Posted on 07/07/2008 11:46:35 AM PDT by K-oneTexas
Let's Solve the Tanker Mess
by Gen. John Handy
Most of us in the Air Force mobility community were a bit surprised by the decision to buy the quite large Airbus-330 tanker instead of the smaller Boeing 767 tanker. But the real shock was in the unusually harsh language used by the Government Accountability Office in overturning that decision. It was the harshest language used to overturn an action by the Air Force that I have read in my entire career.
In that career -- spanning 39 years in the Air Force -- I was fortunate enough to have been the Commander of the United States Transportation Command (USTRANSCOM) and the USAF Air Mobility Command (AMC) from November 2001 until retiring from the Air Force in October 2005.
I devoted many years to the operation of air refueling tankers in support of the hundreds of other aircraft and tens of thousands of soldiers, sailors, airmen, marines and Coast Guardsmen who depend on them to create the “air bridge” that enables American forces and relief supplies to reach any corner of the world in only a few hours. Without the tankers performing when and where needed, America would not -- quite literally -- be a “superpower.”
In the many challenges we faced in those years, the soldiers, sailors, airmen and marines in TRANSCOM pulled together as a joint team to get the job done on a daily basis throughout the entire time I was blessed to be their commander. We engaged in multiple crises around the world -- humanitarian disasters as well as significant military conflicts in both Afghanistan and Iraq.
The most serious limitation we had was our equipment: the shortage of adequate mobility assets -- meaning airlift and air refueling aircraft. First among those problems was then, and is now, the tankers.
I spoke about the air refueling tanker age and shortages on a routine basis with anyone who would listen. And I did so in the context of the other requirement those badly needed assets would support which includes virtually everything the armed services have to move from one place to another that can be loaded onto an airplane.
The shocking language of the GAO decision compels me to do something I’ve never done before: to speak out publicly. I am not employed by either Boeing or Northrop-Grumman. But the service I’ve devoted most of my life to appears to need a bit of help.
Somewhere in the acquisition process, it is obvious to me that someone lost sight of the requirement. Based on what the GAO decided, it’s up to people such as myself to remind everyone of the warfighter requirement for a modern air refueling tanker aircraft.
Recall that we started this acquisition process in order to replace the Eisenhower era KC-135 aircraft with a modern version capable of accomplishing everything the current fleet does plus additional needs for the future. Thus the required aircraft is of small to medium size much like the KC-135. Not a very large aircraft like the current KC-10, which may be replaced later with a comparably large aircraft.
Why a smaller to medium size aircraft? Because, first of all, you want tankers to deploy in sufficient numbers in order to accomplish all assigned tasks. You need to bed them down on the maximum number of airfields around the world along with or close to the customer -- airborne fighters, bombers and other mobility assets in need of fuel close to or right over the fight or crisis. This allows the supported combatant commander the ability to conduct effective operations around the clock. The impact of more tankers is more refueling booms in the sky, more refueling orbits covered, wider geographic coverage, more aircraft refueled, and more fuel provided. A “KC-135 like” aircraft takes up far less ramp space, is far more maneuverable on the ground and does not have the risk of jet blast reorganizing your entire ramp when engine power is applied.
The second requirement is survivability. The aircraft and crew must be able to compete in a threat environment that contains enhanced surface to air missiles and other significant threats. The crew must receive superior situational awareness to include automatic route planning and re-routing and steering cues to avoid those threats. They must have maximum armor protection, fuel tank explosion protection and world class chemical/biological protection. All of this means the warfighter has the requirement for a large number of highly flexible and survivable air refueling aircraft.
I also want the acquired aircraft to be integrated with the current defense transportation system. That means 463L compatible pallets; floor loaded on a freighter capable floor all compatible with the current modern airlift fleet. When I put passenger seats in this aircraft, I want to be able to use existing airlift aircraft seats and pallets. When tasked with our precious aero medical mission, I want to be able to use integral medical crew seats, onboard oxygen generation systems, more outlets and be able to use the USAF patient support pallet. I do not want to harness the USAF with the problem of going out to acquire unique assets due to a more radically sized and equipped tanker aircraft.
