it right to do so?
By Charles Horner
The Boeing Corporation’s protest of the United States Air Force decision to award the contract for a new tanker/cargo aircraft is well within the company’s rights. At issue, however, is whether it was the right thing to do for the Air Force, for the country, and for Boeing itself.
Boeing claims that the rules were changed mid-game and Boeing was not informed. The implication of this claim is that Northrop Grumman was in on a secret that was kept from Boeing. This is patently absurd and false.
In announcing that Northrop Grumman had won the bid, Air Force Assistant Secretary for Acquisition Sue Payton stated unequivocally that there was constant, open communication between her group and the two competitors. Each side had a chance, through multiple steps, to protest or question anything that they felt was going awry in the process. Boeing accepted the playing field as it was and remained silent. In fact, company officials repeatedly praised the openness of the process. It was only after they lost that they found it to be unfair.
Now Boeing is protesting, thereby delaying even further a long overdue upgrade in the nation’s capacity to refuel its warplanes. In a fit of pique, Boeing has decided that petty political infighting takes precedence over the interests of our men and women in uniform.
Moreover, through its surrogates, Boeing has decided to impugn the integrity of one of the candidates for President believing that, somehow, this will make things right. Senator John McCain is undoubtedly partly responsible for the circumstances surrounding the Boeing situation. Instead of inviting criticism, however, his actions should invite only praise, for it was Senator McCain who lead the charge against a previous tanker “deal” that was not only wrong for the Air Force and for the country, but was rife with illegalities and would have cost the American taxpayers.
To suggest that Senator McCain took a stand that is un-American is to suggest that corruption is the American way. If this is the point of view of Boeing’s corporate leadership, then Boeing does not deserve the tanker contract — or any other contract for that matter — irrespective of the technical quality of the company’s bid.
Finally, Boeing — again through its factotums — complains that Northrop Grumman has teamed with a foreign company to manufacture the planes. This much is true. If this is so wrong, then, why does Boeing not draw criticism for the Chinese, Japanese, Italian, and other non-U.S. composition of its many planes?
More to the point, why does Boeing not draw criticism for the fact that the engines on its KC-135R refueling tanker are made by a manufacturer half-owned by the French company, Snecma? Never once in our nation’s sometimes difficult relationship with the French has a single engine part been withheld or even delayed because of the disagreements over foreign policy between our countries. If it has never happened before, why would it happen now, as some suggest that it will?
The fact of the matter is that Boeing lost, and lost fair and square in an open process, and all of its post-defeat complaining is little more than noise. Nonetheless, the company is within its rights to file this protest.
Is such action right for the Air Force, which badly needs these modern planes to service its warplanes?
Certainly not.
Is it right for the country, which needs and deserves an Air Force with the best equipment available?
Not in the least.
And, for Boeing?
I cannot speak for the company and its interests, but I do know that moving forward with KC-45A program is in the national interest, and that should be every American’s top priority.
— General Horner was the Combined Forces Air Component Commander during Desert Shield and Desert Storm. He consults for a number of defense firms including Northrop Grumman.
The Washington Times
March 31, 2007
Letters to the Editor
A good deal for America
The Air Force’s selection of Northrop Grumman to build its replacement for the KC-135 surprised many Pentagon-watchers. It also unleashed an unfortunate tsunami of shock and indignation from some politicians.
I, too, am shocked but not at the Air Force’s decision. I’m shocked at the shrill rhetoric and outright falsehoods being hurled at the winners of this competition. If we are to have a national discussion on jobs and the defense industry, it should be based on facts.
First, and perhaps most obviously, Northrop Grumman is an American company. With its headquarters in Los Angeles, it employs 120,000 Americans in every corner of our great nation. Northrop Grumman has been a fixture in American aerospace from the F6F “Hellcat” and P-61 “Black Widow” to the F/A-18 “Hornet” and B-2 stealth bomber. Northrop Grumman is as American as apple pie and baseball.
