Boeing Tanker Woes Return

The story of the new refueling tanker that Boeing Co. (NYSE: BA) is building for the U.S. Air Force began in 2000. More on that later. As things stood on Monday, Boeing was to begin deliveries of the new tanker, the KC-46A, in the first half of this year. The Air Force said Tuesday that’s not going to happen.

Boeing is scheduled to deliver all 18 new tankers to the Air Force by October in order to meet longstanding contract terms and to avoid further penalty payments for missing deadlines. Boeing already has swallowed about $2 billion in after-tax charges on the fixed-price contract.

Aviation Week cited Air Force spokeswoman Capt. Emily Grabowski:

The Air Force will continue to work with Boeing to develop schedule mitigations, where appropriate, to expedite the program. These potential delays will not result in additional program cost to the taxpayer.

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The stubborn problem the company faces is the tendency of the rigid boom on the KC-46A to scrape the surface of the aircraft being refueled. This is a serious issue for stealth planes because it damages the coating that gives the aircraft their stealth capabilities.

Two less significant issues with the tanker are an electrical problem that could cause a fire when the plane is refueling and a software issue that cause a problem when the refueling boom is disconnected from the receiving aircraft.

A Boeing spokesman said:

While there is always risk on any development program, we’re relying on our partnership with the Air Force to help mitigate those risks, complete KC-46 testing and deliver 18 game-changing tankers to them as quickly as possible.

Using the word “quickly” to describe anything related to the new tanker is almost humorous. The Pentagon’s first try at getting a new tanker began in 2000 and a contract was awarded to Boeing in 2004. The $35 billion award would have replaced 179 Boeing 707-based tankers built from the original contract awarded during the Eisenhower administration. A bribery scandal involving Boeing executives resulted in cancellation of the contract and a new round of bidding.

The contract was re-awarded in 2008, this time to Northrup Grumman, which had partnered with Airbus to build the planes at the European maker’s Alabama plant on a modified version of the Airbus 330 passenger plane. That contract too was canceled when the Government Accountability Office found irregularities in the way the decision was made.

The bidding was opened a third time in 2009 and again awarded to Boeing in 2011. The cost had ballooned to $51.7 billion and the deadline for delivery of the first 18 planes was set for August of 2017. And so it goes.

Boeing stock traded down about 1.7% at $344.10 in Wednesday’s premarket session, after closing down 1.3% on Tuesday at $348.92.

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