The US Air Force awarded Boeing a $2.1 billion contract for the third lot of low-rate production of the KC-46A tanker last week, just days after the company announced another penalty that would bring the recapitalisation programme’s total charges to $2 billion.
The contract will cover 15 tanker aircraft, as well as two spare engines and five wing refueling pod kits. Work is expected to complete by 30 July 2019, according to the 27 January contract announcement.
During a 25 January fourth quarter earnings call, Boeing announced it would eat another $312 million in pre-charges related to to wiring changes identified last year. The issue marks Boeing’s fifth cost overrun on the programme, bringing overall costs to $2.1 billion. Under the fixed-price development contract, Boeing takes the hit rather than the government.
Boeing kicked off the low-rate production phase of its tanker programme last August, when the USAF awarded a $2.8 billion contract for Lots 1 and 2. Lot 1 covered seven aircraft, two spare engines and five wing refueling pod kits while Lot 2 included 12 aircraft, two LRIP spare engines and five LRIP wing refueling pod kits.
While the recent Lot 3 contract may help Boeing offset its total charges, the programme could face further penalties in the future if Boeing does not stay on schedule. An annual report from the Pentagon’s top weapons tester gave a pessimistic outlook on the KC-46 programme. Based on previous performance, the current schedule is “aggressive and unlikely to be executed as planned,” Michael Gilmore wrote. “Execution of the current schedule assumes historically unrealistic test aircraft fly and re-fly rates,” Gilmore adds.