Funny Business with Jane Wells

EADS: No Regrets For Tanker Try


Remember the $40 billion competition for the Air Force's new refueling tanker? The massive, must-have deal won by Northrop Grumman , which partnered with Airbus' European parent EADS last year, only to be overturned by a challenge from Boeing ?

One year later, the new bidding hasn't even begun. The Department of Defense tells CNBC there may be movement soon, but a decision is still pending on who will award the contract: the Air Force, or the Office of the Secretary.

What should be a fairly straightforward competition has turned into a soap opera over the last decade. One of the biggest hang-ups is the debate over whether an American military tank should be made by a European aircraft company. Northrop is the lead contractor on the bid, and much of the construction would be done in Alabama, but the plane is based on an Airbus A330. Choosing Airbus is seen, by some, as unpatriotic and bad for American jobs.

So, does EADS regret ever getting involved? "Why should we regret it? We're going to win again," laughs Ralph Crosby, the former Northrop executive who now is Chairman and CEO of EADS North America. He spoke exclusively with CNBC this week before giving a speech at LA Town Hall. Crosby says EADS has beat out Boeing in four other global tanker competitions, and, at this point, the company has no intention of changing its entrant for the U.S. competitions. As for when the bidding will restart, "We think we're getting close." But Crosby points out that the cycle of bidding may take nine months, and that's without another challenge. "Let's get on with it. I mean, these things are getting older," he says of the current tanker fleet. "It's nine years since this process was started, and it'll be another five years before we get aircraft in the inventory."

EADS's Crosby

Meantime, pressure mounts on the Pentagon to split the buy between Northrop Grumman/EADS and Boeing.

"That's a government decision," says Crosby diplomatically.

He says, however, that the whole idea of an American-built airplane is no longer relevant. "Nobody, nobody can build an aircraft, especially a commercial one, based on U.S. or European or Asian components. We're too well-integrated for that."

You can watch more of what Crosby has to say about the tanker, starting with whether the company has any regrets about taking on Boeing.

On the commercial side, Airbus has strongly outsold Boeing so far this year.

But with seemingly every major crash this year involving an Airbus (the US Airways crash in the Hudson, the Air France crash in the Atlantic, the Yemenia crash off the Comoros), Crosby was asked if passengers should feel safe flying a 300-series Airbus. "I don't have any comment except to say look at the safety record of the aircraft over the many, many years it has been in service."

EADS & Safety

Regarding the Air France crash in particular, which may be due to problems in the aircraft's speed sensors, Crosby says, "Those are very modern aircraft, they operate every day, hundreds of flights a day. We've got to make sure we really do understand that, the phenomena at work. And I don't think we understand it yet."

You can watch more of what Crosby had to say about Airbus safety, including specific issues regarding the US Airways crash in the Hudson, and the Air France crash in the Atlantic.

Finally, Crosby talking about his belief that the economic cycle for his industry will pick up at the end of this year.

"We've seen some signs of improvement, and as soon as you do, the market goes down." But he says the Airbus backlog is "robust".

EADS & the Economy

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