Boeing Defeat Points To Problems In Air Force Relationship
Northrop Grumman's stunning defeat of Boeing yesterday in the competition to provide contractor logistics support for the KC-10 tanker suggests that Boeing's relationship with its biggest customer -- the Air Force -- is in bad shape. Over the last two years, the Air Force has selected Northrop over Boeing to provide a next-generation tanker; supported termination of Boeing's C-17 cargo plane; moved to end Boeing's role in modernizing electronics on the C-130 cargo plane; and now awarded a $3.8 billion contract to its rival for maintenance on a plane Boeing built and currently supports. What is going on here?
If Boeing was seeing similarly poor results in its relations with the other services, then company management would have to bear most of the blame. But the Army loves Boeing's helicopters and work on future combat systems, while the Navy praises its performance on fighters and patrol planes. So there is something uniquely impaired about the company's relationship with the Air Force, and Boeing managers need to figure out what that is.
It's not as though Boeing has failed to deliver for the Air Force. Every tanker in its 500-plane aerial refueling fleet was built by Boeing, and the company's performance on contracts supporting the planes has been exemplary. Boeing's C-17 is by far the best long-range airlifter the service has ever owned, and the company has done a good job of supporting that airframe too. But the relationship went awry in a series of procurement scandals at mid-decade, and then melted down during the competition to build the KC-X future tanker. While Northrop skillfully marketed its plane to the service, Boeing managed to alienate the source evaluation panel. When Boeing lost, it launched a successful protest to overturn the award; with $35 billion in business on the table it hardly had a choice, but the protest further deepened resentments on both sides.
So now Boeing's defense unit finds itself once again at odds with its biggest customer, at a time when the outlook for some of its Army and Navy programs is dimming. Combine that with the decision not to build a third missile-defense site in Europe -- which Boeing probably would have led -- and it's pretty obvious why the company needs to get back on track with the Air Force. But the Air Force needs to get back on track with Boeing too, because there just aren't that many companies left that can build the kind of planes it will require in the future. This hasn't been a great decade for either organization, but if they get a divorce the next decade could be worse.