Now, if you look at these rather simple requirements and look at the previous offerings from industry, you might agree with me that the KC-767 more closely meets these needs than the competition. If that’s what the warfighters need, that’s what they should get.
My purpose is only to help select the right aircraft that meets the warfighter’s requirements. It is not anything else. With that thought in mind, the KC-767 -- or another that is the same size and has the same capabilities -- is the right aircraft for the USAF. Now let’s see what the new leadership of the Air Force does to obtain the right aircraft for the warfighter.
General John Handy, USAF (Ret.) is the former commander of both Air Mobility Command, where he had responsibility for all Air Force tanker operations and US Transportation Command where he was responsible for the air, land and sea movement of all DOD personnel. He is now the executive vice president of a domestic over-ocean shipping company based in Charlotte, NC.
The general ought to know. IIRC, isn’t the Northrup-Grumman just a concept, whereas the Boeing already exists?
The Boeing model is flying with the Japanese, only having seen service recently.
This another obvious pro-Boeing opinion. I can show you many retired AF Genrals who have pro-Grumman opinions. The GAO finding never criticized the Grumman Aircraft. It criticized the AF selection procedures. Now that Secretary Gates is taking a personal involvement, my guess is they will split the contract between Boeing and Grumann and avoid a lengthy re=bid process.
I was the Superintendent of F-15 training at Tyndall AFB from 1992 until I retired in 1996. Tankers were the hardest asset to get for training because they were always in use in real world operations. General Handy made some excellent points in his editorial and I agree with him. Most of our fighters can’t make a trans-atlantic flight without air refueling and we just don’t have enough tankers to support an all-out deployment. We were lucky that Sadaam gave us six months to prepare for Desert Storm and let us set the time table. We may not be that lucky in the next war.
They only want one airframe.
Perhaps award the bid and set the loser as a major subcontractor?
I meant the airframe itself, sorry I wasn’t as clear as I should have been.
Good article and a reasoned argument by Gen. Handy.
Both airframes have been flying for some time, but the Airbus is newer by a decade.
Both airframes have been flying for some time, but the Airbus is newer by a decade.
We’ve allowed consolidation to the point where Boeing in the only aircraft manufacturer left in the US. We’ve created a monopoly. And Boeing now feels entitled to all US contracts simply because they exist. They have no real competition and in this one instance where there was even a consideration of having another company provide an airframe we have a PR jihad on our hands.
Boeing can lobby their way back into ‘winning’ this contract and, like Microsoft, we will end up with inferior technology in a number of aspects and we’ve be forced to pretend that their square plane will fit into our round hole.
McDonnell-Douglas (sp) might consider either buying or creating a stronger partnership with the Canadian Bombardier to start building military aircraft. Without the airframe component, they are going to be cut out of everything going forward and their talent will be forced to jump ship and go work for Airbus.
I will be a subcontractor to either Boeing or Northrop-Grumman/Airbus, so I will win either way. There were some unusual tactics used in this bid procedure, mainly the Air Force changed rules in the middle of the game. The GAO was forceful in their language because the playing field should always be level. In no event should a foreign entity (Airbus) be given an advantage over a domestic one (Boeing).
I'm sure the personnel at Northrop Grumman will be surprised to hear that!
And Lockheed-Martin will also be surprised that they no longer exist!
McDonnell-Douglas is owned by Boeing.
Uh, McDonnell-Douglas hasn’t existed as a separate entity in over a decade. The company merged with Boeing in 1997.
Your poor knowledge of the aerospace industry weakens the impact of your arguments.
