This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ Explore more of Starbucks at Starbucks.com. http://www.starbucks.com/default.asp?ci=1015 \----------------------------------------------------------/ Air Force Pushes Its Plan to Lease Boeing Tankers July 15, 2003 By LESLIE WAYNE The Air Force began campaigning yesterday for quick Congressional approval of a $20 billion plan to lease 100 Boeing 767's to be used for aerial refueling, replacing Vietnam-era airplanes in the skies over Iraq that the Air Force says are too old. In a hastily called meeting with reporters at the Pentagon, Dr. Marvin R. Sambur, the Air Force's assistant secretary for acquisition, said delays in approving the plan would be "very difficult on the Air Force and very difficult on Boeing." Dr. Sambur's statements were an opening shot from the Air Force in what promises to be a heated Congressional debate over the plan. While the deal is a priority for the Air Force, critics term the program a "Boeing bailout." Last Friday, the Air Force secretary, James G. Roche, issued a report to Congress saying the Boeing 767 lease deal was the fastest way to put new aerial tankers into the skies. At the same time, Mr. Roche's report showed that leasing could cost $150 million, more than buying the planes outright, although footnotes indicated the cost could be as high as $1.9 billion. Dr. Sambur sent the Air Force's request for quick approval of the aerial tanker plan to the four committees that control military spending. He added that he hoped Congress would approve the measure by September, and he stressed that delays would be costly to Boeing, which has kept its 767 production line going in anticipation of the contract. The tanker lease deal is controversial on many fronts. A report from the General Accounting Office has said the existing fleet of KC-135 tankers, many of which are nearly 40 years old, could be upgraded at a much lower cost than the lease plan and still provide the services that the Air Force needs. Those opposed to the plan have questioned why the planes need to be leased - an extremely rare way to procure military equipment - rather than bought outright. The leasing arrangement would enable the Pentagon to make the deal appear cheaper than it actually is, by not having to include the full cost of the airplanes in its budget. An off-the-books financial partnership, similar to the arrangements made infamous by the Enron scandal, would be set up by Wall Street firms, which would own the planes the Air Force would lease. This would allow Boeing to keep the deal's debt off its balance sheet, protecting its credit rating. Also, as part of the lease agreement, the Air Force could later buy the tankers from the investment partnership. For Boeing, the deal is highly lucrative. It would keep the 767 production line operating in the face of falling orders, and a report by a Morgan Stanley analyst indicates that leasing 100 Boeing 767 tankers would bring Boeing the same profit as selling 1,033 of its popular 737 commercial aircraft. Senator John McCain, an Arizona Republican, has been critical of the deal and has said he will hold hearings on it later this year. After Mr. Roche released his report last Friday, Mr. McCain said that he continued to have "grave concerns" about the need for the new tankers, as well as their cost. "America's security and fiduciary responsibilities," said Mr. McCain, "are apparently being subordinated to what's in the best interest of the Boeing Company." In response, Jim Albaugh, chief executive of Boeing Integrated Defense Systems, said the proposed tanker deal provided "the best value to the American taxpayer." "In the end," Mr. Albaugh said, "the Air Force chose leasing because it most quickly delivers the needed tankers to the customer." Powerful politicians like House Speaker Dennis Hastert, an Illinois Republican whose state is home to Boeing headquarters, are backing the plan. But it has also been attacked by a coalition of Washington research groups that includes both liberal advocacy groups and conservatives with close ties to the White House. http://www.nytimes.com/2003/07/15/business/15BOEI.html?ex=1059275758&ei=1&en=6be81bdebf9917a9 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! Click here: http://www.nytimes.com/ads/nytcirc/index.html HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company