Brilliant or Stupid?

The United States Air Force needs to replace approximately 500 of its aging KC-135 aerial refuellers with a smaller number of new multi-role tanker/transport aircraft.  It will do so via a series of staggered contracts—KC-X, KC-Y and KC-Z—over a period of 40 years.  The KC-X contract will replace 179 of USAF’s oldest KC-135E Stratotankers; prime contenders are the EADS/Northrop Grumman KC-30 (based on the civilian A330), and the Boeing KC-767 (based on the civilian 767).

The KC-30 is a larger aircraft with greater fuel and payload capacity.  The KC-30 has already been selected by Australia, the United Kingdom, Saudi Arabia, and the United Arab Emirates to fulfil their air refuelling/air mobility needs.  The KC-767 is a smaller but more efficient aircraft—efficiencies such as 24% less fuel burn being derived primarily from its lesser weight.  The KC-767 has been selected for use by the air forces of Italy and Japan.

I had read in several magazines that Boeing had considered and rejected plans to offer a tanker conversion based on its highly-successful 777, which is a closer match to the KC-30’s capabilities.  But I could not unearth the reason why.  This AFA Daily Report offers some explanation:

Less is More?: Countering claims by KC-X rival Northrop Grumman-EADS North America that “bigger is better,” a Boeing official reminded reporters on Friday that USAF tankers rarely fly with a full load of fuel and fly with considerably less than a full load from high-altitude runways on hot days, so fuel capacity isn’t a big discriminator in the competition for a new aerial tanker. Boeing claims that its KC-767 is more fuel-efficient than the much-larger KC-30, if only because it weighs far less. The Boeing official, who asked to remain nameless, also discounted the cargo-hauling aspect of the competition, saying that USAF only flies tankers as cargo planes one percent of the time, and the KC-767 can carry 19 pallets, one more than the C-17. Boeing considered offering a tanker variant of its 777 airliner, but decided there was no competitive payback for the extra size. The official said a KC-777, or something like it, may be a player in the KC-Y competition circa 2020, because USAF will have to replace its larger KC-10s in that procurement. Air Mobility Command made a case earlier this year for ensuring the KC-X can perform in both refueling and cargo-hauling capacities.

Daily Report, Air Force Association, September 17th, 2007.

[emphasis mine]

Let me see if I understand the dynamics correctly.  The USAF says it wants fewer, higher-capacity tankers to replace its 500-strong KC-135 fleet .  EADS/NG respond with the KC-30, a larger bird with great fuel/payload capacity, higher MTOW, etc.  Boeing responds with the KC-767, a slightly larger bird with KC-135-equivalent fuel capacity and a minor increase in cargo capacity.  The KC-30’s greatest strength is capacity and airframe room for future growth.  The KC-767’s greatest strength is its efficiency and reduced fuel costs over the life of the airframe.

If Boeing and EADS were car dealerships, EADS would have sold the customer exactly what they asked for: a pickup truck with increased payload and multi-role capability.

Boeing would have asked the customer a variety of questions about their current car, driving habits, average use, and deduced that the customer was asking for capabilities they would never use.  Boeing tries to sell the customer a fuel-efficient midsized sedan, arguing that the desired capabilities are at massive variance with the customer’s current usage profile.

Does the customer buy Boeing’s interpretation and adjust their expectations?  Or do they get pissed off and go to the guy who sells them what they want, whether or not they are likely to use its full capabilities?

It’ll be interesting to see who ends up winning the KC-X contract.

UPDATE: Now we have an answer.  Boeing’s approach was stupid, after all.

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