I am a political economist studying innovation, industry, and international security. Since September 2001, I have been advising industries and ministries on their issues of strategy, planning, and policy. My work aims to inform investors, industrialists, technologists, and policy-makers on how to effect, economically, a secure future.

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09 February 2010

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Thanks – I enjoyed that, although I found the theory a bit heavy going. An interesting parallel to “keeping the RFP vague” is the difference in the way the US and UK looks at tax avoidance. The US writes extremely precise and complex tax and if you can find a way round it, that is fine (until more precise and complex tax law is written to close the loophole). In the UK, the code is intentionally kept more vague, so the taxman can say “OK, I see where you are coming from, but no, I’m not going to allow it – nice try though”
 
The other thought is regards to the prices of the green 767 and A330 – the 767 is basically a dead programme (and has been so since 2004, when they produced a massive 8, or 0.7 per month or so) and is only being kept alive (at 1 per month) in the hope that they can win the KC-767, which looks as though it will run at 3 per month. The A330 is very much alive (currently at 8-9 per month) and is likely to continue at full rate production until at least 2015 (when the A350XWB is due to come in) and will continue for a while longer in freighter form – realistically I see the natural death of the A330 in about 2020.
 
This raises two points:

–         First, although the 767 line is likely to be pretty fully depreciated (EIS 1982), and although the A330 is probably getting there too (EIS 1994), you will get much higher benefits of scale from an aircraft line at 8-9 per month than 3 per month. In fact, I reckon that the fixed costs at Airbus (and Boeing) are about 30%, so as long as Airbus prices the green aircraft down by less than 30%, it will make more money than if they didn’t have the contract. This is not available to Boeing as the 767 line would be closed without the KC767. The difference in green aircraft price is thus probably not that much; on the other hand, the larger A330 will probably need more fuel, space etc., so the running costs per aircraft are likely to be higher. At the same time, the running costs per capability are likely to be lower.

–         Secondly, the USAF can either buy a brand new aircraft which should have been out of production for 5 years already (and is a 12 year older design), or one that commercially has another 10 years of life in production. Of course, part of the reason the 767 is on life support is that the A330 killed it (in the same way as the 777 killed the A340).
 
Regards,

Charles

Wow this is all pretty heavy analysis, and it is refreshing to see no bias on a quick review. Some thoughts...

Typically the KC-135 offloads 30% of its fuel payload, and the 767 carries a lot more than the 707 based KC-135, so why do we need a big giant replacement with the higher base costs and required infrastructure improvements? A 767 Tanker would have a cockpit more resembling the 787/747-8 than the current 767. A 767 based Tanker would be much more like the Navies brand new P-8 Orien submarine hunter, based on the 737, built on the same production line but not the same plane at all.

Big planes big wakes, just like a boat, simple rules of nature, physics. The U.S. military practices and conducts operations that no other country dares. For instance, night time carrier flight operations and below radar on the deck refueling at night. You want to do that behind a A330?

So if the USAF bought the A330, what are we gonna do, tear every single one down and then reassemble to make sure there are no Trojan Horses? This is a military asset.

And finally, we get nothing more than token help from Europe in Afganistan. They do not even vote reliably with us in the United Nations, so why would we be interested in exporting even one single job to Europe?

Oh yeah, how could I forget about the pending WTO ruling between EADS and Boeing, in favor of Boeing.

The nuts and bolts of that decade long dispute is that if EADS wants to build a plant anywhere in the US, all local and federal incentives are available to them. Not so for Boeing in Europe.

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