Airbus-Boeing tanker battle looming?

Eight years after the battle to build aerial tankers for the Air Force, Airbus and
Lockheed are teaming up to win any contracts for additional U.S. tankers...


David Tortorano
December 2018

In an opening salvo of a future aerial tanker battle, Europe's Airbus is teaming with U.
S.-based Lockheed Martin to develop tankers to meet the military's growing demand.

The early December announcement of the memorandum of agreement between the
two aerospace giants comes eight years after Airbus lost an Air Force tanker battle
to rival Boeing. In that battle, Airbus teamed with Northrop Grumman and in 2008 won
the $35 billion contract to build tankers in Mobile, Ala.

But after a protest by Boeing, Northrop Grumman dropped out and Airbus opted to
go it alone. The Chicago-based Boeing in 2011 won a $49 billion contract to build
179 of its 767-based tankers, called the KC-46A. It has missed deadlines and has
piled up $3 billion in costs, according to Reuters.

Although Airbus lost the tanker competition, it built a plant in Mobile anyway to
assemble the popular A320 series of jetliners. The 100th jetliner built in Mobile was
delivered in December. Mobile will also be getting a second assembly line to build
A220 passenger jets as a result of a joint project between Airbus and Canada’s
Bombardier. The second assembly line will deliver its first aircraft in 2020.

Now Airbus will work with Lockheed Martin, the largest U.S. defense contractor, to go
after the next possible aircraft and refueling service orders from the U.S. military. The
U.S. Air Force, which wants to ultimately replace its entire fleet of over 400 tankers, is
examining ways to meet growing demand for aerial refueling with possible fee-for-
service arrangements, purchases of hundreds of additional aircraft, and the future
development of a stealthy tanker.

Senior executives from Airbus and Lockheed agreed to jointly explore all those
opportunities. Airbus has had success selling its A330-based Multi Role Tanker
Transport (MRTT), which has been selected by 12 countries.

The aircraft is already refueling or capable of refueling most major U.S. combat
airplanes, including the stealthy F-35 fighter jet. Lockheed builds, among other
things, the F-35 and the C-130 transport plane that can also be used as a tanker.

“By combining the innovation and expertise of Airbus and Lockheed Martin, we will be
well-positioned to provide the United States Air Force with the advanced refueling
solutions needed to meet 21st century security challenges,” said Lockheed Martin
Chief Executive Marillyn Hewson.

The Airbus-Lockheed agreement opens the intriguing possibility that Mobile could be
the site to build A330 MRTT aircraft. Key officials from Airbus have said for a long
time that Mobile is the company’s primary industrial home, and that it has room to
grow.

Airbus has not ruled out producing tankers in Mobile if it can secure Pentagon
business, according to the Wall Street Journal.

Although it’s already building A320 jetliners and will eventually build A220 jets - up to
10 total every month - there appears to be no issue of space.

During the Southeast Aerospace and Defense Conference in Mobile in June, Chris
Curry, executive director of the Mobile Airport Authority, said the plan to move
commercial airline traffic to the 1,200-acre downtown airport will not hinder industrial
tenants, like Airbus. He said tenants were consulted during the study to ensure any
move would not jeopardize their operations.

Asked what kind of space Brookley has for future companies, Curry said it has as
much space as needed and hinted it could acquire more if needed.

The heavy activity is also apparently not an issue to Airbus. During November’s
Aerospace Alliance Summit, an Airbus official pointed out that the airport in France’s
Toulouse is far busier and it poses no problems for building aircraft.

Growth curve
Paul Gaskell, who is heading up the Airbus A220 final assembly line project in Mobile,
said during the November summit that the expected growth of the A320 production
rate combined with the new assembly line for the A220 will double the size of the
Airbus footprint at the Mobile Aeroplex over the next few years.

Airbus in Mobile delivered its 100th A320 jetliner Dec. 11, an A320neo to Frontier
Airlines. The Mobile plant will build its first extended range A321 next year, Gaskell
said.

Right now they are finalizing construction plans for the A220 assembly line. Like the
A320 assembly line, major sections will be brought to Mobile from a variety of
locations, including Belfast, Montreal and Italy. Gaskell said that with the A320
assembly line it took three years from project launch to start of assembly. For the
A220, it will be 13 months. He called it a “copy and paste” of what’s done in Mirabel,
Canada, where A220s are now built.

Airbus has committed to going to an annual rate 60 A320s by mid-2019, up from the
current 48.

“Getting to rate 60 is an extremely difficult task, especially in Europe,” said Gaskell.
“But here, we have room to grow, and therefore, I can’t announce anything, but we
will definitely grow in Alabama.” His comment is particularly intriguing in light of the
Airbus-Lockheed agreement.

The company began its military operation in Mobile in 2005, and followed that with
the engineering center in 2007. That was followed by the A320 assembly line, which
delivered its first jetliner in 2016, “and today, we’re producing four aircraft a month,
and we're actually increasing slightly above that at the moment and we're hoping to
even go above that.”

Airbus is feeling right at home here.

“We have an excellent relationship with Alabama and the rest of the Gulf Coast, and
we're extremely proud of that,” he said.

“So what comes next as we go into 2019 and beyond? It could be summed in three
simple words: growth, growth, and growth. That's what we're doing,” he said.

“In terms of what we’re looking at over the next few years, we’re probably looking at
doubling the size of the plant both in physical space but also employees, adding
another 400 to 600 people over the next two to three years,” he said. “So that’s a
huge economic growth for the community.” It will also create opportunities in the
supply chain.

For the A220 assembly line, Gaskell said the intention is to be at rate four before
2023.

“The only way we can achieve those tight timelines is, we’re building in a temporary
footprint. The main final assembly line is a complicated building it takes quite a while
to build, so we will start building, we literally are going to start our first section right
next to the first section of the A320 so we put it right in the existing hangar. At some
point put we have to pick all that tooling up and put it in the main assembly line when
it's ready,” Gaskell said.

“Our intent on the site is to try to have as many synergies between the 320 and 220
as possible.” he said.

He noted the amazing story of Mobile’s growth as an aerospace center. Today it is
ranked sixth in the world and three in North America.

“Where will we be in another three, four years? If everything comes to fruition on the
320 and 220 program then there’s absolutely no reason why Mobile shouldn't be
number four in the world and number two in North America,” he said.

Mobile is behind Seattle, Hamburg and Toulouse, but they have been producing
aircraft for more than 100 years, Gaskell said.

“So you’ve jumped up into fourth place in just 10 years … The pace of growth here is
just phenomenal,” he said.

“It’s all about creating a Southeast aerospace cluster,” he said. Having two programs
here and potentially going up to a rate eight and maybe even rate 10 as a production
center, that draws in more suppliers.

Airbus attracted nearly 20 suppliers with a rate of four. The size of those suppliers
varies, from as little as one person to 80. “Imagine what it will be when we have A220
planes as well..”

Gaskell said the move of commercial traffic to the downtown airport not only
represent no problem, but could be a benefit for suppliers flying direct. He said it
could be “fantastic.”

Could subassembly manufacturing eventually come to the Gulf Coast or other areas
of the United States?

“It’s something we’ve looked at several times,” he said, but it’s a difficult decision to
make as Airbus is ramping up. “It's difficult because you can’t just bring the sections.
You need to bring the supply chain with it so it's an enormous investment to do it.”

He can’t say whether it will happen, but said that as other locations reach their
capacity limit and they have to invest somewhere, “then it could be an opportunity
where we look at Mobile and other centers.”
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