MD merged with Boeing years ago. Where have you been hiding?
this is weird. most people here in europe would freak out if the governments spends their tax money to buy from a forreign manufacturer when we have a domestic one who can do the job. is this for what you are paying taxes? so they can give away your money to a forreign country and your own people will lose their jobs because of that. crazy and criminal.
So for you its anyone but Boeing right? You have a hard-on for Harry Stoncipher and Mike Sears who sold out 30,000 plus domestic and overseas Boeing employee's? Harry's retiresd and Mikes in Jail with Druyan for ethics violations.
Yes I beleive Boeing deserves to win vs. Airbus every time because we DO have a quality product regardless of our managements past ethical lapses.
That would be a fitting capstone to all the other boneheaded things AF has done in this fiasco.
Spending start up costs on two aircraft in order to buy half as many of each would be the absolutely least cost effective stunt they could pull...after already wasting millions on multiple procurement pratfalls over the past decade or so.
(Which, of course, means you may have nailed it)
Lockheed builds the Raptor and MacDac is now a wholly owned nonentity within Boeing.
(NOTE, to other posts:
Boeing is a subcontractor on the F22.
Assigning subcontracts to the loser in this case would not work, both AC have established supplier chains in being today. I have seen the losing bidder employed as 'project integrator' under NASA and DOE contracts - it works miserably when at all and, all things considered, there's no love lost between these players.)
Is they why the Brits fly the Apache and Chinook helicopters, even locally-assembled versions?
Or, whey the RN and RAF are signed on with the F-35 program (although they’re partners and have some manufacturing orles)?
Big ticket projects are simply too big to bid locally only.
I've been on the fence about this, leaning towards the EADs product. I worked with Gen Handy and I can confidently say that he is an honest man who can't be bought.
<self-imposed exile >
McDonnell Douglas is no more.
Pardon me, General, but you are full of CRAP.
1) The contract was for 179 tankers, no matter who won the competition. That's an equal number of 'booms.'
2) In spite of Boeing hype to the contrary, both the KC-767 and the KC-30 take up approximately the same ramp space, and unless the KC-30 is fully loaded (with more fuel than the KC-767 can carry) both have approximately the same ramp loading.
3) A KC-30 uses two CFM-6 turbofan engines. On the other hand, the KC-767 uses...wait for it...Two CFM-6 turbofan engines (with slightly higher thrust rating.) So much for jet blast reorganizing your entire ramp.
It’s not weird. You use competitive tender to get the best plane for the job at the best price. The bulk of the planes would be built on American soil regardless.
Boeing lost, so they went crying to their bought-and-paid minions in Congress. Apparently a whiney sense of entitlement is ok as long as it’s Boeing.
As far as tender processes go this has been a grade-A CF.
Thanks for the PING Jaz. We’ll see how all this plays out and how hard McQueeg will fight to keep the tanker contract with EADS.
It does not exist and as usual its 2-3 years behind on the Italian and Japanese Tankers that are based on the same model that Boeing is claming to be the only way to go.
And I believe the KC-767AT uses the PW4062 which is in the same class as the CF-6
Actually it's the other way around.
The Boeing bid is a concept aircraft 
The Northrop Grumman/EADS SSD-1 and SSD-2 are flying 
(Production version will need a cargo floor, but as the A-330 uses the same tube as the A-300 - which had a freighter variant - that shouldn't be a problem
At first I thought Boeing’s protest was just normal contractor whine. However, after reading the specifics it appears as though the USAF really did screw with the awarding process.
It is as if Chevy and Ford were invited to submit proposals to supply a new 3/4 ton pick-up truck. Chevy submits their 3500 and Ford submits their F-150. Ford then asks repeatedly about the criteria to ensure that the buyer does not want to see their F-250, F-350, or even F-450. They are assured that extra capacity will not be a factor in the award. Then when the award is made to Chevy, excess capacity is listed as one of the winning elements.
You've got it backwards.
There are multiple 767 variants with max T/O weights running from 395k to 412k pounds
The 787 covers 364k-540k max T/O.