Second, Northrop Grumman had the courage to enter the competition, knowing it was the underdog. It secured suppliers in the same manner as its competitor and its victory will employ 48,000 Americans in 49 states in direct and indirect jobs. That’s a significant boost to America’s industrial base.
More than 7,500 of those jobs are in California, 4,000 in Arizona, 1,800 in New Mexico and 2,300 in Ohio. Plus, 5,000 of those Americans call Alabama home. To decry the Air Force’s decision as sending jobs overseas ignores the reality of these thousands of American jobs being created at home. It also ignores the fact that the Northrop Grumman tanker program does not transfer any jobs from the United States overseas. Actually, with the Northrop win, new jobs will be added to the U.S. industrial base.
Third, the competition for the tanker contract was the most rigorous and transparent in the history of the Air Force. It certainly has been the most scrutinized. The Defense Department inspector general, the Government Accountability Office and Army and Navy acquisition personnel were all involved to ensure fair methodologies were used in judging the competitors’ proposals. Throughout the process, both competitors praised the Air Force for conducting a fair and open competition.
Fourth, in America, when you have a competition, the winner is supposed to be selected on the merits, not because someone wanted to change the rules after the factbecause their competitor didn’t win.
Two great American companies competed, so who won?
Our troops won because they are getting an aircraft the Air Force decided has the most capabilities. Our citizens won because the Air Force selected the aircraft that was judged to be the best value to the taxpayers. Our nation won because America is getting a second aerospace sector and the first new wide-body aircraft manufacturing plant in 40 years.
Politicians always talk about giving our troops the best equipment. Well, a fair competition judged this aircraft as being the best equipment for our troops. It’s dismaying to hear some in Congress now talking about blocking funds so the Air Force can’t replace its aging fleet of tankers just because Northrop Grumman won. The average age of these tankers is now almost 50 years old.
In a time of war, it would be an outrage if politics forced our troops to wait any longer for the equipment they need, or if politics forced an inferior product on them.
[B]BOB RILEY
Governor of Alabama
Montgomery, Ala.
[/B]
The Washington Times
Outsourcing defense contracts
March 28, 2008
By Duncan Hunter
As American forces confront the global terrorist threat on the battlefields of Afghanistan and Iraq, an equally serious threat exists here at home with the continuous outsourcing and erosion of our defense industrial base. The deterioration of our domestic defense industries, which helped carry us to victory in World War II and the Cold War, represents one of the greatest challenges to our security and the future success of our military forces.
Despite this fact, the list of U.S. defense contracts awarded to foreign competitors continues to grow, most recently with the addition of the French- and German-controlled European and Aeronautic Defense and Space Company (EADS) as the proposed manufacturer of the Air Force’s next refueling tanker. The initial $35 billion contract for 179 aircraft was awarded to EADS over the U.S.-based Boeing Co., a leading competitor in the aerospace industry that has built and supported the Air Force’s tanker fleet since the Eisenhower administration.
In 2005, the Navy chose an international group primarily composed of British and Italian manufacturers to build the next presidential helicopter, even though Sikorsky Aircraft, an American defense contractor, had manufactured the familiar Marine One helicopter since the Eisenhower years. Only several months earlier, the Brazilian jet maker Embraer was awarded a $6 billion contract to build the new Aerial Common Sensor reconnaissance aircraft.
Even the pistols and medium machine guns our Marines and soldiers are using on the battlefield today are no longer American-made. The 240G machine gun that replaced the venerable M-60, the standard machine gun from Vietnam to the first Gulf War, is manufactured by Fabrique Nationale, a Belgian company. The standard 9mm pistol carried by U.S. service personnel, which replaced the Colt M-1911, a weapon that was in service from 1911 through the late 1970s, is now made by the Italian company Berretta.
These examples clearly illustrate that foreign contractors are assuming a much greater role in the development and maintenance of America’s defenses. But as we become increasingly dependent on other countries for military resources and innovative technologies, we are becoming less capable of meeting our own critical defense needs.
