Boeing Formally Protests US Air Force Tanker Contract Award

Boeing KC-767 Tanker Adds Up to Best Value for Warfighter, Taxpayers

ST. LOUIS, April 15, 2008 -- The Boeing [NYSE: BA] KC-767 Advanced
Tanker would save billions of dollars over the anticipated lifetime of
the aircraft compared with the larger Airbus-based KC-30. Nonetheless,
the U.S. government selected the larger air tanker from the team of
Northrop Grumman and the European Aeronautic Defence and Space Company
(EADS).

Due to irregularities in the competition, such as the cost comparison,
Boeing has protested the decision and asked the Government
Accountability Office (GAO) to determine if the tanker acquisition
process, including the cost analysis, was unfair and flawed. As the
GAO reviews the decision, Boeing is also calling on policymakers to
question why the comparison of full costs of the new tanker fleet
failed to reflect that the Airbus KC-30 tanker is larger, heavier,
less fuel-efficient and -- according to the Northrop/EADS team itself
-- more costly to operate.

"As Americans pay their taxes this week, it's essential that they
consider how effectively those dollars will be spent to equip U.S.
warfighters," said Sen. Sam Brownback of Kansas. "It's especially
important to think about the total cost of developing, producing,
operating and maintaining vital defense assets that must be ready to
fly at least two generations of American military men and women."

In evaluating the two tanker offerings, the U.S. government determined
that the Boeing KC-767 and the Northrop/EADS KC-30 were nearly equal
at a cost of $108 billion to buy and operate 179 tankers over 25
years. Boeing contends that a realistic comparison of life-cycle costs
-- what the Air Force calls Most Probable Life-Cycle Costs (MPLCC) --
should have resulted in a significantly higher price tag for the
Airbus KC-30 when considering the biggest cost drivers: fuel,
maintenance costs and infrastructure.

* Fuel: Using commercial aviation data, a Conklin & deDecker
Aviation Information fuel study funded by Boeing indicated that with
the price of oil between $100-125 per barrel, the larger, heavier and
less fuel-efficient KC-30 would cost $30 billion more in fuel costs
than the Boeing KC-767 over an anticipated 40-year service life.
* Maintenance: Based on the requirements for a smaller aircraft,
the KC-767 would be approximately 22 percent less costly than the
KC-30.

* Military Construction: The larger KC-30 would require
approximately $2 billion to build or upgrade hangars, ramps, access
roads and other facilities at tanker bases, while existing facilities
that are sized for the current fleet of KC-135 tankers will be able to
accommodate the smaller KC-767 with substantially less costly
improvements required.
* Additional Infrastructure Costs: To accommodate Air National
Guard and Air Force Reserve units -- which operate primarily from
civilian airfields and have 60 percent of the Air Force tanker fleet
--
further costly investment would be required to upgrade facilities
where KC-30s would be based.