The 777 starts at 545k max T/O.
The 747 start in that area and run up to 912k max T/O.
Boeing could have tendered many options had they been told that increased size was desirable over operating costs.
It wasn't. The desirable was "meets requirements, right price, soonest". Boeing's only option was 767, Northrop-Grumman/Eads had more aircraft for the price.
Where do you get that? Certainly not from Boeing, or the available data. The 767 variant put forward was the only one put forward because it most closely matched the USAF requirements as stated. Certainly more closely than the EADS entry did.
For the USAF to post-facto state that larger size at the expense of greater operating costs was desirable is a rewrite of the original specifications.
There is absolutely no reason that Boeing could not have entered the multiple variants of the 767, 777, and 787 had they been told that a larger tanker was desirable, or that the USAF would deviate from the criteria specified. Of course the 787 would have had increased costs to make the schedule, but that is part of the process, and the USAF ultimately appeared content to pay a higher price.
I think I misread that the first time.
If increased size wasn't a desirable, then the USAF shouldn't have listed it as a major reason for the selection.
As for price, Boeing and the GAO have both demonstrated without contest from EADS or the USAF that the 767 was the far more affordable option.
Other than the KC-767AT, none of your other variants would have met the KC-X delivery requirements. The 787 is a joke, right? There is no production slots open before 2012 at the earliest, and there is no proven way to cut open a composite fuselage to attach a refueling boom.
The 777 may have been viable, but there too there are not enough open production slots on a maxed out line.
Also, the KC-30 was too big, then the 777 and 747 would have been WAY too big. A KC-747-8F would have been an interesting option for the KC-Z replacement of the KC-10, but clearly not for the KC-X or KC-Y which are to replace the KC-135.
If the Air Force wanted something smaller, NG/EADS could have bid the KC-310 MRTT that Canada and Germany flies, and is the testbed for the KC-30 boom. The KC-310 is a closer match in footprint to the KC-135 than the KC-767AT.
The winner is the entry that most perfectly meets all of the requirements. Had the 787 been perfect in every other way and clearly superior, they would have spent more money to ramp up production and they would have waited. Not exactly an unheard of practice in military procurement. You may notice that the F-35 still hasn't been introduced.
The 777 may have been viable, but there too there are not enough open production slots on a maxed out line.
Boeing has the ability to ramp up another line, and that would have been factored into the price, and yes that may have made it too expensive, but then again, it may not have if production was adequate to keep that line efficient.
Also, the KC-30 was too big, then the 777 and 747 would have been WAY too big. A KC-747-8F would have been an interesting option for the KC-Z replacement of the KC-10, but clearly not for the KC-X or KC-Y which are to replace the KC-135.
The point is that if the USAF is going to post-facto state that larger size is desirable, then they should have stated so up front, especially when they were pressed on it by Boeing multiple times. Boeing, unlike EADS, is in the money making business and sought to target the requirements as precisely as possible with one single entry. However, that is impossible if the criteria stated upfront is not the criteria used in the final selection.
If the Air Force wanted something smaller, NG/EADS could have bid the KC-310 MRTT that Canada and Germany flies, and is the testbed for the KC-30 boom. The KC-310 is a closer match in footprint to the KC-135 than the KC-767AT.
The KC-767 is a much closer match to the USAF tanker replacement criteria. That is all that should matter.
Handy may be honest, but his arguments aren’t very convincing.
Ramp blast? Yest...everyone can damage structures by running up the power while on the ramp, but why do so? Mx is usually done in a different area.
The NG aircraft can takeoff in the same distance, and is capable of operating at the same ramp loading - so why are they limited in the bases they can deploy to?
And survivability? That’s what systems like LAIRCM are for - and they can be put on any aircraft.
