20100709 airbus logo 18
The logo of the European Airbus manufacturer is seen on the door of a building in the Saint-Martin-du-Touch plant, near Toulouse, southwestern France. - 


Steve Chiotakis: A major European defense company has submitted a new bid to build expensive aircraft for the U.S. Air Force. EADS makes Airbus planes -- and the company's offer is just the latest in a big and bitter dispute over a $35 billion military contract. Marketplace's Europe correspondent Stephen Beard is with us live from London with the latest. Good morning, Stephen.

Stephen Beard:Hello Steve.

Chiotakis: What does Airbus want to build?

Beard: They want to replace the 179 of the U.S. Air Force tanker aircraft that are due to be replaced. These are the ones that refuel military plans in mid-air. Now Boeing won the contract originally, but then lost it after a bribery scandal. Then EADS, which as you say owns Airbus, won the contract along with an American partner. But this contract was canceled after an uproar in Congress. Now EADS has submitted a solo bid.

Chiotakis: And why has this contract been so bitter and disputed?

Beard: There have been allegations of blatant protectionism by the U.S. Department of Defense. Here's Howard Wheeldon, a veteran defense analyst with BGC Partners.

Howard Wheeldon: I have never seen a competition that has been so one-sided towards the in-house party. The DOD seemed to go out of its way to favor the Boeing bid.

Now I should add that both Boeing and EADS have lodged trade complaints with the WTO against each other about separate protectionist issues. So far, the Boeing complaint has been upheld. The EADS complaint is still under consideration.

Chiotakis: And Stephen, what about those who argue the military should choose a company that would create American jobs? Boeing is an American company.

Beard: Yes, and it would create more jobs in the short-term. But because EADS admits it will only be building about 65 percent of the plane in the U.S. -- the company says if it wins the deal, it will build a plant in Alabama, which could in time be building commercial aircraft and that would create more U.S. jobs. The decision on this deal, by the way, is expected in November.

Chiotakis: Marketplace's Stephen Beard in London. Stephen, thanks.

Beard: OK Steve.