In fact, when I was chairman of the House Armed Services Committee and American troops began taking casualties from roadside bombs on the streets of Iraq, I sent out my team to locate more steel to armor and better protect their tactical vehicles. They found only one company left in the United States that could still produce high-grade armor plate steel.
The danger of this dependency also became evident when the Swiss company Micro Crystal refused to provide our military with components for the effective deployment of Joint Direct Attack Munitions (JDAM), otherwise known as smart bombs, during the first phase of the Iraq war. Because the Swiss government objected to American action in Iraq, it ordered the company to stop the shipment of JDAM components.
Given that our military relies on this weapons system to strike with precision and limit the potential for collateral damage, this could have cost time and lives. We were fortunately able to find alternative components through a domestic manufacturer, though it took several months.
These issues alone should be reason enough to begin restoring our defense manufacturing base and reverse the current course. Unfortunately, as evidenced by the continued selection of foreign contractors to build some of our weapons systems, it appears we have learned little so far.
Today, our nation’s defense-manufacturing base is at a crossroads. Current law requires that our military systems be manufactured with at least 50 percent of domestic-made materials. But when I wrote language into the House version of the annual Defense Authorization Act several years ago to raise this requirement to 65 percent, these provisions were met with strong opposition by the Bush administration and several of my Senate counterparts. Although these provisions were later removed from the bill, the discussion surrounding this effort valuably underscored the fact that our reliance on foreign suppliers is infringing on our industrial productivity and the operability of our armed forces.
Those who believe we do not need to worry about the health of our defense industrial base and propose free trade and globalization as remedies are wrong. Consider our high-tech defense industry, for example. In 2000, the Defense Department and National Security Agency became concerned about the shortage in domestic sources of supply for semiconductors, a necessary component for the next generation of weapons systems. These concerns prompted the agencies to jointly fund a “Trusted Foundry” to fabricate these integrated circuits domestically and rebuild this technical expertise in the U.S.
American companies that helped build our nation’s defenses, particularly over the last several decades, did so through years of experience and the talent of thousands of valuable engineers and technicians. But each time we outsource our most critical defense needs and award contracts to foreign suppliers, we lose this expertise, and, once lost, it is extremely difficult to regain.
The tanker contract award is just the latest case in what is becoming a standard practice in America today. As this decision is reviewed by the Government Accountability Office, I am carefully considering several courses of legislative action, in preparation for the approaching budget process, to ensure the next American tanker is built in the United States by American workers. Moreover, I intend to introduce legislation that prohibits the defense secretary from entering into contracts with beneficiaries of foreign subsidies, as appears to be the case with EADS, which offer companies unfair competitive advantages.
It is important that we also make greater investments in the research and development of new defense technology, as well as our domestic manufacturing capability. Together, these efforts will not only help create and keep American jobs, but will also ensure that our military services have a reliable source of supplies and equipment in future conflicts.
The father of free trade, Adam Smith, stated in his book, “The Wealth of Nations,” that an exception to this practice must be made when it comes to defense production. On this point, I will agree with him. And for those who say that opening our defense market engenders security cooperation, one need only look at the last request for NATO troops in the Afghan operation. This spring, 3,000 Marines will deploy to Afghanistan for the simple reason that our 26 NATO allies refused to come up with approximately 100 soldiers apiece.
Every time we send elements of our defense industrial base overseas, we are also outsourcing a piece of our security. We must reverse this damaging course and begin revitalizing our own defense industrial base in the interests of promoting a strong and prosperous America.
Rep. Duncan Hunter, California Republican, is the ranking member on the House Armed Services Committee.
The views of General Horner and Govenor Riley are to be expected, but Representative Hunter’s opposition is significant since he is the Republican Party’s point man on defense in the House of Representatives. If he can’t be sold on the KC-45A, it’s in real trouble.