Sorry, you lost all credibility there. Try looking into the state of the 787 program, how far behind they are with first flight, and how they just announced a much slower ramp-up to full production, which is going to cost Boeing billions in penalty payments. If there were any way for Boeing to ramp up production of the 787 faster, they already have more incentive than a lousy tanker contract.
Boeing offered the only aircraft that they had production capacity for.
As for the superior Tanker, the KC-767AT carried 202,000lbs of fuel, the KC-30 carried 220,000. Yes the KC-30 carries more fuel, but it's not exactly the same league as the KC-10 which carries over 350,000lbs.
Let's not get carried away with spin and hyperbola.
There were at least 3 choices just in the 767 family. The fuselage could have been a -200, -300 or -400. Three different lengths. So in this analogy F-150 short box, F-150 long box or F-150 crew cab. That is part of the problem in rating your tanker on its cargo carrying capacity. They are really different duties. The densities are way different. So to carry the most fuel efficiently you want the smaller fuse. To carry cargo, which is bulkier than fuel, you want a larger volume.
If cargo was this important to the AF why didn't they give a number value for the requirement? Or a relative value?
Both carry plenty. How many packing peanuts does your F-150 carry - plenty, how much does your F-450 carry - plenty.
But to run a V-10 all the time when you don't need it costs you every time you fire it up. That is wasteful.
The KC-30 can takeoff from a 7,000’ runway at it's MTOW. Why? Because of those longer wings that everyone is having a cow about.
The logical move for Boeing was to have based their bid on the 767-300F which was already a freighter, But they didn't. Instead they offered the KC-767AT by piecing together a -200 fuselage with a -300 cargo door and wings, -400 flaps and cockpit.
Why didn't Boeing offer a tanker based on the -300F? Because they felt they had the contract in the bag, as did most observers. But the KC-30 came in at close to the same cost and offered more.
More expensive, more fuel, more MILCON.
Also Boeing could have offered the -400ER wings if they didn't think wingspan would be an issue.
The point is the RFP spelled out a rating system. The GAO report finds that the AF did not score the bids per the method they set up.
They gave NG more credit for less important features and discounted Boeing's meeting more of the higher rated features. That is no way to run a “fair and open” competition.
As this article points out survivability is an important issue to guys who actually fly these birds. Boeing's bid was rated as superior in survivability and they were given little credit for it.
No, pardon me, Yo-Yo, but you’re full of CRAP.
1) The contract was for 179 tankers, no matter who won the competition. That’s an equal number of ‘booms.’
The metric is booms in the air in the proximity of the fight. The closer those booms are to the fight, the better—if I can base more aircraft closer to the engagement, I have more options than having to fly those aircraft from hundreds of miles further away (and I burn less gas doing so). This is a prime of example of those who no nothing about the warfighter’s mission attempting to tell the warfighter how to fight. Do you believe you know more than a previous commander of Air Mobility Command?
2) In spite of Boeing hype to the contrary, both the KC-767 and the KC-30 take up approximately the same ramp space, and unless the KC-30 is fully loaded (with more fuel than the KC-767 can carry) both have approximately the same ramp loading.
You clearly have no understanding of common dimensional units, such as length and wingspan expressed in units such as feet. Go look up the numbers and do the math. While you’re at it, look up load bearing capabilities. If two aircraft have the same number of landing gear, then, if one is heavier, it must have a higher ACN (go ahead, look up ACNs/ALRs/PLRs/PCNs).
3) A KC-30 uses two CFM-6 turbofan engines. On the other hand, the KC-767 uses...wait for it...Two CFM-6 turbofan engines (with slightly higher thrust rating.) So much for jet blast reorganizing your entire ramp.
Hello? Larger, heavier aircraft require MORE thrust to taxi. You obviously have no understanding of physics.
2) In spite of Boeing hype to the contrary, both the KC-767 and the KC-30 take up approximately the same ramp space, and unless the KC-30 is fully loaded (with more fuel than the KC-767 can carry) both have approximately the same ramp loading.
