While Israel Aerospace Industries (IAI) aspires to be the vendor in one of Israel's biggest defense procurement programs in the next few years, for fuel tanker aircraft for the Israel Air Force, US aerospace giant Boeing is liable to put a serious obstacle in its way: sources inform "Globes" that Boeing will not grant IAI permits to convert its planes to tanker configuration. Such a restriction means that IAI is liable to find itself out of the running for supplying the Israel Air Force's new tankers, as its proposal is based on buying used Boeing 767 aircraft on the open market and converting them for airborne refueling of combat planes.
Boeing has a clear interest in ousting IAI from the procurement program that has been taking shape at the Ministry of Defense and in the Air Force for a long time, since it is considered the leading candidate for winning the order, estimated to be worth hundreds of millions of dollars. Boeing is offering the Israel Air Force its new KC-46 tanker, which is also based on the 767. A first aircraft of this type will be delivered in two months' time to the US Air Force, which will receive nearly 200 of them over the next few years.
IAI, which has won similar deals in the past from Brazil and Colombia and has competed for other contracts, is convinced that its proposal is more attractive than that of Boeing, since it can sell such aircraft to the Israel Air Force at half the price. The KC-46 costs $250-300 million, whereas IAI is offering its converted aircraft for $150 million, with no significant shortfall in capacity and performance.
Jobs for 500 workers
Defense sources have stated in the past few days that work on the program is not complete and that the matter has not yet been considered at the highest levels of the IDF and the Ministry of Defense. Nevertheless, Israel defense companies have gained the impression that the Ministry of Defense intends to buy the planes from Boeing, among other things in order to enable the deal being formulated to be financed from US military aid. To this consideration is added the new limitation that will prevent Israel from converting a quarter of the aid to shekels, as it did in the past, in order to use it for procurement in Israel.
Defense industry sources warn that a decision to buy the planes in the US will represent a blow to IAI and jeopardize the jobs of at least 500 employees. The matter is creating tension at IAI, which badly needs this order from the Ministry of Defense, as much as anything in order to preserve its know-how and consolidate its status in tanker aircraft, an area in which only Airbus, Boeing and IAI operate.
The restriction that Boeing is expected to place on IAI in the context of the bidding to supply tanker planes to the Israel Air Force is well known to the Israeli defense establishment. "This is a serious restriction, and regrettably, and there is genuine regret, IAI is ruled out of the process," a defense source involved in the matter told "Globes".
According to the source, any Boeing aircraft that IAI converts from passenger configuration to cargo or fuel tanker configuration must receive a special permit from Boeing, as the manufacturer and the owner of the intellectual property in the aircraft's design. A source close to Boeing confirmed this to "Globes", and said that in order to receive the required permits, for every Boeing aircraft that IAI converts to a different use it pays Boeing between $500,000 and $1 million. "How would it make business sense for Boeing to give IAI such a permit when it is bidding against it in the very same tender?" the source said.
The Israel Air Force's current tankers are used Boeing 707s converted by IAI in the early 1980s, and the Air Force seeks to replace them.
Published by Globes [online], Israel business news - www.globes-online.com - on August 6, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018