Flying-AA mixed review of the USAF’s choice:
Due diligence
The Washington Times
March 13, 2008
By James Lyons – The announcement that the U.S. Air Force chose the Northrop-Grumman-EADS team to build 179 tanker aircraft at initial procurement costs of $40 billion should have come as no surprise to anyone following the competition.
Studies last year showed the Northrop-EADS KC-30 tanker had distinct operational advantages. Loren B. Thompson, a defense consultant at the Lexington Institute, said Northrop-EADS KC-30 bested Boeing’s 767 tanker version in four of five categories, adding that Northrop’s winning bid was not a close call.
Heads should roll at Boeing. After the debacle of its failed leased tanker deal, Boeing certainly had to be aware of the capabilities of the competition’s tanker. And yet, instead of taking a bold new approach — using the 777 airframe as the tanker’s chassis — it appears Boeing gambled that, because of its close relationship with the Air Force, it could convince it to accept the good but inferior and already obsolete 767 airframe. While this is not a classic “two-way street” deal, it could certainly fall under that umbrella.
One must also expect that Northrop Grumman did extensive due diligence on EADS’ past unethical practices and verified beyond a shadow of doubt that EADS has cleaned up its act. In the past, EADS benefited from the French government’s policy of industrial espionage and bribery to give their favored companies an unfair advantage over U.S. firms (the French government owns 15 percent of EADS).
In a 2003 article, the Economist magazine cited EADS/Airbus bribery that was subsequently confirmed by a European Parliament report on the company’s corrupt practices. EADS has also tried to circumvent U.S. law to help Venezuelan dictator Hugo Chavez. In January 2006, the U.S. invoked international arms trade regulations (ITAR) to stop EADS from selling Spanish-built transport and patrol planes with U.S. components to Mr. Chavez. Under ITAR, nations cannot sell military products containing U.S. components to third countries without U.S. approval. EADS was notified of our objections but attempted to go ahead with the sale by trying to replace all U.S. components. EADS failed — and the sale did not materialize.
Another question both congressional investigators and Pentagon logistics watchdogs might want to pursue is whether Northrop-Grumman, as part of its due diligence, determined the extent of the Russian government’s ownership in EADS and more important, the role the Kremlin wants to play in EADS management. When the British government decided in 2006 to get rid of its EADS holdings, Vladimir Putin’s regime secretly bought up more than 5 percent of EADS through the state-controlled Vnesktorgbank. This was a serious coup because Vnesktorgbank did not let EADS know of its acquisition until October 2006.
Kremlin officials have allegedly said the Russian government intends to buy up to 20 percent of EADS on the international market — a big enough stake to give the Russian government the ability to influence management decisions and even place a Putin associate on the EADS board of directors.
Hints have surfaced: In February 2007, Mr. Putin told the French defense minister that Russia’s “purchase of stock is not a hostile takeover” and that Russia was ready for a constructive relationship. Subsequently, Mr. Putin told the Germans he insists on Russia’s capability to have a hand in EADS corporate matters.
These developments are troubling. The Moscow-EADS relationship could very well provide Russia access to sensitive Western technology developed or acquired by EADS. EADS has said it is standing firm against Mr. Putin’s demands and rejected a Russian attempt to buy a seat on the board in the fall of 2006. How long EADS can hold out, however, is unknown.
The Northrop-Grumman-EADS team clearly had the more capable tanker. What is of concern is that neither Northrop-Grumman, nor EADS, nor for that matter the Pentagon have weighed in publicly on the implications of Russia’s current and future role vis-a-vis EADS, the danger that Russia could siphon off sensitive Western technology, and the potential impact the Kremlin might have on the ability of EADS to fulfill its contractual commitments. We need to hear from all parties on this troubling situation.
James Lyons, U.S. Navy retired admiral, was commander in chief of the U.S. Pacific Fleet, senior U.S. military representative to the United Nations, and deputy chief of naval operations, where he was principal adviser on all Joint Chiefs of Staff matters.
