Brussels weighs in over EADS's cancelled US bid

EADS is withdrawing from the race for a $35bn Pentagon contract because the terms "clearly favour" US rival Boeing, prompting harsh words from the European Commission.

The European defence giant announced the decision alongside 2009 results revealing €763m (£692m) losses, which it blamed on foreign exchange effects, a €1.8bn charge for the troubled A400M programme and another €240m-worth of provision on the A380.

EADS was bidding for the US Air Force in-flight refuelling tanker programme with US partner Northrop Grumman. Concerns about the KC-X deal were raised with the Department of Defence, but to no avail. "Serious concerns were expressed that the acquisition methodology would heavily weigh the competition in favour of the smaller, less capable Boeing tanker," EADS said yesterday. "Northrop's analysis reaffirmed those concerns and prompted the decision not to bid."

The European Commission was quick to voice extreme concern at the possibility that "the terms of tender were such as to inhibit open competition". The EU trade commissioner, Karel De Gucht, said: "It is highly regrettable that a major potential supplier would feel unable to bid for a contract of this type."

The withdrawal is just one more twist in a long-running saga. The first KC-X deal was won by Boeing in 2003. But it was cancelled because a US Air Force official allegedly unfairly promoted Boeing. The programme was then re-tendered and EADS/Northrop won it in 2008. But that deal was also cancelled, this time after a Boeing appeal.

The latest storm over KC-X helped to deflect attention away from EADS's sharp losses and cancellation of its dividend yesterday. Revenues were broadly flat at €42.8bn and earnings before interest and tax came in at €2.2bn, in line with guidance.

The past week has seen some welcome certainty for the A400M military transporter, after months of brinkmanship that saw the chief executive of EADS's Airbus unit, Tom Enders, threatening to can it. The seven "customer nations" have finally agreed to put in more money to support the delayed programme. Yesterday Airbus also unveiled plans to increase production of single-aisle A320 planes from December.

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