AIRBUS IS CONVINCED THAT THE U.S. TANKER BIDDING

C O N F I D E N T I A L SECTION 01 OF 02 BERLIN 001355 SIPDIS E.O. 12958: DECL: 10/27/2019 TAGS: EAIR ECON ETRD PINR PREL EU GM SUBJECT: AIRBUS IS CONVINCED THAT THE U.S. TANKER BIDDING PROCESS IS RIGGED IN BOEING'S FAVOR BERLIN 00001355 001.2 OF 002 Classified By: DCM GREGORY DELAWIE for reasons 1.4 (b,d). ¶1. (C) Summary: In an October 14 meeting with the Ambassador, Airbus CEO Thomas Enders expressed strong disappointment regarding the bidding process for the next generation of U.S. Air Force tankers. He contended that Boeing has used its influence to ensure a process that will work in its favor. Pointing out that the Airbus bid has support at the highest levels of European governments Enders claimed that Airbus would win any "free and fair" process. This outcome, would benefit the U.S. aerospace industry, he noted, opening the doors for it to win lucrative future contracts in Europe. The Ambassador assured Enders of Obama Administration commitment to a fair process, while reminding him of the role of Congress in the decision. End Summary. ¶2. (C) On October 14, Airbus CEO Thomas Enders met with the Ambassador and delivered specific talking points on aviation-related issues. However, his principal intent was to deliver a message to the USG regarding the bidding competition between the Airbus KC45A and Boeing's Advanced 767 tanker. Stating that Airbus is "very concerned," Enders frankly stated that his company believes Boeing has used political influence to devise a new competition highly biased in its favor that wrongly discounts the strong points of the KC45A. ¶3. (C) Enders accused Boeing of structuring the competition as a "price shoot-out," and since its aircraft is smaller, it will always be cheaper. Enders further contended that Boeing has made the contest "protest proof." Enders stressed that Airbus is an entire generation ahead of Boeing when it comes to tanker development and that is why it won the first contest. It is a "disappointment" to Airbus, said Enders, that the current competition does not take the higher capabilities of the KC45A into account. Price has been made the principal determinant for selection. For the KC45A to be competitive, it cannot cost more than one percent of the Boeing 767, he emphasized. However, because of the size difference and the difference in technology, it is impossible for Airbus to close this gap. ¶4. (C) Enders pointed out that because this tanker contract could have a serious impact on international trade, there is high-level political involvement, including the Prime Ministers of France and Germany. Enders urged the USG to ensure that the competition is "free and fair," in which case, he claimed, the KC45A would be the hands down winner. In this instance, he pointed out, Airbus simply has the "best product," as the production of tankers is a "European niche." ¶5. (C) Enders emphasized that U.S. purchase of the KC45A would benefit the U.S. aerospace industry over the long run. Conceding that U.S. companies generally make better military aviation products than the Europeans, an Airbus victory in this instance would make it easy for European air forces to purchase American products in the future. Enders further noted that this is not a straight competition between a European and an American product as Boeing contends. The KC45A is a joint production of Airbus and Northrup-Grumman and fully 60 percent of the value-added is American. Furthermore, the KC45A would be produced in Alabama and provide high-paying jobs to American workers. This, Enders said, is the real reason why Boeing has pulled out all the stops to prevent Airbus from gaining this contract. It does not want to see Airbus gain a manufacturing foothold in the U.S. ¶6. (C) In his response, the Ambassador emphasized that the Obama Administration is committed to a free and fair bidding process. Enders indicated that Merkel may raise this issue during her upcoming visit to Washington. Enders conceded that the Executive Branch has not shown bias, and that in light of the recession, Congressmen are in a "buy America" mood and have little inclination to support Airbus against an American company. Comment -------------- ¶7. (C) Enders' presentation was ample proof that Airbus has pulled out all of the stops and is willing to go to the mat to win this contract. Reading between the lines, Enders made it clear that Airbus has strong political supporters in European governments who would be angered by a Boeing victory. Left unspoken was the implication that such an outcome would ensure that these same governments would not be BERLIN 00001355 002.2 OF 002 sympathetic to Boeing and other American aerospace companies in the future when they bid against Airbus for military contracts. Murphy