Flying-AAnother take on the issue:
Plane wreck
The Washington Times
March 11, 2008
By Frank J. Gaffney Jr. – The Pentagon has had a dirty little secret for years now: Foreign suppliers are an increasingly important part of the industrial base upon which the U.S. military relies for everything from key components of its weapon systems to the software that runs its logistics.
With the Air Force’s Feb. 29 decision to turn over to a European-led consortium the manufacture and support of its tanker fleet — arguably one of the most important determinants of U.S. ability to project power around the world — the folly of this self-inflicted vulnerability may finally get the attention it deserves from Congress and the public.
The implications of such dependencies were made clear back in 1991 during Operation Desert Storm. In the course of that short but intense operation, American officials had to plead with the government of Japan to intervene with a Japanese manufacturer to obtain replacement parts for equipment then being used to expel Saddam Hussein’s forces from Kuwait.
The obvious lesson of that experience seemingly has been lost on the Pentagon. In the nearly two decades after, it has sought to cut costs and acquisition timelines by increasingly utilizing commercial, off-the-shelf (or COTS) technology. Under the logic of “globalization,” COTS often means foreign-supplied, particularly with respect to advanced computer chips and other electronic gear.
Such a posture raises obvious questions about the availability of such equipment should the United States have to wage a war that is unpopular with the supplier’s government or employees. Then there is the problem of built-in defects such as computer code “trap doors” that may not become obvious until the proverbial “balloon goes up” and disabling of U.S. military capabilities becomes a strategic priority to foreign adversaries, or those sympathetic with them.
Even the Pentagon and intelligence community recognized this sort of train-wreck was in prospect had Huawei, a company with longstanding ties to the Chinese People’s Liberation Army, been allowed to buy 3Com. The latter’s “intrusion prevention” technology is widely used by the U.S. government to provide computer security against relentless cyber attacks from, among others, Communist China.
Now, unfortunately, the Air Force has set in motion what might be called a “plane-wreck.” Opposition is intensifying on Capitol Hill, on the presidential hustings and across America to the service’s decision to make the European Aerospace, Defense and Space (EADS) consortium the principal supplier of its aerial refueling capabilities for the next 50 years.
There appear to be a number of questions about the process whereby the decision was made to reject the alternative offered by the nation’s historic supplier of tanker aircraft — the Boeing Co. These questions (for example, concerning the ability to operate on relatively short and austere runways) seem likely to result in that corporation protesting the source-selection of a much larger Airbus aircraft over Boeing’s modified 767.
Even more telling may be other considerations that argue powerfully against a reliance on the EADS-dominated offering. A number of these considerations were identified in a paper issued by the Center for Security Policy in April 2007 and re-released last week (click here to view the paper). Evidently these were not taken into account by the Air Force:
• One of the owners of EADS, the government of France, has long engaged in: corporate other acts of espionage against the United States and its companies; bribery and other corrupt practices; and diplomatic actions generally at cross-purposes with America’s national interests.
• The Russian state-owned Development Bank (Vneshtorgbank) is reportedly the largest non-European shareholder in EADS with at least a 5 percent stake. It is hard to imagine that, just when Vladimir Putin and his cronies are becoming ever more aggressive in their anti-Americanism and efforts to intimidate Europe, we could safely entrust such vital national security capabilities as the manufacture and long-term support of our tanker fleet to a company in which the Kremlin is involved.
• The enormous U.S. taxpayer-financed cash infusion into EADS will probably not only translate into more money for the slush funds the company has historically used to bribe customers into buying Airbus planes rather than Boeing’s. It will also help subsidize the Europeans’ space launch activities — again at the expense of American launch services.
• EADS has been at the forefront of European efforts to arm — over adamant U.S. objections — Communist China, Hugo Chavez’s Venezuela and Iran.
