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. Last Updated: 07/27/2016

Boeing Scandal Offers EADS U.S. Foothold

PARIS -- An ethics scandal that put a key government contract on ice and helped set off a top-level shake-up at Boeing Corp. could aid archrival Airbus and its parent company, the European Aeronautic Defense and Space Company, in their search for a foothold in the U.S. defense market.

A source close to the European group said it was ready to speed up development of key technology for mid-air refueling tankers, after the Pentagon suspended a deal with Boeing for 100 of the planes.

EADS is determined to avoid giving the impression it might seek to benefit from Boeing's current difficulties, which arise in part from allegations that it obtained and used confidential EADS pricing information to win the tanker deal.

A spokesman for the European defense and aerospace giant said there was "no indication" that it might be reconsidered for the suspended contract.

But a source close to EADS and Airbus said the group was ready to bring forward development of a refueling boom to link U.S. military planes with EADS tankers. EADS has already spent 80 million euros ($97 million) on the boom to improve its bid for the next Pentagon tanker contract expected in 2005-2006.

"Should something come up earlier, we would speed that up," said the source, who asked not to be named.

The Pentagon announced it was suspending the multibillion-dollar Boeing contract on Tuesday, a day after the surprise resignation of chairman and chief executive Phil Condit, who said he hoped his departure would help end "controversies and distractions" dogging the company.

A week earlier, Boeing fired chief financial officer Mike Sears and vice president Darleen Druyun, the former military procurement official Sears recruited while she was still working for the government and in a position to influence contract decisions.

Boeing is under investigation by the Pentagon over the tactics it used to win the contract -- despite a cheaper bid from EADS.

"Airbus probably now has a much better chance," said Barbara Beyer of Avmark Inc., which advised the Pentagon on the tanker deal. "They did look very seriously at Airbus, so that whole thing may be opening up again."

Much will depend on the results of the investigation, Beyer said, and the attention it receives from Congress.

The high-level departures at Boeing could further loosen its grip on the market for commercial passenger jets, Beyer added. "With Boeing's upper management in disarray, Airbus has a real opportunity to get in there and make sales -- and with the economy improving now's the time to do it."

Boeing increased its focus on military business in the wake of the Sept. 11, 2001, terror attacks, to lessen its dependence on the volatile market for airliners. Its big new wager in commercial aviation is the fuel-efficient 7E7 Dreamliner, which is planned for 2008 -- two years after Airbus' 555-seater A380 Superjumbo heaves itself aloft from specially modified runways worldwide.

Some industry-watchers are more skeptical about what Airbus might stand to gain from Boeing's latest woes, and whether it might have a second shot at the tanker deal.

Richard Aboulafia of the Teal Group, an aerospace and defense consulting firm, said the original contract decision was "driven partly by a need to satisfy union-voting machinists -- the kind that congregate in Washington state, not Toulouse."

Boeing has laid off more than 40,000 workers, mainly in the states of Washington and Kansas, and the suspended deal holds the promise of creating jobs in both locations.

EADS now has 20 production sites in the United States, and has pledged that much of the work on the proposed tankers would be done by Americans.

"This scandal certainly gives Airbus a foot in the door," Aboulafia said, "but there's still no denying that Boeing is the incumbent."

Pierre-Antony Vastra, an aerospace analyst with French brokerage CDC Ixis, said all eyes were now on the British Defense Ministry -- soon to announce a smaller tanker deal with either Boeing or EADS and their partners.

"There's always the fear Boeing might have used information it obtained on Airbus for the British bid," said Vastra. "The British government will be aware of that."

Success in Britain would put EADS in a stronger position to bid for later U.S. contracts, he added.