David versus Goliath. Frazier versus Ali. Tom versus Jerry. The annals of history are full of contests between giants of their genre, but few contests have lasted quite as long as the dogfight between Boeing
By my count, we're up to at least Round 4 or 5 in this title fight -- but I admit, I could have missed a few rounds, and maybe dozed off as the contest (now entering its seventh year of negotiations) dragged on. So here on Feb. 11, 2011, let's just call it "Round 11." Because whatever the number, it's looking like the judges are tuckered out enough to finally make a decision -- and make it stick.
Yes, Fools, the day has come. The bids are in. In a few short weeks, we'll know who wins. This week, EADS and Boeing submitted their final offers to build KC-X. Whichever paperwork volley finds its mark should yield $50 billion for the winner, and the right to build flying gas stations for American fighter jets for decades to come.
Team Boeing members Spirit AeroSystems
Neither team should have long to wait, however, as the Air Force has promised to announce a winner "early" this year. Assuming that means end-of-Q1, a decision could be mere weeks away. But when it arrives, which team will be smiling?
As recently as December, Boeing's prospects looked bleak. Leaked documents showed the Pentagon leaning toward EADS's plane as trumping Boeing's on "mission effectiveness." And we already knew the generals preferred EADS's larger, A330-derived design, believing it offers fuel savings over Boeing's smaller 767-based offering.
Regardless, I clambered out on a limb last year to argue that whatever the merits of EADS's plane, the contest would ultimately come down to a series of political decisions -- do we really want to hitch U.S. fighter jets to a foreign-built gas pump? Do American legislators have the backbone to choose a cheaper, better plane (assuming that's what the A330 is) over providing jobs to local constituents?
Personally, I have my doubts on both fronts. Now, add the latest fear factor of wide-ranging Pentagon budget cuts that imperil U.S defense contractor revenues ... and I still think Boeing comes out of this a winner.
Spirit AeroSystems Holdings is a Motley Fool Hidden Gems recommendation. The Fool owns shares of Northrop Grumman.
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