Lockheed Martin Exits U.S. Air Force Tanker Competition, Boosting Boeing's Chances

Lockheed Martin Corp has announced its exit from the competition to construct a minimum of 75 refueling tankers for the U.S. Air Force. This move potentially strengthens Boeing's position in the highly scrutinized defense contract worth billions of dollars. In 2018, Airbus had partnered with Lockheed to propose its A330 multi-role tanker transport. 


However, Airbus will now continue in the competition without Lockheed's involvement. Despite Boeing's KC-46 Pegasus having a history of expensive errors with its existing fleet, Lockheed's withdrawal significantly enhanced Boeing's probability of winning the contract. The total order, based on current rates, could be approximately $12 billion, but it is expected to be more. The KC-46 has been affected by several defects, including issues with an onboard video system and a refueling boom that fails to connect with aircraft requiring refueling, costing Boeing $7 billion in losses. 


Following the news about Lockheed, Boeing's shares increased by 1.7%. If Airbus wins, it will secure its first aircraft contract with the U.S. Air Force after trying to break into the U.S. defense market for 20 years. This is the second time Airbus has been left by a U.S. collaborator. Previously, Airbus had joined forces with Northrop Grumman Corp to secure a $35 billion contract in 2008 to construct MRTT tankers for the U.S. Air Force, but this was thwarted when a protest by Boeing paved the way for the KC-46. The Air Force initiated a competition in 2022 to replace hundreds of KC-135 tankers from the Eisenhower era with up to 160 jets in addition to the 179 KC-46 Pegasus planes that Boeing has started constructing. However, this number was later reduced to 75. 

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Lockheed stated it would redirect its tanker team and resources towards other projects including "aerial refueling solutions in support of the U.S. Air Force's Next-Generation Air-Refueling System (NGAS) initiative." NGAS is the final phase of the current tanker replacement program and is anticipated to be announced and completed in the 2030s. Lockheed's sudden withdrawal from the bid, known as LMXT, caught some Capitol Hill aides off guard. Lockheed had invested heavily in advocating for LMXT, which would have been manufactured in Alabama and Georgia, to ensure that Boeing's plane was not guaranteed to win the second phase of procurement. In 2011, Boeing secured the first phase of procurement to replace the Air Force's outdated tanker fleet with a contract for 179 KC-46s.

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