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Boeing's $44 billion tanker may miss a milestone by three years

MATTHEW LLOYD/BLOOMBERG

By TONY CAPACCIO | Bloomberg | Published: January 23, 2019

Boeing Co.'s first aerial refueling tanker in a $44 billion program is scheduled to land Friday at an Air Force base in Kansas for a celebration tempered by what now may become a delay of at least three years in meeting its most important milestone.

A ceremony is planned for the arrival of the KC-46 at McConnell Air Force Base, with scores of Air Force personnel on hand, along with Kansas Governor Laura Kelly and the state's two U.S. senators, Pat Roberts and Jerry Moran. The Air Force accepted the first delivery despite unresolved issues including fixing a troubled camera system used in refueling operations.

Of more significance than the first aircraft, the contractor was originally required to deliver 18 planes, two spare engines and nine sets of wing-mounted refueling pods by August 2017. That's already slipped past a revised estimate of October 2018. Now, the Defense Contract Management Agency is predicting it won't happen until the third quarter of 2020.

The contract agency is citing the prospect of added delay until a Boeing subcontractor based in the U.K., Cobham, can deliver the wing-mounted pods, which allow two aircraft to be refueled at once.

While Cobham is continuing qualification testing needed for the pods to be certified by the Federal Aviation Administration, their production "is not an issue at this time," Mark Woodbury, a spokesman for the defense contract agency, said in an email.

Air Force spokeswoman Ann Stefanek said in an email that the service agrees that the pace of pod deliveries is likely to determine whether the KC-46 can meet its milestone.

Delivery of certified pods was originally scheduled for August 2017 but is now projected for June 2020, Capt. Hope Cronin, another Air Force spokeswoman, said in an email. Cobham's difficulties in producing the pod sets "was attributed more to compliance with FAA processes" than to technical difficulties, she said.

Boeing spokesman Chick Ramey said the company is "actively helping" Cobham "address the challenges they're having, and we look forward to continued progress as we prepare to deliver KC-46 aircraft."

Last July, Cobham dropped by the most in about one and a half years in London trading after it disclosed Boeing was withholding invoice payments in a dispute over progress on the pods. Boeing made "as yet unquantified damages assertions," which Cobham is challenging, the company said in a statement at the time.

In an August regulatory filing the company told investors that qualification of the pods "is in its early stages with risks relating to schedule and cost. Completion could take significantly longer than originally planned, and this increases concurrency risk as well as base cost assumptions."

Cobham spokesman Charles Harrowing said in an email that "in speaking with various members of the team here at Cobham, we are not looking to comment further to the DCMA statements you have received."

In its latest program assessment, the Defense Contract Management Agency said that based on Boeing's past performance, it has "low confidence" that the company will meet its most recent revised master schedule.
 

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