Correction The KC-30 takes up more space leaving less room on the ramp due to the 50 foot spacing between wing tips. Also of the proposed bases that are to get the KC-x None of the current Hangars will work with the KC-30 The KC-767 will fit in current parks spots and in the hangars.
Lets not forget that EADS/NG tried to also pull a fast one with this so called tanker. 1, It cannot perform emergency breakaway procedure in accordance with current tanker operations a big NO NO. and 2 no 2 year depo support.
Wrong. There is no way to ramp it up further inside of their business model for profitability. The tanker deal would have the prospect of changing that model. Boeing often allows demand to far outstrip supply because they know that the airline business is cyclic, which means those expensive lines can quickly close and used aircraft sitting in the desert work against selling new aircraft.
Now I seriously doubt that the 787 would be possible as a factor of price, but that isn't the point. The point is that if the USAF wanted something in the 787 capability range, then they should have stated so, and then turned it down due to price if that was the case.
My fundamental argument is that the USAF set a requirement that was best met by the 767, and then they stated different criteria for picking the EADS entry. This is not how government awards should work.
Boeing offered the only aircraft that they had production capacity for.
Again, capacity is not capped, it is a matter of price. Boeing offered the aircraft that most closely met the government criteria. Why would they offer another? Given that the EADS life-cycle costs were far greater than the 767, Boeing appears to have had a great deal of room to increase costs (capacity) and still come in under EADS.
As for the superior Tanker, the KC-767AT carried 202,000lbs of fuel, the KC-30 carried 220,000. Yes the KC-30 carries more fuel, but it's not exactly the same league as the KC-10 which carries over 350,000lbs.
Indeed, even the post-facto justification of increased capability does not appear to support the much higher price. A GAO finding as well.
Let's not get carried away with spin and hyperbola.
Right. The EADS is a larger airframe with much higher life cycle costs, delivers very little additional capability, and was awarded the contract on faulty calculations and partly on criteria that fell outside of the desired specifications.
Boeing has world class professional teams that determine what is doable and for how much. They certainly deserved the chance to have those teams examine 777 and 787 submissions, if that is indeed what the USAF wanted. You simply don't know what the tipping point would be to justify opening a new line, they would.
The metric is booms in the air in the proximity of the fight. The closer those booms are to the fight, the better—if I can base more aircraft closer to the engagement, I have more options than having to fly those aircraft from hundreds of miles further away (and I burn less gas doing so). This is a prime of example of those who no nothing about the warfighter’s mission attempting to tell the warfighter how to fight. Do you believe you know more than a previous commander of Air Mobility Command?
Question: The SRD specified operations out of a 7,000' runway. Given a 6,000' runway, how much fuel can a KC-767 take off with? A KC-30? If you actually look up the answer, you may not like it.
Another question: At the end of 20 years, when the last of the 179 tankers under the KC-X contract is delivered, how many KC-135 aircraft are projected to remain in the USAF fleet? If you bother to look up that answer, you will not like it either.
A third question: Where in the world are all of these air bases with limited ramp space, limited tarmac strength, yet are equipped with vast fuel storage system to sustain ongoing tanker operations? If you look up that answer, you may be surprised. In any case, if such a facility exists, question number two above answers your objection. In the meantime, for 99% of the cases where precious ramp space is not an issue, we would have 179 tankers that have 25% more fuel to offload, and be able to stay on station NEARER TO THE FIGHT LONGER to refuel Air Force, Navy, and allied aircraft.
You clearly have no understanding of common dimensional units, such as length and wingspan expressed in units such as feet. Go look up the numbers and do the math. While you’re at it, look up load bearing capabilities. If two aircraft have the same number of landing gear, then, if one is heavier, it must have a higher ACN (go ahead, look up ACNs/ALRs/PLRs/PCNs).
