Dubai Airshow 2011

Pentagon Relationship With EADS 'Improved': CEO

Reported by Yousef Gamal El-Din, CNBC Anchor, Written by Catherine Boyle, Staff Writer,

The decade-long battle between Boeing and European arch-rival EADS for a $35 billion refueling airplane contract from the Pentagon ended in defeat for Airbus owner EADS earlier this year – but Chief Executive Louis Gallois insists that the bidding process improved its relationships with the U.S. military.

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"We have enhanced our relationship with the Pentagon," he told CNBC at the Dubai Airshow Monday. "We were very good competitors, our proposal was extremely robust and we have the best airplane. We refused to follow our competitor on price and we lost on that."

The contract was initially awarded to EADS and its American partner in the bid, Northrop Grumman, in 2008, before Boeing appealed.

Gordon Brown, then British prime minister, and French President Nicolas Sarkozy criticized the deal for "protectionism" in 2010.

The Pentagon has now ordered Boeing 767 wide-body aircraft—essentially flying gas stations for other airplanes—to replace its existing fleet.

Boeing on Sunday signed the biggest deal in its history at the Dubai Airshow as Emirates agreed to buy 50 777-330R aircraft worth approximately $18 billion.

Gallois insisted that the order had "no relation" to well-publicized delays to the Airbus equivalent to the 777, the A350.

"It's only that Emirates already has a fleet of 777s, and they want to grow it," he said.

It emerged last week that EADS, which is part-owned by the French and German governments, has delayed the introduction of its A350 passenger jet until the first half of 2014, a six-month delay, after a number of suppliers were late delivering components.

"We have no reason not to stick to it, but we have very changing orders ahead of us, in particular the flight test and certification," Gallois said. "For the time being that's our plan and all the company is focused on that, including our suppliers."

He added that the company is continuing to see a healthy appetite for its commercial planes.

"The commercial market is still very alive, and we don't see the impact of crisis on the appetite of airlines for new airplanes. 2011 will be a record year for Airbus and ATR," he said.

"The helicopter market is recovering. It's quite different (from) the defense market, where we are feeling the impact of the budget constraints in Europe," he said. "We are now on the way to being much more aggressive in export markets and we have some prospects, particularly in India."