• As the Center for Security Policy paper points out: “Through its aircraft production division, EADS is a huge jobs program for anti-American labor unions that form the backbones of some of Europe’s most powerful socialist parties. By purchasing products that employ these workers, we will be feeding those who would rather bite our hand than shake it.”
These and other aspects of the selection of the Airbus tanker (notably, preposterous claims about the number of American jobs that will be created by contracting out our tanker fleet to the Europeans — see Michael Reilly’s essay at http://www.centerforsecuritypolicy.org) seem to assure that this decision will indeed be a political plane-wreck.
The tragedy is that the replacement of our obsolescent aerial refueling fleet has already been unduly delayed. The further deferral that now seems inevitable may mean we wind up literally sacrificing aircraft and their crews or at least the national power-projection capability we need while this mess is sorted out.
Frank J. Gaffney Jr. is president of the Center for Security Policy and a columnist for The Washington Times.
Flying-ALou Dobbs has the most popular show on CNN and this is how his website reports the story:
Thursday, March 6
U.S military sells out American workers
The U.S. Air Force’s decision to award a major defense contract to a European company is unconscionable, short-sighted and borderline treasonous. These decisions show our overwhelming lack of real leadership in Washington, DC, and it’s time our elected officials stand up and demand this be reversed. The Machinists and Aerospace Workers Union is justifiably outraged at the Air Force tanker deal, and Lou interviewed union president Thomas Buffenbarger last night.
Before one dismisses Dobbs, remember that he played a leading role in stirring up the successful grassroots opposition to the Dubai Ports World deal in 2006 and the immigration bill in 2007. Judging by the news story comments I’ve read and the calls to radio shows I’ve heard, his opinion is in the majority.
So this is shaping up as a major story and it might become a campaign issue. Even if it isn’t a major issue nationally, it could sway the election one way or another in Kansas, where Boeing is the single largest employer, and in battleground industrial states such as Indiana, Michigan, Ohio, and Pennsylvania, where outsourcing is a hot issue. In purely political terms, the only way the timing of the decision could have been worse would have been an announcement in late October.
Flying-AThe delays in the announcement to Wednesday and then to Friday were strong hints that the KC-330 had gotten the nod. The extra four days provided more time to lay the political groundwork for a decision that was going to be unpopular in many quarters.
Moreover, a classic gambit in American politics is to make a problematic announcement on a Friday afternoon, which limits news coverage to Friday evening TV newscasts and Saturday’s newspapers, both lightly patronized.
Several factors will mitigate the inevitable backlash: much of the work on the KC-330 will be done here in the States; Boeing already has a full plate of military and commercial orders; and the disclosure yesterday that Boeing had badly bungled a 28-mile “virtual fence” project along the Mexican border.
Still, the KC-330’s future is not necessarily CAVU. A protest by Boeing is likely, although historically few have succeeded. Congress might balk at funding, although it has seldom used the power of the purse to reverse a procurement decision. More plausibly, Senator Clinton or Senator Obama might “revisit” the decision should either be elected President, given their close ties to labor and their recent statements on trade (although Obama’s economics guru has reportedly told Ottawa not to take his seriously).
Even if none of these come to pass, there will still be a ton of bricks ready to fall on the KC-330 should serious problems or delays arise. NG and EADS should plan accordingly.
Flying-AThe Associated Press reports that a decision might be annonced as early as Monday, 25 February 2008.
Flying-ATo exhange information and opinions with people who provide at least four answers to “Who Built the Tornado?”
Flying-ATo exhange information and opinions with people who provide at least four answers to “Who Built the Tornado?”
Flying-ALatest news I heard this morning on NPR/PRI is that the USAF is leaning toward the Airbus
Besides the Mobile plant, was any explanation provided?
There is some sentiment in the Pentagon for having a major aircraft prime contractor besides Boeing and Lockheed Martin, as well as worry about weakening trans-Atlantic ties. Those considerations might work in the KC-330’s favor.
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