The parent company of European jet maker Airbus and U.S. defense contractor Northrop Grumman have agreed to team up to build a refueling...

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NEW YORK — The parent company of European jet maker Airbus and U.S. defense contractor Northrop Grumman have agreed to team up to build a refueling plane for the Pentagon in an effort to compete with Boeing’s troubled tanker program, according to published reports.

European Aeronautic Defence & Space and Los Angeles-based Northrop Grumman have a draft agreement, The Wall Street Journal reported yesterday.

EADS plans to announce June 22 where it will build a U.S. factory for the project if it wins the Pentagon contract, the report said, citing people familiar with the joint-venture talks.

Northrop Grumman, a military-aircraft maker, would be prime contractor, while EADS would supply aircraft to be refitted in the U.S. as tankers, Bloomberg News reported, citing people familiar with the situation.

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Reports about an Airbus-Northrop agreement come a day after the Pentagon’s inspector general issued a report — the latest in a series of critical ones — that said the Air Force ignored legal requirements and violated its own rules as U.S. officials pushed for a now-canceled $23.5 billion deal to lease and buy refueling tankers from Boeing.

Lawmakers have called it the most significant defense-contract abuse in decades.

“If [the Pentagon] announces its intention to hold a fair and open competition for a tanker replacement, then Northrop Grumman will be very interested in competing,” Northrop spokesman Randy Belote said in an e-mail.

He declined to comment on the EADS cooperation.

Guy Hicks, spokesman for EADS North America, said: “It’s our strategic intention to build a strong American industry team to bid for the U.S. Air Force next-generation tanker program. … We’ve always said that and we continue to try and do that. I can’t comment on specific negotiations with any one company.”

Boeing spokesman Dan Beck said it would be inappropriate to comment on potential competitors for any future tanker work.

“At this point, there is no tanker-replacement program or competition,” Beck said. “It’s all in the hands of the Department of Defense.”

A congressional committee has moved to block the tanker contract from being opened to EADS, Europe’s largest defense contractor.

“They’re wasting their time,” said Dan Solon, an analyst at Avmark International, a London-based consulting firm, commenting on the Airbus-Northrop news. “Unless Northrop really has something wired into the Pentagon and all over Capitol Hill or unless they’re willing to set up a complete production line in the U.S. to actually build the planes,” he said.

News of the Airbus-Northrop agreement also comes as the United States and the European Union trade complaints to the World Trade Organization, with Washington accusing the EU of providing unfair aid to Airbus and the EU claiming Boeing gets unfair aid from the U.S. government.

Information from The Associated Press and Bloomberg News is included in this report.

Decision on A350 jet

won’t come until fall

Airbus parent European Aeronautic Defence & Space said it won’t make a decision on building a new plane to challenge Boeing’s 787 until the end of September, three months later than Airbus had hoped.

EADS’ board found Airbus’ proposed A350 “very appropriately meets the airlines’ expectations in the field of midsize twin aircraft,” EADS said yesterday. A final decision will come by the end of September.

While the board in December gave Airbus a green light to offer the plane, it hasn’t committed to spending money to develop and build it.

Chief Commercial Officer John Leahy had predicted EADS would give approval by the Paris Air Show, which opens Monday.

“The general consensus was for a flock of orders leading to quick launch, which would have minimized the time gap between the 787 and the A350,” said Richard Aboulafia, vice president of the Teal Group, a Fairfax, Va.-based consulting company. EADS’ delay “puts doubt in the mind of customers. Customers like to see a clear funding plan.”

Bloomberg News

Air Canada parent

may scrap Boeing deal

ACE Aviation Holdings, parent of Air Canada, may cancel a $6.1 billion contract for Boeing planes if the carrier can’t reach agreement this week on how much to pay the pilots who would fly them, ACE Chief Executive Robert Milton said.

The airline is in the final stages of talks with Air Canada pilots on terms for flying as many as 36 Boeing 777s and 60 Boeing 787s ordered in April, Milton said at a Merrill Lynch investor conference in New York yesterday. Montreal-based ACE can withdraw without penalty by tomorrow, he said.

“It is my hope that we’ll get it done,” he said. “If we don’t, we’ll have to revert to Plan B, which would be adding more used aircraft.”

Failure to reach agreement with the pilots’ 3,000-member union would jeopardize the first Air Canada order for Boeing since 1989 and the second-biggest for the 787.

Air Canada, the country’s largest carrier, needs to amend its contract with the pilots to take the new aircraft into account. The contract, which expires in 2009, links pilots’ wages to the size, speed, weight and revenue potential of the plane they fly, union President Kent Wilson said.

Boeing spokesman Jim Condelles declined to comment.

Bloomberg News

Boeing boosts forecast

for global jet market

LONDON — Boeing yesterday raised its forecast for the value of the global commercial-airplane market over the next 20 years to $2.1 trillion from $2 trillion.

In its annual market outlook, Boeing said it now sees a need for about 25,700 new passenger and freighter planes during the period compared with last year’s projection of 25,000.

The company predicts industrywide passenger-traffic growth will average 4.8 percent annually through to 2024.

“The long-term demand for new airplanes is going to remain very strong over the next 20 years,” said Randy Baseler, marketing vice president for Boeing’s commercial-airplanes division.

Boeing predicts the largest individual market by value will be the Asia-Pacific region, accounting for 36 percent of the $2.1 trillion total.

Some 80 percent of the new planes are likely to be in the single-aisle and midsize twin-aisle categories, it said.

Dow Jones / The Associated Press