Modified 767 offered as tanker candidate

Boeing Co. announced Monday that it would propose a redesigned version of the 767 jetliner as its entry in the bidding for a $40-billion contract to supply the Air Force with new aerial refueling tankers.

The aerospace giant said it had tweaked the design of its 767 long-range freighter to improve fuel-efficiency and allow it to take off and land on shorter runways.

Chicago-based Boeing is competing against Century City-based Northrop Grumman Corp., which is expected to offer a derivative of the Airbus A330 airliner at a discounted price. Boeing’s entry, designated the KC-767, and the Northrop Grumman-Airbus tanker, the KC-30, are twin-engine jets.

At stake is a multiyear contract to replace a portion of the Air Force’s KC-135 Stratotanker fleet. The newest KC-135 was delivered to the Air Force in 1965.

The contract is the first installment of an expected three-phase deal that calls for the purchase of more than 500 tankers. The deal ultimately could be worth $100 billion.

The Boeing-led team includes Smiths Aerospace, a unit of Smiths Group; Rockwell Collins Inc.; Vought Aircraft Industries Inc.; Honeywell Inc.; and Spirit AeroSystems Inc.

Boeing said it would build the aircraft in Everett, Wash., with additional work to be completed in Wichita, Kan.

“This KC-767 advanced tanker will support more than 44,000 American jobs and 300 suppliers,” said Mark McGraw, a vice president of Boeing’s tanker division.

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 company executive and a former high-ranking Air Force official.

The 767 has a listed retail price of about $130 million. Industry insiders expect Northrop Grumman, which is partnering with European Aeronautic Defense & Space Co., parent company of Boeing rival Airbus, to discount its KC-30 candidate to increase its competitiveness. The current retail listing of the A330 is about $160 million.

Last week, after much speculation that Northrop would bow out of the competition, the company said it would bid on the contract. Northrop executives said changes made by the Air Force addressed concerns it had that the contract specifications would unfairly favor Boeing.

Shares of Boeing fell 80 cents to $89.20 and Northrop rose 40 cents to $74.40.