Going Once, Going Twice

And the bids are in. On Thursday, the two teams competing to build the next generation of Air Force refueling tankers announced that they have submitted their final bids to the Pentagon.

In dueling press releases, both Boeing (NYSE: BA  ) and Northrop Grumman (NYSE: NOC  ) said that the "KC-X Tanker Program" winner will be announced by the end of this month -- but that's about all they agree on. For bettors on this horse race, here's a quick breakdown of the players, and their self-proclaimed advantages:

Team Northrop
Along with partners that include EADS, General Electric (NYSE: GE  ) , and Honeywell (NYSE: HON  ) , Team Northrop argues that its KC-30 Tanker (a modified Airbus A330) "offers greater capabilities and versatility than any tanker available today ... It also meets all of the Air Force's key requirements and is superior in every respect to the KC-135R it replaces."

Team Boeing
You will doubtless be shocked to learn that Boeing disagrees. Its KC-767 Advanced Tanker (KC-767AT) will "meet or exceed all of the Air Force's mission requirements," burns 24% less fuel than the KC-30, and costs 22% less to maintain. What's more, in a swipe at its rival, Boeing pointed out that because the KC-767AT is a smaller aircraft, "nearly twice as many KC-767s can be based on a parking ramp compared to the competitor's oversized aircraft."

(Replied Northrop: "Did they just call me fat?")

Riding on Boeing's assertions of superiority are the fortunes of partners Rockwell Collins (NYSE: COL  ) , United Technologies' (NYSE: UTX  ) Pratt & Whitney, and Spirit AeroSystems (NYSE: SPR  ) . It's also worth pointing out to anyone looking for a safe bet: Honeywell wiggled its way onto both teams, so is guaranteed a piece of this pie.

Laying odds
Who's most likely to win this dogfight?

My money is on Boeing. I don't entirely buy its argument about cost savings -- Boeing's plane is smaller than Northrop's, so naturally will cost less to fuel and maintain. Thus, a better measure of cost-efficiency would probably compare the KC-30 to the KC-767AT in terms of which is cheaper to operate per unit of fuel delivered to the refuel-ees.

That said, Northrop entered this bidding war at a disadvantage when it buddied up with EADS. We've already seen how the strong euro/weak dollar dichotomy hurts EADS' profits on civilian airliners. And last month, EADS had to pull out of a bidding war for a Nordic fighter jet contract, possibly because it was getting underbid. So, unless Northrop's KC-30 is markedly more fuel-efficient than Boeing's offering under the standard I set, I expect Boeing will win this one on cost.

Believe it or not, the Fool is your source for all things investing and defense (investing). See:

Help us in our goal to give every young person around the globe a financial education!  Learn more about the new direction of Foolanthropy, now in its second decade, here.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 557726, ~/Articles/ArticleHandler.aspx, 10/27/2016 7:19:58 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,169.68 -29.65 -0.16%
S&P 500 2,133.04 -6.39 -0.30%
NASD 5,215.97 -34.29 -0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 4:00 PM
BA $143.31 Down -2.23 -1.53%
Boeing CAPS Rating: ****
NOC $225.35 Down -2.70 -1.18%
Northrop Grumman CAPS Rating: ****
COL $82.15 Up +0.75 +0.92%
Rockwell Collins CAPS Rating: ****
GE $28.63 Down -0.24 -0.83%
General Electric CAPS Rating: ****
HON $108.83 Down -0.60 -0.55%
Honeywell Internat… CAPS Rating: ****
UTX $100.07 Down -0.94 -0.93%
United Technologie… CAPS Rating: ****