Delivery delays of the KC-46 tanker catch heat from Air Force

The years-long, drama-filled saga to replace an aging fleet of U.S. Air Force tankers continues to drag on.

In 2011, Boeing Co. won the first phase of a lucrative $35-billion total contract to build the next generation of aerial refueling tankers after a contentious battle involving three bid competitions and prison terms for a former company executive and former Air Force official.

Boeing’s design was seen as relatively low risk — the Chicago aerospace giant’s tanker bid was based on a modified commercial 767 passenger jet. But delivery of the first KC-46 aircraft — last planned for August 2017 — is now expected to be more than a year late, and technical issues have cropped up during development and testing. The Air Force will eventually receive 179 new tankers.

The delays have raised the ire of the Air Force. In late March, Air Force Secretary Heather Wilson told the House Armed Services Committee that she didn’t expect the tanker to be delivered until late 2018, despite Boeing insisting that the plane would be delivered before that, in the second quarter.

“Boeing has been overly optimistic in all of their scheduled reports,” she told the committee. “One of our frustrations with Boeing is that they’re much more focused on their commercial activity than they are on getting this right for the Air Force.”

Last year, Boeing’s commercial airplanes business generated revenue of $56.7 billion, according to the company’s annual report.

Boeing spokesman Charles Ramey said there is “no higher priority for the company than delivering tankers to the Air Force right now.”

“We have a great team looking to make that happen, and that team includes the Air Force as well,” he said. “We’re working together to get through testing and delivering those first tankers.”

Tankers are a crucial part of the U.S. military’s global operations. The planes are responsible for refueling a variety of aircraft in midair using either a boom — a rigid tube that’s guided into the receiving aircraft by an operator lying on his or her stomach — or a hose and drogue system, in which a receiving aircraft inserts a probe into a hose stabilized by a metal basket that trails behind the tanker. The KC-46 will be able to utilize both refueling methods in the same mission.

Though Boeing built the 1950s-era KC-135 refueling tankers, the planes are still complex to build and must essentially function as flying gas stations that can also defend themselves in combat, said Scott Hamilton, founder of aviation consulting firm Leeham Co., in Bainbridge Island, Wash.

Wilson told the House committee that Air Force Undersecretary Matthew Donovan visited Boeing’s KC-46 production and modification facility in Everett, Wash., last month to do a “deep dive” with the company.

“We’ve asked them to put their A-team on this to get the problems fixed and get the aircraft to the Air Force,” she said.

The U.S. currently has 457 tankers in its fleet, Wilson told the House committee. Most of those are KC-135 Stratotankers. The other tankers in the fleet are 1980s-era KC-10s.

With proper maintenance, the tankers could fly for an indefinite amount of time, Hamilton said. But as the tankers age, the cost of maintenance increases dramatically. At some point, the Air Force decides to retire the oldest airplanes rather than put the money into maintaining them, he said.

The journey to replace the aging tankers dates from 2001, when Congress allowed the Air Force to consider leasing 100 modified Boeing 767 jets.

Boeing later won the contract, but it was overturned in 2004 after a contracting scandal in which a former top Air Force official admitted she passed Boeing inside information about a rival Airbus bid and favored Boeing in several major Pentagon contracts because the aerospace firm had given jobs to several family members.

That former official, Darleen Druyun, was sentenced to nine months in prison for illegally seeking a job at Boeing while reviewing bids for the tanker deal. Former Boeing Chief Financial Officer Michael Sears was also sentenced to four months in prison for illegally offering the job during the negotiations.

A team composed of Northrop Grumman Corp. and the parent company of Airbus, then known as EADS, won the Pentagon’s re-launched tanker competition in 2008.

But that decision was overturned months later after the U.S. Government Accountability Office said the contract was flawed and recommended that the Air Force redefine its specifications. The ruling was cheered by Boeing, which had lobbied intensely against the contract decision.

In a surprise to many industry analysts, Boeing then won the new contract competition over EADS, which by then had lost Northrop Grumman as a partner. Though industry experts had thought EADS would win a second time, the new criteria released for the competition clearly indicated that the Air Force was looking for a tanker similar to Boeing’s 767 proposal, analysts said.

It also didn’t hurt that Boeing’s bid price was much lower than that of EADS — a strategic move designed to block EADS, based in the Netherlands, from entering the U.S. market, analysts said. EADS had said it would build the tanker in Alabama.

The KC-46 program has more than 600 suppliers in 42 states, including California, where more than 160 suppliers contribute to the planes’ production, according to Boeing.

Because it was viewed as a low-risk program, Boeing was awarded a fixed-price contract — meaning Boeing alone would be on the hook for cost overruns, according to a GAO report released last year.

But the program has run into difficulties. Problems with the planes’ wiring, fuel system component design issues and a “fuel contamination event” that corroded the fuel tanks of one of the developmental aircraft all led to schedule delays, according to the GAO report. They have since been fixed.

More recently, the Air Force said there are problems with the tankers’ remote vision system, which involves sensors and a 3-D display to help operators guide the boom into a receiving aircraft. Boeing developed a software fix for the system that was set to be reviewed during flight tests in March, according to the Air Force.

There have also been “recent occurrences” in which the receiving aircraft unintentionally disconnects from the centerline drogue fueling system, an issue that the Air Force and Boeing are investigating.

“This was just modifications to what they had already done,” said Todd Harrison, director of the aerospace security project at the Center for Strategic and International Studies. “It’s kind of surprising they’ve run into so many technical challenges.”

Ramey of Boeing said that part of a development program is finding and resolving issues before delivery. Last week, the company said it successfully completed fuel on-load testing, which involved a refueling flight between two tankers.

Further delays would not only be costly for Boeing’s bottom line — the company has already incurred $1.9 billion after taxes in program charges — but also potentially bad for its reputation, said Cai von Rumohr, managing director at Cowen & Co.

“If you want to win new business, past performance is critical,” he said. “You’ve got to perform.”

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