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selecta · Member Joined: 24 Dec 2006 Posts: 813 Location: ORD

By J. LYNN LUNSFORD and COREY DADE
February 6, 2007; Page A6
The Wall Street Journal
source

United Parcel Service Inc.'s purchase of $4 billion of Boeing Co.'s 767 jetliners could give the aerospace company breathing room in its fight to land a big government contract.

Boeing is considering whether to offer the 767 to the Pentagon in its continuing search to replace the U.S. Air Force's fleet of aging aerial tankers. The contract, concerning planes that act as flying fuel trucks for other aircraft, is valued at $40 billion for the first 15 years.

UPS's order of 27 Boeing 767 freighters to provide needed capacity in its package-delivery business breathes new life into the airplane's production line. Earlier in the decade, it was unclear whether Boeing had enough orders to continue the line until the Air Force came up with a new tanker strategy.

Before the UPS order, Boeing's backlog of unfilled 767 orders stood at 28, amounting to slightly more than two years of production for that line. The UPS order nearly doubles that backlog, giving Boeing leeway in the event that the Pentagon's latest attempt at buying tankers encounters delays.

Boeing said it hasn't decided whether to offer the 767 or its larger 777 in the tanker selection, although officials have said they are leaning toward the 767. Six years ago, Boeing had planned to build 767 tankers as part of a multibillion-dollar leasing program that was thwarted in part because the Pentagon didn't seek competitive bids.

In the last couple of years, the twin-engine widebody jet has received a surprising influx of new orders from airlines that were eager to add capacity. Boeing is in the midst of replacing the 767 with its new 787 Dreamliner, which is in development and expected to enter service in mid-2008.

Last week, the Air Force released its final bidding terms for a new tanker program. Northrop Grumman Corp., which was considering offering a tanker version of the Airbus A330, threatened last month to shun the tanker race over concerns that bidding guidelines favored the Boeing 767. The Air Force said it tweaked the language of the bidding documents, but Northrop Grumman hasn't said whether it will enter the competition.

In a statement, UPS said its new 767 freighters would be delivered between 2009 and 2012. The planes are worth $4 billion at list prices, but neither Boeing nor UPS would discuss the value of the contract. Orders of such magnitude usually carry significant discounts. The engines will be supplied by General Electric Co.

UPS said the decision to buy the Boeing freighters wasn't related to its continuing discussions with Airbus, a unit of European Aeronautic Defence & Space Co., over whether to continue with its order for 10 Airbus A380 freighters. Other freighter customers have canceled A380 freighter orders after production problems threw that program two years behind schedule. UPS says it hasn't decided yet whether to abandon the order.

UPS said it plans to use the 767s on routes to and from Europe and Latin America as well as on certain trips within Asia and Europe. "The Boeing 767-300ER freighter already is part of our current air fleet and we know from experience what a great workhorse it is," Bob Lekites, UPS's vice president for airline and international operations, said in a statement.

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