×

Tanker Tangle: The Air Force Responds

THE AIR FORCE RESPONDS, AND MORE ANALYSIS OF THE TANKER DECISION

This statement came from the Air Force Wednesday evening, on the Government Accountability Office decision which brutally took the service to task over the way it awarded the $35 billion tanker contract...

"The Air Force is currently reviewing the GAO’s decision that sustained portions of Boeing’s protest. Once the review is complete, the Air Force will be in a position to determine the best course of action.

'The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability,' said Sue C. Payton, Assistant Secretary of the Air Force (Acquisition). 'The Air Force will select the best value tanker for our nation’s defense, while being good stewards of the taxpayer dollar,' said Payton. 'As soon as possible, we will provide the Air Force’s way ahead. We appreciate the GAO’s professionalism and thoroughness in its assessment of the protest of the KC-45A source selection,' Payton said."

Morgan Stanley analysts call the GAO ruling in favor of Boeing "something of a surprise" and believes the competition will start over...in 2009. The brokerage called the tanker saga a "soap opera."

After all, the Air Force has been trying to replace the planes since 2001 in a saga that has included everything from prison stripes to bad math. Why start from square one? Morgan Stanley believes that allows the Air Force to "bypass prospects for a lengthy, painful questioning by legislators in a politicized election year." The Air Force has 60 days to say what it plans to do next, and "That's too close to the elections, in our view."

In fact, Morgan Stanley believes the process will be dragged out into the next administration. So either President McCain or President Obama will be the Air Force's Commander-in-Chief when a decision comes down.

Which brings up an interesting point. Many believe, including Howard Rubel at Jefferies, that one reason Northrop Grumman /EADS had a shot at the tanker was because John McCain was "was looking over (the Air Force's) shoulder." The Arizona senator was extremely critical of the original deal to lease tankers from Boeing. So, how does this tanker deal play in the McCain presidential campaign? Will the Republican senator continue his "straight talk," or will he back off from his criticism of Boeing to avoid alienating voters who want their military's planes built by an American company?

Yes, I know the Northrop Grumman plane would be assembled in Alabama and potentially create more new U.S. jobs than Boeing, but Boeing has convinced a lot of people it's unpatriotic to let Airbus build an Air Force plane.

So. What will John McCain say now? Let me know what you think.

Keep in mind, the GAO didn't care if the plane was made on Mars. Its decision is based on the Air Force's method of determination, not on the tanker's point of origin. Which gives EADS CEO Louis Gallois hope.

Questions? Comments? Funny Stories? Email funnybusiness@cnbc.com