Boeing Lease Deal Stalled by Panel

Boeing Co.’s controversial bid to lease 100 jets to the Air Force hit a major snag Thursday as a key Senate committee put off approving the $20-billion contract and raised the possibility of leasing a significantly smaller number of aircraft.

In a surprise move, Sen. John W. Warner (R-Va.), chairman of the Senate Armed Services Committee, asked the Pentagon to consider slashing the number of leased aircraft to 25.

“This thing will suck the life’s blood right out of the Department of the Air Force,” Warner said during a hearing on the deal. “We owe an obligation to the taxpayers to very carefully assess this issue.”

His committee was scheduled to cast the final vote Thursday. Analysts had expected committee members to approve the lease contract.

Under the current plan, Boeing would manufacture 100 of its 767 commercial jetliners, convert them into aerial refueling tankers, then lease them to the Air Force for $16 billion. The Air Force would have the option of purchasing the planes for $4 billion at the expiration of the six-year lease.

The decision to delay the vote came a day after the Pentagon’s internal watchdog agency announced that it would launch an investigation into allegations that Boeing may have illegally obtained proprietary information from European rival Airbus to secure the deal.

Analysts said news of the probe might have contributed to the committee’s reluctance to vote on the matter as scheduled. Three congressional committees already have approved the Boeing tanker deal and analysts widely expected Warner’s committee to join them.

“They don’t want to make a decision in the face of an investigation,” said Paul H. Nisbet, a longtime aerospace analyst for JSA Research Inc. “It seems like a delay tactic until things settle down.”

Sen. John McCain (R-Ariz.) and several taxpayer watchdog groups have decried the Boeing deal and have been pushing Congress to derail the arrangement, arguing that leasing the aircraft would be far more costly than purchasing them outright. Critics contend that the deal amounts to a taxpayers’ bailout of a company ailing from slow aircraft sales.

The Air Force has maintained that the difference between leasing the aircraft and purchasing them outright is a “wash,” but that the service would be able to get the aircraft a lot sooner under a lease deal than by following normal military procurement procedures.

The Air Force needs the new tankers because its current fleet of planes, which on average are 42 years old, soon could be dangerous to operate.

Several taxpayer watchdog groups praised Warner’s proposal.

“Today’s decision shows that public outrage can overcome sleazy deals made behind closed doors,” said Eric Miller, senior defense analyst for the Project on Government Oversight.

McCain said that although he was willing to consider Warner’s proposal, he also would demand a formal analysis of alternatives and an independent look at the aging KC-135 tankers, the mainstay of the tanker fleet. The Air Force has cited corrosion problems as a key reason for seeking the lease.

Boeing executives declined to comment on the proposal to scale back the lease but said the tanker lease program was crafted to meet the Air Force’s “urgent replacement needs at an affordable price to taxpayers.”

Boeing’s stock fell 48 cents to $37.89 Thursday on the New York Stock Exchange.