Steve Trimble Ten years after heated KC-X competition, Bridge Tanker renews the bitter rivalry between Airbus and Boeing under eerily familiar conditions.
Steve Trimble
The Airbus A330 Multi-Role Tanker Transport is operated by several countries’ air services, including the Royal Australian Air Force, whose MRTT is pictured refueling a Boeing C-17. Credit: Christian Turner/U.S. Air Force
On Feb. 24, 2011, the U.S. Air Force selected Boeing over Airbus for the KC-X tanker contract. The $20.6 billion award closed a bitterly protracted competition but finally established two certain facts: Boeing would deliver the first batch of 179 tankers over the next 18 years, and both sides would meet again in roughly a decade to fight over the contract for the next batch.
Ten years and some six months later, the competition for the Bridge Tanker contract, formerly known as “KC-Y,” has begun. The Boeing KC-46 and Airbus A330 Multi-Role Tanker Transport—this time rebranded as the Lockheed Martin/Airbus LMXT—are already posturing for a planned three-year competitive phase, leading to contract award probably in fiscal 2024.
The obvious prize for the competitors is a contract for a single company to build 140-160 tankers at an annual rate of about 12 per year, with the first delivery of a production aircraft expected shortly after Boeing ships the 179th KC-46A in fiscal 2029.
As in the KC-X competition, however, other forces are at play.
For Airbus, the Bridge Tanker ranks among one of the few franchise-level, U.S. defense contracts suitable to the company’s product portfolio, with the opportunity to establish a possibly taxpayer-funded, widebody aircraft assembly site on U.S. soil as an attractive bonus.
For the LMXT’s prime contractor, Lockheed, the Bridge Tanker may fill a potential gap in its mobility product portfolio after the end of C-130J production and improve its chances to win contracts for the Advanced Autonomous Refueling (AAR) aircraft in the mid-2030s as well as a new large military transport in the 2040s.
Meanwhile, Boeing’s team, an incumbent with a troubled track record, is under pressure to deny those opportunities to two companies that comprise its most formidable competition in the commercial and defense markets, while seeking to recoup billions in losses on the first batch of deliveries with another long production run.
Some of the competitive dynamics have changed, but the signs still point to an intensely competitive bidding process, posing a critical test of the Air Force’s managerial skills in a time of sharp congressional scrutiny.
The Bridge Tanker is “going to be just as important” as the KC-X to Airbus and Boeing, says Richard Aboulafia, vice president of analysis at the Teal Group. For both airframers, waning demand from airlines in the widebody aircraft sector only increases the competitive pressure to win a potentially $20 billion order from the Air Force.
“The widebody market now is as bad as it gets. Nobody wants a widebody, and pricing in the jetliner businesses in general has taken a hit,” Aboulafia says. “So defense looks like one of the few ways to make that good.”
The Bridge Tanker competition opened publicly on July 19 with the release of a “sources sought” announcement by the Air Force Lifecycle Management Center. This is a mandatory step, ensuring all possible bidders are made aware of a pending competition.
Further problems with the Remote Vision System of the KC-46, pictured lining up to be refueled by a KC-135, could jeopardize Boeing’s bid for the Bridge Tanker. Credit: Petty Officer 1st Class Christopher Okula/U.S. Navy
The announcement, however, clarified that the Air Force expects the Bridge Tanker winner to deliver the first production aircraft in fiscal 2029 as well as enough operational tankers to declare initial operational capability by the following year. That schedule implies a brisk process, with bids likely due in fiscal 2023, contract award in fiscal 2024 and first flight of an aircraft that meets the Bridge Tanker’s specifications by around fiscal 2027.
Over the next year, the Air Force’s program executive office for mobility and tankers will be crafting an acquisition strategy, including the evaluation criteria that will define the winning bid.
As military derivatives of commercial aircraft, the KC-46 and the A330 MRTT-derived LMXT come with certain parameters that cannot be easily changed. The KC-46, for example, carries a maximum of 212,000 lb. of fuel, or about 15% less than the larger and heavier A330 MRTT. If the Air Force prizes fuel offload capacity in the evaluation criteria, the KC-46 could be disadvantaged. If the evaluation favors the lowest-cost, technically compliant option, however, the smaller KC-46 may have an advantage.
