Jun Ji-hye, a reporter at the finance desk of The Korea Times, focuses primarily on economic policy and government agencies, mainly covering the Ministry of Finance and Economy, the Ministry of Budget and Planning, the National Tax Service and the Korea Customs Service. She previously covered financial authorities, including the Financial Services Commission and the Financial Supervisory Service, and earlier worked on the political, city and business desks, reporting on a wide range of issues.
Forex rate may favor Airbus over tanker deal
By Jun Ji-hye
The fluctuating exchange rate may affect the defense acquisition agency’s decision on who wins the Air Force contract to deploy four in-flight refueling tankers by 2019, according to industry observers, Wednesday.
Three competitors ― Boeing, Airbus Defense & Space, and Israel Aerospace Industries (IAI) ― presented their opening bidding prices to the Defense Acquisition Program Administration (DAPA), Tuesday.
Generally, companies present bidding prices about 30 to 40 times in accordance with their review of changes in the market.
The DAPA earlier said it will review prices suggested by firms by the end of this month before conducting an overall evaluation in May and making a final decision in June between Boeing’s KC-46, Airbus’s A330 MRTT (Multi Role Tanker Transport) and IAI’s KC-767 MMTT (Multi Mission Tanker Transport).
Observers say the firms are paying close attention to the exchange rate as it can have a considerable effect in price competition. The price ratio accounts for 20 percent of the overall bidding for the 1.4 trillion won ($1.4 billion) project, according to the DAPA.
They say Airbus could gain advantages from the exchange rate because of the falling euro from the end of last year.
“The favorable euro-won exchange rate could contribute to Airbus’s price competitiveness,” an informed source said on the condition of anonymity. “It has been so far expected that the European company might present the highest price, but the falling rate for the euro could resolve such an obstacle.
“It could be a good chance for South Korea to introduce an outstanding model with better capacity for loading fuel and cargo at a cheaper price.”
On the other hand, Boeing is expected to suffer a setback caused by the rise in the dollar exchange rate.
“Boeing is experiencing problems because of delays in development due to technical problems and a possible rise in price due to the higher dollar exchange rate,” another source noted.
The record over the past 10 years shows that Airbus holds a dominant position in selling aerial tankers.
Those who have selected Airbus’s model from 2005 include Australia, Singapore, Qatar, UAE, Saudi Arabia, the U.K., France, Spain and India, while the United States and Brazil purchased Boeing’s.
The Air Force expects in-flight refueling tankers to enable its fighter jets to considerably extend their flight time when patrolling Ieodo or Dokdo. The two islets, which are under South Korea's jurisdiction, are subject to territorial claims from China and Japan, respectively.
Since 1993, the Air Force has sought to deploy aerial tankers to refuel fighter jets, but the plan has been repeatedly shelved due to budget constraints and changing priorities.
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