Boeing's top executive denies that his company has gained unfair advantage in the battle for the U.S. Air Force's KC-X refueling tanker contract and charges that the competing EADS-Northrop Grumman team is using a government-subsidized platform.

EADS and Northrop initially won the $35 billion tanker competition in early 2008, only to see it snatched away after the U.S. Government Accountability Office questioned the Pentagon's selection criteria. The team now questions whether detailed pricing information about its A330-based bid was divulged to Boeing after its loss -- a charge that Pentagon officials dispute.

"It's a topic of concern for us because we are proposing the same airplane" in the new tanker competition, EADS CEO Louis Gallois said during a press conference in Washington Oct. 20. "It's convenient for Boeing to have the breakdown of our costs. We could find it convenient to have the same."

Boeing Chairman, CEO and President James McNerney lashed back Oct. 21 at talk of Boeing's "purported" advantage. "Our competition somehow feels that we have some information coming out of the last protest about them that they don't have about us," McNerney said during a third quarter earnings call. "I'm not sure what they mean."

McNerney also pointed to a preliminary World Trade Organization finding that European governments provided illegal development subsidies to Airbus. A WTO ruling on a European countercomplaint about government incentives for Boeing is expected in 2010.

"The playing field is not level, basically because the ruling points to virtually every airplane that Airbus developed being the result of a subsidy, including the A330," said McNerney. "That should enable them to take more risk … than I can take. That is one area that we are probing very deeply."

McNerney's comments came as Boeing reported that year-over-year revenues in its Integrated Defense Systems unit rose 3 percent in the third quarter to $8.7 billion. Operating earnings increased 4 percent to $885 million. The increases were driven by a strong showing from the company's military aircraft business, which generated a 25 percent increase in profit on a 7 percent sales gain. That helped offset a 9 percent sales decline and 17 percent profit drop in its network and space systems business, the result of lower volume on intelligence and security systems, missile defense and combat systems.

Image: Boeing