Pardon, me, but I do believe that you need to take aircraft loading into account when calculating ACN, do you not? Therefore, if you find yourself with a KC-30 in one of these magical places that can handle a KC-767 at MTOW, you can load the KC-30 WITH THE SAME AMOUNT OF FUEL AS THE KC-767 and operate out of the same field.
ACN at maximum loads, rigid subgrade category A:
B767-300: 46.8
A330-200: 52.2
Source: https://transportation.wes.army.mil/acnpcn/Default.aspx
Hello? Larger, heavier aircraft require MORE thrust to taxi. You obviously have no understanding of physics.
OK, Professor, let's do some math: Empty weight of a 767-200 is approximately 80t. Empty weight of the A330-200 is approximately 119t. That's a 32.7% difference in weight. Are you seriously telling me that 30% more thrust AT TAXI will make that much difference in jet blast on the tarmac? If so, then how do we ever operate those big, nasty C-17s?
Look, I hate the French as much as you do. I was even for the KC-767 until after the award was announced, and I really started to look at the capability differences between the two, and how small the differece in MPLC costs were.
The KC-767 will handle 19 pallets, the KC-30 will handle 32 pallets. The KC-767 can carry up to 190 passengers. The KC-30 can carry up to 226. The KC-767 can carry 97 medevac litters. The KC-30 can carry up to 120 medevac litters. The KC-767 carries 202,000lbs of fuel. The KC-30 carries 245,000lbs.
Just to dispel all these "too big" excuses, let me point out that the KC-10 carries 356,000 lbs of fuel. So yeah, the KC-30's wingspan may be close to the KC-10's, but that allows the KC-30 to take off from a 6,000' runway with 200,000 lbs of fuel, where the KC-767 needs 7,000' with the same fuel load. The max fuel load of the KC-10 is 30% more than the KC-30, 43% more than the KC-767, and 44% more than the KC-135.
Also don't forget that both the KC-767 and KC-30 will be able to refuel both Air Force (boom and recepticle) and Navy/Marine/Allied (hose and drogue) aircraft in the same mission, something that only a handful of KC-135s and the small fleet of KC-10s can do. That will increase the demand on the tankers, so the longer they can stay on station the more fuel they can offload, and the fewer tankers are required to fulfill the mission.
If we have a fleet of KC-135s, KC-30s, and KC-10s, we will have a nice mixture of three sizes to choose the right tanker/transport for the specific mission.
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When you finish with your homework, then you can lecture me on business models and how Boeing is intentionally limiting full production ramp-up on the highest demand airliner in the world, just so they can pay anywhere from $500 million to $2 billion in penalty payments to their customers.
Intentionally deciding not to spend the additional money to ramp up production was taken some time ago and was set based on predicted demand (not including tankers). It may or may not have had a price tag greater than the penalties they are now looking at, but that is irrelevant. What is relevant is whether a company can build airplanes faster by spending more money. They unquestionably can.
As I said before, Boeing much prefers to lag demand, but that doesn't mean that increasing their capacity is beyond their control.
Hypothetical to make the point: Had the air force stated at the very beginning of this entire process (which was long before the current bid was put out) that the new tanker would need to fall within the proposed 787 capabilities and that they would be purchasing 3000 tankers, there would be two lines putting out 787s today.
For any business the rate of production is a factor of sales. A home builder that has a dozen orders for the year will equip and employ to build a house a month, even if he could sell them all today, and even if some penalties must be paid. To extrapolate that production rate to say that it is therefore impossible for that builder to ever deliver on an order for 50 houses per year is flawed. The builder may choose not to surge operations and fixed costs if they are not greater than the captured profit, but profit is ultimately driven by the buyer's willingness to pay. The same is true of building airplanes.
If ramping up 787 production cost $2 billion, possible delay costs were projected at $1 billion, and building tankers were projected to produce $2 billion in profits, then Boeing would have had a $1 billion incentive to open another production line for 787s without adding any additional costs to the 787s.
OK, lecture complete.
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