Boeing KC-767 Tanker Cost Advantage Grows as Fuel Prices Soar

    ST. LOUIS, July 16 /EMWNews-FirstCall/ -- As the U.S. military

expresses concern over escalating fuel costs stressing defense budgets,

Boeing (NYSE: BA) reports that the U.S. Air Force could pay as much as $44

billion more in fuel bills over 40 years to operate a fleet of 179 Airbus

A330-200 aerial refueling tankers, compared with a similar number of

tankers based on the Boeing 767-200ER.



    This assessment is based on a Conklin & de Decker Aviation Information

study, funded by Boeing, that calculated the Air Force's cost with oil at

$130 per barrel, $150 per barrel and $200 per barrel(1). Oil prices hit a

record high last week above $147 a barrel, and many analysts expect prices

to continue climbing. Escalating fuel costs are a critical military

concern. As the largest consumer of fuel in the Department of Defense

(DOD), the Air Force, for example, spends an additional $600 million

annually for each $10 increase in the price of a barrel of oil, spending

approximately $6.6 billion on aviation fuel costs in 2006 alone.



    "Boeing's primary focus and objective, as always, is on our customers'

operational needs -- and affordable life cycle cost is a key component to

any aircraft acquisition," said Dave Bowman, vice president and general

manager of Boeing Tanker Programs. "This is even more evident today as our

Air Force customer seeks the most affordable and capable solution."



    Conklin & de Decker, an independent aviation research company, recently

recalculated fuel price costs for the Boeing 767-200ER and the Airbus

A330-200, popular commercial twin-aisle aircraft that are being converted

to military aerial refueling tankers. The larger, heavier A330 is less

fuel-efficient than the 767-200ER and, as a result, consumes 24 percent

more fuel per trip than the 767-200ER. The study also factored in estimated

costs of refining, transportation, storage, handling and fueling the

aircraft.



    The Air Force's Request for Proposals (RFP) called for a highly

capable, medium-sized, low-risk and low-cost refueling tanker to replace

its aging fleet of KC-135 tankers. However, on Feb. 29, the Air Force

selected Northrop Grumman-EADS to build 179 next-generation tankers based

on the A330. The DOD called for a recompetition after the Government

Accountability Office (GAO) urged the Air Force to reexamine 10 of 15

significant issues in Boeing's protest of the contract award. Among the

sustained issues, the GAO concluded that fuel costs needed reevaluation.

The report stated that "even a small increase in the amount of fuel that is

burned per hour by a particular aircraft would have a dramatic impact on

the overall fuel costs." The Air Force is now preparing a new RFP for an

expedited competition.



    For a copy of the Conklin & de Decker fuel study, visit

http://www.globaltanker.com.



    A unit of The Boeing Company, Boeing Integrated Defense Systems is one

of the world's largest space and defense businesses specializing in

innovative and capabilities-driven customer solutions. Headquartered in St.

Louis, Boeing Integrated Defense Systems is a $32.1 billion business with

71,000 employees worldwide.



    (1) International Energy Agency (complete citation)