Week in review (8/30 to 9/5)

As if the contest between Boeing and EADS over the Air Force tanker contract isn’t complicated and politicized enough, a ruling late in the week by the World Trade Organization has made it even more so.

The WTO issued a lengthy ruling that backed a U.S. complaint, filed in 2004, that EADS-owned Airbus received illegal European government subsidies, giving the company an unfair advantage over U.S.-based Boeing. Still pending is a European Union complaint alleging illegal government subsidies have been given to Boeing through Washington state tax breaks and non-repayable federal military and space contracts.

But the fact that this is only the first round of the subsidies debate hasn’t stopped the ruling from making its way into the tanker debate. Boeing backers, who want the tankers built in Washington state, say the Pentagon needs to consider the ruling when it awards the $40 billion contract. The other side, who want the Northrop Grumman/EADS team to assemble the planes in Mobile, Ala., say the only factor should be the best tanker.

Whether it’s officially considered or not, the WTO issue will be a factor. The Pentagon certainly understands it will take years before this subsidies debate plays out, and trying to figure out the ultimate outcome based on the first round is risky. There’s a 50/50 chance of getting it wrong. Even before the WTO ruling, it was clear that no matter which company wins, the other would protest. The ruling by the WTO will give the losing side even more ammunition for a protest.

This whole issue of subsidies is a battle that should have been avoided in the first place. Government money has subsidized portions of the private sector for years, and will continue to do so. It varies only in degrees and types. Local governments have provided tax breaks and state governments have built infrastructure to benefit companies for years, and will continue to do so. Competitors don’t complain because it may be their company that benefits from the next government largess.

And the trend lately has been even more help from tax dollars. Look at the billions Washington has spent to shore up banks, insurance companies and automakers. It’s amazing that any government can point an accusatory finger at another with a straight face. The whole issue of government subsidies and will get even more sticky when China’s aerospace industry one day begins competing for contracts.

The Air Force has already waited too long to replace the aging fleet of tankers, and it simply should not make a decision that will guarantee protests and further delays. The only smart approach is a split the buy. Everyone wins, including American and European taxpayers who have poured money into Boeing and Airbus. And the most important taxpayer that will benefit will be the American warfighter. They need a break more than anyone else.


Space
The independent Augustine Commission will release its report on the future of U.S. manned spaceflight in mid-September. The panel had planned to release its report last week, but that was delayed. The 10-member panel did plan to send a draft of its executive summary to NASA and the White House. Even though it has not been officially released, the key finding has been that NASA does not have the funding needed to return astronauts to the moon and beyond.

- Despite the uncertainty over the future, NASA has taken another step toward building the next crew exploration vehicle. It completed the Orion Project's preliminary design review. Orion is designed to carry astronauts to the International Space Station and other destinations as part of the Constellation Program.

The preliminary design review is one of a series of checkpoints that occurs in the design life cycle before hardware manufacturing can begin. Michoud Assembly Facility in New Orleans and Stennis Space Center, Miss., are both involved in the Constellation Program.


F-35
Defense Secretary Robert Gates visited the Lockheed Martin F-35 factory in Fort Worth, Texas, during the week and said the importance of the aircraft can’t be overstated. He held up the Joint Strike Fighter as an example of new, innovative and more cost-effective ways to meet the country's current and future defense needs.

The Joint Strike Fighter is being developed to meet the needs of three services. The $300 billion program is a partnership of the U.S. and allied nations. Gates said he’s particularly excited that the F-35 appears to be on schedule to equip the first training squadron at Eglin Air Force Base, Fla., by 2011.


Unmanned systems
Northrop Grumman is developing a common autonomous airborne sense-and-avoid system for both the Air Force and Navy Global Hawks. The services were pursuing separate solutions for operating the aircraft in national airspace, but the Navy announced its intention to award Northrop a sole-source contract to develop a common system. Global Hawks are built in part in Moss Point, Miss.


Airports
Three Panhandle cities, Pensacola, Fort Walton Beach and Panama City, are competing to land low-cost, Dallas-based Southwest Airlines. Panama City hopes to get the service at a new airport it plans to open in 2010, while Fort Walton Beach would like to have Southwest to make up for losing AirTran to Pensacola nine years ago. For Pensacola, landing the carrier would coincide with a $78 million expansion.


Contracts
Three defense contracts of interest to the Gulf Coast were awarded during the week. In all three cases the Air Armament Center at Eglin Air Force Base, Fla., is the contracting activity. InDyne Inc. of Reston, Va., was awarded a $168 million contract for Eglin Test and Training Complex Range operation and maintenance. … Tybrin Corp. of Fort Walton Beach, Fla., was awarded a $37.4 million contract for software engineering support of guided weapons systems evaluations, simulations, and other services supporting research and development for the principals and customers of the Air Armament Center. … Lockheed Martin Corp., Lockheed Martin Aeronautics Co. of Fort Worth, Texas, was awarded a $7.2 million contract to provide for software and hardware updates for the F-16 avionics test station located at the 46TH Test Squadron's Data Links Test Facility at Eglin Air Force Base, Fla.