Northrop enters race for Air Force deal

WASHINGTON - Northrop Grumman Corp. on Thursday said it will compete against The Boeing Co. for a $40 billion Air Force contract to replace 179 aerial refueling planes, ending speculation there might be just one bidder.

The Los Angeles-based company had hinted as recently as last week it might bow out, saying Air Force specifications seemed to favor Boeing. But on Thursday, Northrop said it was satisfied with changes the Air Force made to address its concerns in the formal request for bids.

Northrop will partner with European Aeronautic Defense and Space Co., the parent company of Boeing's arch rival, Airbus.

Had Northrop declined to compete, the Air Force would likely have faced unwanted scrutiny from Congress, analysts said, and this might have given Air Force officials enough incentive to try to satisfy Northrop's concerns.

The tanker program has been on hold for three years, after Boeing lost the contract amid an ethics scandal that resulted in prison terms for a former senior Boeing official and a former high-ranking Air Force official.

"The Air Force needs a competitor to Boeing in order to get this contract under way," JSA Research Inc. analyst Paul Nisbet said.

But the Air Force also held some leverage over Northrop, Nisbet said. Northrop is vying for an estimated $100 billion contract to upgrade the Air Force's fleet of B-2 Bombers.

"They didn't want in any way to jeopardize their position with the Air Force by backing out and causing a delay in the tanker program," Nisbet said.

Northrop spokesman Randy Belote said "the Air Force has addressed the vast majority of our team's concerns."

Northrop sought language in the contract that would allow for planes with significant cargo space and thereby justify the higher price of its aircraft, compared with Boeing's.

Boeing spokesman Bill Barksdale declined to comment on Northrop's decision, but he said the Chicago-based aerospace company will disclose Monday which of its aircraft it plans to use in the competition.

Defense analyst Loren Thompson of the Lexington Institute said Northrop's decision to pursue the contract might signal the company's willingness to offer its aircraft at a discounted price. Or, he added, executives might be entertaining the outside chance that the Air Force will purchase refueling tankers from both Boeing and Northrop.