Military
Do KC-46A Tanker Problems Jeopardize Boeing Bid for New Bomber?
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At a Monday press conference, Air Force Secretary Deborah Lee James said:
We’re in the process of going over the schedule again to see whether we can see our way clear on that as well. Certainly, the margin in the schedule is all but gone at this point.
Boeing already has written down $835 million in pretax charges for the new tanker, and the test flight for a plane equipped with the refueling mechanism has been delayed until September. That is just the latest delay. The entire schedule is about a year behind and, as Secretary James noted, the margin for meeting the delivery commitment is vanishing.
And while this is all going on, the Pentagon is expected to decide, perhaps as soon as next month, on the winner of a contract to build the Long Range Strike Bomber (LRS-B), often called the B-3. Boeing and partner Lockheed Martin Corp. (NYSE: LMT) are teamed against a competing bid from Northrop Grumman Corp. (NYSE: NOC).
The B-3 procurement is expected to fall in a range of 80 to 100 planes at about $500 million per plane, and the contract is the last of three new airplane deals the Pentagon has included in its budget plans. The Joint Strike Fighter, or F-35, was awarded to Lockheed in 2001, and planes are being delivered in small quantities for testing and evaluation now. The KC-46A contract is valued at around $50 billion for 179 planes, not including long-term maintenance and parts deals.
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Northrop won the contract for the previous version of the Air Force bomber, the B-2, and has got to be considered to have the inside track for the new contract. And Boeing’s performance on the KC-46A contract is not a ringing endorsement of its bid for the B-3. An IHS analyst told Investor’s Business Daily, “The risk to the Air Force is too great for them to select the Boeing/Lockheed team.”
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