The Air Force faced such a decision a decade ago with the KC-X about the same aircraft. In that case, the evaluation formula set a minimum threshold for fuel offload, then offered an escalating series of credits for providing more capacity. That approach during the KC-X competition seemed to favor the A330 MRTT, but the credit came with a caveat: Credits for exceeding the fuel offload minimum would be awarded only if the bids came within 1% of each other.
In effect, the KC-X evaluation formula showed that the Air Force valued the lowest-priced, technically compliant bid over all other factors, including the aircraft that offered the most fuel capacity. (Ultimately, Boeing’s total price for the KC-X contract came in 10% beneath Airbus’ bid, which nullified the credit for additional fuel capacity.)
In a competition between derivatives of existing aircraft, the finely tailored criteria that guided the 2011 KC-X decision offer a lesson. The elaborate formula constructed for that bidding process came three years after the KC-X competition first round ended in an embarrassing failure for the Air Force.
Amid severe scrutiny from Congress and the media, the Air Force originally awarded the KC-X contract in 2008 to Airbus, which was then partnered with Northrop Grumman. But the Government Accountability Office (GAO) overturned the decision about six months later. According to the GAO’s July 2008 decision, the Air Force initially informed the competitors that no extra credit would be given for exceeding the fuel offload capacity requirement, yet cited the A330 MRTT’s larger size and fuel capacity as a key factor in the final decision.
Now, a decade later, the Air Force again faces a decision over how to score the same 15% disparity in fuel offload capacity between the competitors for the Bridge Tanker contract.
To some analysts, the difference in fuel offload between the KC-46 and the A330 MRTT should not be a factor in the competition. “When it comes to additional fuel, I’m not so sure that’s as compelling,” Aboulafia says, “You know, a boom is a boom is a boom.”
But Scott Hamilton, founder of the Leeham consultancy and author of Air Wars, a newly published book about the Airbus-Boeing rivalry, points to the original Air Force decision that favored Airbus and the rising importance of fuel capacity to operate over the Pacific Ocean.
“The longer range and the longer loiter time of the A330 versus the [KC-46] was at the time one of the things that was part of the equation,” Hamilton says. “Today, we see more aggression out of China, so are [those] capabilities going to be more important than [a lowest-price, technically acceptable bid]?”
The Air Force is not the only party in the competition that faces hard decisions. The likely six-year stretch between contract award and the IOC milestone suggests the Air Force has little appetite for inserting advanced technology. The sources-sought announcement signaled that the Air Force wants the Bridge Tanker to carry the latest networking and self-defense equipment on board, but otherwise few new features may be required. Under those conditions, the Air Force often prefers to use a fixed-priced contract for the engineering and manufacturing development (EMD) phase and to shift the risk of any cost overruns to the contractor.
Boeing bid aggressively in 2011 to win the fixed-price EMD contract for the KC-X but lost $5 billion over the next decade due to unexpected glitches and delays on a supposedly low-risk project. Much may depend on the maturity of a major pending upgrade to the KC-46 Remote Vision System (RVS). Already the source of the costliest delays and Air Force frustration with the KC-46, Boeing is scheduled to deliver the upgraded RVS 2.0 shortly after submitting final bids for the Bridge Tanker. Any further delays or technical glitches to the RVS 2.0 will complicate Boeing’s bidding calculations for the next batch.
The Lockheed/Airbus team also has decisions to make about how much risk to accept on a fixed-price contract. The Air Force, for example, required Boeing to obtain FAA certification of the military refueling systems on the KC-46. The A330 MRTT is operated by several air forces, but the LMXT may still need to undertake the often complicated process of certifying military hardware with the FAA. Unlike Boeing, the Lockheed/Airbus team also faces the cost of establishing final assembly and modification lines in the U.S. for the LMXT fleet.
