The latest snag in Boeing’s Air Force KC-46 tanker program has pushed out the Pentagon’s go-ahead on building the first production tankers to as late as April 2016, forcing a compressed schedule that may require heavy spending.
The latest snag in Boeing’s Air Force KC-46 tanker program has pushed out the Pentagon’s approval on building the first production tankers by three to six months to as late as April.
Even so, both Boeing and the Air Force insist the jet-maker can still deliver 18 tankers ready for action just 16 months later, per the August 2017 contracted delivery deadline.
To accomplish that, a company veteran on the tanker program said Boeing has begun building the wings and body sections of the first two production jets even before the first KC-46 test flight.
That introduces risk, because those production planes may need to be modified due to design changes arising from discoveries during flight tests.
Loren Thompson, a defense analyst with the Lexington Institute, which receives funding from Boeing, said that makes further accounting charges for excess costs, on top of the one announced last week, “a distinct possibility.”
Earlier this year, the first flight of a fully equipped KC-46 tanker was delayed from April to July and a Pentagon contract decision to let Boeing go ahead with initial production was set for August.
Boeing subsequently encountered problems with military-systems software and delays in the supply of parts for the refueling systems. That pushed first flight — which begins a period of intensive tests to prove performance — out to as late as September and the production go-ahead to October.
Then Boeing announced last week an $835 million write-off due to higher costs associated with fixing problems discovered over the past few months in the tanker’s complex fuel system.
The program veteran said that when engineers ran pressure tests on the first test plane’s fuel system “the connectors came apart.” The system had to be repaired and redesigned.
He attributed some of the tanker problems to Boeing placing inexperienced people, including managers, on the program.
He said some mechanics recently assigned tanker work came from the 787 surge line that’s being closed down and have never worked on a metal airplane.
The write-off is the second such charge in the past year, bringing the total cost overrun to almost $1.3 billion.
Air Force spokesman Ed Gulick said Tuesday the production go-ahead is now delayed until sometime between January and the end of April, news first reported by Bloomberg.
“Even with these slips, Boeing projects they can achieve the (August 2017 delivery) date, although all previous schedule margin is gone,” Gulick said. “We believe it is achievable and do not see any technical showstoppers.”
Richard Aboulafia, aviation analyst with the Teal Group, agreed with Thompson that the newly compressed schedule risks further accounting charges if Boeing needs to retrofit already built jets with significant design modifications.
“It’s just not an efficient way to build aircraft,” said Aboulafia. “It increases the risk of further losses.”
Yet Thompson insisted it makes sense for Boeing to “spend more of its own money upfront” by building production jets before formal approval from the Pentagon.
Long term, the tanker program “is worth a huge amount of money to Boeing,” he said, so even though it could add cost, it makes sense.
The Air Force requirement is for delivery of 179 planes by 2027, valued at about $50 billion. Boeing forecasts a total global market for refueling aircraft of $80 billion.
Thompson said maintaining the tankers over their lifetime could add $60 billion in value.
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Boeing won the KC-46 contract in 2011 in a bitterly fought competition with r Airbus.
Due to last week’s tanker charge, Boeing will revise its profit projection for this year when it releases its second-quarter financial results Wednesday morning.
FedEx order 50 freighters
FedEx announced Tuesday it has agreed to purchase 50 Boeing 767-300F freighter aircraft, with additional options to purchase 50 more of the jets.
The firm order is worth about $4.2 billion after standard discounts.
The first 50 aircraft will be delivered between 2017 and 2023. FedEx now has a total of 106 of the 767 freighter jets on firm order.
The 767 is produced at a rate of 1.5 jets per month and Boeing plans to increase that rate to 2 per month next year.
The 767s will replace FedEx’s aging MD-10 tri-jets.
“Acquiring additional 767F aircraft … will enable us to reduce structural costs, improve our fuel efficiency and enhance the reliability of our global network,” said David Bronczek, chief executive of FedEx Express, the freight carrier’s airline unit.