EADS chief hopes to win tanker

[July 03, 2010]  AIX-EN-PROVENCE (AP) -- The head of Airbus parent company EADS NV said Saturday that he hopes to win a $35 billion Pentagon tanker project despite a WTO ruling that European governments gave Airbus illegal subsidies.

In a first key ruling on a long-running dispute between the European Union and Washington, the World Trade Organization ruled Wednesday that there was some wrongdoing by Europe, but interpreting the decision wasn't easy.

Both sides claimed victory, and said the other's claims were misleading.

EADS CEO Louis Gallois told reporters at the Rencontres Economiques conference in southern France that 70 percent of Boeing's claims were rejected and the European Commission will probably appeal on the points they lost.

Crucially, he said that the WTO ruling found that low-interest government loans -- commonly called "launch aid"- to develop the A330-200 plane on which the tanker is based are legal.

Boeing claimed the ruling said launch aid for every Airbus program was illegal and damaging.

"I think the nervousness which Boeing is showing in this affair and the propaganda campaign they have been waging in the last few days is because they are afraid that we will have a competitive offer on the tanker," Gallois said.

"They know we have a better plane.... and they are worried that we will be cheaper than them."

Bids for a contract for 179 tankers are expected from EADS' North American unit and Boeing Co by July 9.

Boeing Chairman and CEO Jim McNerney said in June that it's possible his company will be underbid.

Gallois said that more than 200 American companies will work with EADS if they win, but he declined to name them.

EADS was originally awarded the contract with American partner Northrop Grumman, but it was overturned on appeal. Northrop then withdrew from the competition saying the Pentagon's guidelines favor Boeing.

Gallois said he is confident that the Pentagon will follow rules of fair competition.

"My hope is to win," he said. "We have confidence in the U.S. to follow their own rules and until now we have nothing to complain about. I don't think that I need to work under the hypothesis that there will be political pressure."

The Pentagon has tried and failed twice to award a contract to replace its Eisenhower-era fleet of tankers that refuel military planes in flight.

The last attempt in early 2008 was overturned on appeal after a political outcry in Washington.

The 2004 award to Boeing was undone by an ethics scandal that resulted in prison terms for a former company executive and a former high-ranking Air Force official.

Gallois also said the WTO is due to make an initial ruling on a countersuit alleging illegal U.S. support for Boeing on July 16.

He said that last week's ruling will not change Airbus' funding plans for the A350 program, midsize, long-haul plane that aims to compete with Boeing's 787.

[Associated Press; By EMMA VANDORE]

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