The $27bn turbulence caused by Boeing's ability to court scandal

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The Independent Online

In his official biography, published on the company's website, the Boeing chairman Phil Condit is described as "a distinguished Eagle Scout Award winner", "a past president of the Chief Seattle Council of the Boy Scouts of America" and a recipient of "the Aerospace Industry Distinguished Good Scout Award".

It is not known what the scouting movement thinks of the ethical scandals that have tied Boeing up in knots this year. But you cannot expect Mr Condit to receive a good behaviour badge.

Last week the boss of the world's largest aerospace group sacked his chief financial officer, Mike Sears, along with Darleen Druyun, a former chief procurement official with the US air force, who had been hired by Boeing only a few months before. Though Mr Sears claims he did nothing wrong, the allegation is that he had been in contact with Ms Druyun when she was still running the competition for a $27.6bn (£16bn) contract to supply air refuelling tankers. It is alleged she gave Boeing financial information about a rival bid from a consortium led by European defence giant EADS, the majority shareholder in Airbus.

The contract, not surprisingly, was won by Boeing.

The Bill authorising the contract was passed by the US Congress earlier this month and signed by President George Bush on Monday - the day Mr Sears and Ms Druyun were sacked. Critics of the deal, such as the Republican Senator John McCain, have seized on the scandal as evidence that Boeing should not have been given the controversial contract to supply all 100 tankers.

Among those who apparently had doubts about the deal was Marvin Sambur, the US air force's assistant secretary for acquisition, who is quoted as saying: "We have been encouraging EADS to develop a tanker. One thing we are concerned about is [avoiding] a homogenous fleet of tankers, so that if there is an issue we don't have to ground the whole fleet." There is now speculation that Boeing might be stripped of the contract, after the US Defence Secretary, Donald Rumsfeld, said on Wednesday that he had asked his officials to review it.

To lose a $27bn contract and one of your most senior executives might be bad enough, but a double blow of this sort could not come at a worse time for Boeing. Only six months ago the iconic American group took the unusual step of taking out full-page advertisements in a number of newspapers to apologise for the behaviour of some of its staff, caught stealing documents from rivals in order to secure bids. Boeing fired the staff in question, paid its rivals compensation and even accepted a ban from the US navy on bidding for certain contracts. But to its great embarrassment, the company found itself the butt of jokes on late-night television.

Amid all this, Boeing is trying to secure a £13bn tanker contract to refuel RAF planes alongside BAE Systems, a company that is itself no stranger to controversy. Mr Condit was in Westminster only a few weeks ago to lobby for the deal, and a decision is promised by the end of this parliamentary term.

Boeing and BAE are claiming there would be no link between their respective contracts, although as Boeing has promised work for BAE on the US contract if the UK deal is successful, this is a hard case to argue. EADS believes this could swing matters in its favour and, while publicly staying quiet, is privately jumping for joy.

There is talk that Boeing is lobbying for the UK Government to postpone its decision on the tanker deal, for fear that in the current climate it would be politic to give the contract to EADS. The troubles at Boeing's military wing have come on top of the serious downturn in business for the civil aviation side since the 11 September terrorist attacks, and the loss of its leading position in the civil market to its European rival Airbus. Against this background, there is also a strong rumour that Boeing could be pushed into merger talks with BAE - something Mike Turner, BAE's chief executive, has been hoping for.

Whatever the outcome, it looks like Phil Condit has some trouble on his toggle to sort out.

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